US-China trade war to drive down smartphone sales

Huawei's struggles will continue as US restrictions will affect devices' rollout, reports Canalys

The ongoing trade tiff between the US and China will have an effect on global smartphone shipments in 2019, according to Canalys.

The research firm has forecast that smartphone shipments will reach 1.35 billion units this year, representing a 3.1 per cent year-on-year decline.

It has based these figures on the "many uncertainties" surrounding the US and China trade war.

Chinese manufacturer Huawei has been a key figure in the tit-for-tat dispute between the two superpowers, with the US last month banning the vendor from using American components and code for its products.

It then issued a 90-day reprieve in order to prevent huge disruption to Huawei's supply chain and users.

Canalys expects that stringent restrictions will be imposed on Huawei once the reprieve is lifted and that this will have a significant impact on its ability to roll out new devices outside China in the short term.

It also expects the vendor to take steps to lessen the effect of these supply issues but that its global potential will still be hugely affected.

"It is important to note that market uncertainty is clearly prompting vendors to accelerate certain strategies to minimise the short- and long-term impact in a challenging business environment," explained Nicole Peng, VP of mobility at Canalys.

"For example, shifting manufacturing to different countries to hedge against the risk of tariffs. But with recent US announcements on tariffs on goods from more countries, the industry will be dealing with turmoil for some time."

Rival smartphone vendor Samsung is expected to take full advantage of Huawei's current struggles, the analyst predicted.

Rushabh Doshi, research director at Canalys, stated: "We expect the other major smartphone vendors will have short-term opportunities while Huawei struggles.

"Samsung will be the biggest winner, thanks to its aggressive device strategy and its ability to quickly ramp up production, though the Korean firm may struggle to entirely fill the shortfall.

"It will take other vendors until late 2019 to react to new opportunities. Samsung's control over component supply gives it a major advantage."

However, the rollout of 5G and other hardware innovations will see global shipments rise 3.4 per cent to 1.39 billion units in 2020.

"Smartphone fatigue and a lack of meaningful innovation are still major market forces," added Doshi.

"Consumers are holding onto phones for longer. But as device life cycles move towards a new equilibrium point, the rate of quarterly shipment decline will ease."