Phone shipments to drop over 10% in 2020 if virus turns a pandemic
Published: Feb 25, 2020 07:28 PM

Two smartphones connected to the 5G network (R) and the 4G network (L) respectively are shown for comparison by a Chinese mobile service provider at the 2019 Smart China Expo in southwest China's Chongqing Municipality, Aug. 26, 2019. (Photo: Xinhua)

Global smartphone shipments are likely to fall 10 percent or more this year due to the fallout of the coronavirus outbreak on industrial supply chains and consumer demand, an industry analyst said on Tuesday.

In the worst-case scenario - if the disease turns out to be a global pandemic - the world smartphone market would drop more than 10 percent in terms of shipments, Roger Sheng, VP analyst at Gartner's semiconductors and electronics group, told the Global Times.

Global shipments are currently estimated to rise by 2.6 percent in 2020 as the virus outbreak reduces the previous forecast of a 4.9 percent increase, according to Sheng.

The consequences of the epidemic for semiconductor supply chains have so far come across as less worrying than for other sectors, industry observers said.

In China's domestic market, wafer manufacturers supposedly operated nonstop even during the Spring Festival holiday, meaning a major part of the workforce didn't leave for their hometowns to ensure steady production. Additionally, the environment of wafer fabs suggests they will highly likely remain intact despite the virus outbreak, Sheng said.

Semiconductor assembly and test facilities that are more labor-intensive might see some of their nonlocal staff subject to quarantine before returning to work, possibly delaying the restart of manufacturing activity, he went on to say.

Wuhan-based memory chipmaker Yangtze Memory Technologies Co is maintaining normal production and operations, and its raw material supplies and shipments are running smoothly, a company spokesperson told the Global Times recently.

There are more signs of slowing of the virus spread in China, with a host of provinces and cities reporting no new coronavirus cases for many days running and multiple places lowering virus alert levels. This arguably bodes well for broad-based efforts to get the economy going again. 

A spike of the disease outside China, nonetheless, stoked concerns over disruption to global semiconductor supply chains.

Take South Korea, where confirmed infections had soared to 977 as of 6pm Tuesday. The impact on South Korean suppliers remains invisible for the moment, Sheng disclosed. 

The analyst said that he learned from SK Hynix that the company felt tensions resulting from the virus outbreak, but its operations remain unscathed considering its large workforce and high levels of automation.

The South Korean memory chipmaker, which counts Apple and Huawei among its clients, has put 800 of its workers into self-quarantine after a new recruit was found to have had contact with a confirmed patient.

Shares of SK Hynix finished down 1.51 percent on Tuesday, following a decline of 3.4 percent during the prior day.

Samsung Electronics stock gained 1.94 percent while LG Electronics edged down 0.47 percent, after both suffered a rout on Monday. 

In a sign of revived risk rally, South Korea's benchmark KOSPI index rebounded on Tuesday after a virus-fueled slump the previous day. 

But if the epidemic keeps worsening, South Korea might face tighter travel restrictions from a lot more countries and regions. This could cast a shadow over the operations of semiconductor manufacturing faculties in South Korea as many of the machines deployed were made in the US, Europe and Japan and are in need of maintenance and support, which are likely to be hindered by the travel restrictions if the epidemic continues unabated in the near future, according to Sheng.

At least six countries including Israel have banned visitors from South Korea, with nine other countries and regions including Britain tightening travel restrictions for the nation, the Yonhap news agency reported on Monday.

A sudden surge in COVID-19 infections in Italy also fuels fears of a global pandemic, which the Gartner analyst said would inflict pain on both global supply chains and consumer demand.

Infections surged to 270 in Italy including seven deaths as of 6pm Tuesday, pummeling its already struggling economy.

In a sign of the virus-created jolt, Franco-Italian chipmaker STMicroelectronics with manufacturing sites in France and Italy, saw its shares tumble 7.08 percent on Monday.

Flows of people within Europe are much more frequent than within Asia, as facilitated by Schengen visas, complicating efforts to deal with the disease, Sheng remarked, portraying a most dire picture that would see global smartphone shipments taking a supply chain-consumption demand whammy, resulting in a drop of more than 10 percent in shipments this year.

He forecast a pickup in smartphone shipments in the Chinese market in the second half of the year though, citing a substantial cut expected in payouts for 5G services alongside aggressive 5G phone subsidies.