Global Smartphone Production Collapsing, Apple Hit Hard

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After years of growth, smartphone sales have started to slow worldwide. This means production will drop sharply in the first quarter of 2019, bad news for several companies, in particularly Apple Inc. (NASDAQ: AAPL).

Research firm TrendForce expects production in the first quarter to fall 10% to 307 million units. Part of the reason is that global sales in the fourth quarter of 2018 were slow and manufacturers have excess inventory. Several brands will continue to dominate the market worldwide as they jockey for market share based mostly on new features and prices.

TrendForce management said:

The latest first-quarter production figures from the major smartphone makers indicate that the top six brands by production volume for 1Q19, in order, will be Samsung, Huawei, Apple, Xiaomi, OPPO, and Vivo. The leader Samsung has begun adjusting its product strategy since 2H18 in order to challenge the Chinese brands head on in the market segment for economically priced but high-spec devices. For now, the Galaxy J devices still account for nearly 50% of Samsung’s total smartphone production. They will continue to be the pillar that maintains the overall production level in the near future. TrendForce forecasts that Samsung’s total volume for 1Q19 will reach 70 million units.

In terms of global market share, Samsung is expected to be the clear leader. TrendForce forecasts Samsung will increase the production of the Galaxy A phones to gradually shift the Galaxy J devices as the brand’s mainstream offerings. It is also expected to be more aggressive in the huge India market with sales of its Galaxy M. The new mix of products is meant to hold off market share growth by the largest Chinese manufacturers. Samsung’s market share in the first quarter is still expected to fall to 18.6% to from 22.8% in the fourth quarter.

Apple’s share is expected to crater, from 18.3% in the fourth quarter to 13.5% in the current quarter. Apple has announced a decline in expected sales. This is based largely on problems in China. However, Apple has struggled in India as well.

The manufacturers that are expected to do the best in the first quarter are the four largest in China, although some will suffer modest losses of market share. Huawei will take Apple’s place as the number two smartphone company based on global market share, but that share will drop slightly from 15.8% in the fourth quarter to 15.0%. Huawei may hit sales problems in many established markets has the United States goes after the company for intellectual property theft.

Among the other Chinese manufacturers, Xiaoma’s share is expected to move from 7.9% of the global market to 8.5% in the first quarter. Like the other large Chinese companies, most of its sales are in its home market. Production market share for Oppo is expected to drop very slightly from 7.6% to 7.4%. Vivo’s share should be 6.4% in the current quarter, up from 6.3% in the final quarter of last year.

Finally, TrendForce noted that these brand leaders:

… will continue to pursue hardware optimization in the immediate term, mainly focusing on these four main areas: display (i.e. high-resolution displays and all-screen design), camera (i.e. high-resolution multi-lens cameras and in-display cameras), biometric recognition (i.e. in-display fingerprint sensors), and memory (i.e. high-density solutions).

Company Ranking 4Q Market Share 4Q Ranking 1Q Market Share 1Q
Samsung 1 18.60% 1 22.80%
Huawei 3 15.80% 2 15.00%
Apple 2 18.30% 3 13.50%
Xiaomi 4 7.90% 4 8.50%
Oppo 5 7.60% 5 7.40%
Vivo 6 6.30% 6 6.40%

Source: TrendForce

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