- IDC expects global 5G smartphone ASPs to hit $495 by 2023.
- Smartphone volumes will return to pre-Covid levels in 2022.
Bengaluru: Even though 5G smartphones remain a top priority for manufacturers, challenges posed by the Covid-19 pandemic and weak consumer demand have forced vendors to cut their production for 4G devices for this year and slash 5G prices by more than 25 per cent.
The supply-driven 5G push mixed with a poor economic climate will only accelerate the drop in 5G average selling prices (ASPs) in 2020 to about $600 from more than $800 last year.
In the second quarter, China saw 43 per cent of 5G devices priced under $400.
Research firm International Data Corporation (IDC) expects global 5G smartphone ASPs to hit $495 by 2023.
Research firm TrendForce forecasts total smartphone production is likely to make a rebound next year and brands are pushing out 5G models this year to maintain their market shares in the face of the recent demand slump and the share of the 5G models in the annual total smartphone production is projected to grow rapidly to 19.2 per cent for 2020 with China taking a lion’s share of more than 60 per cent.
The penetration rate is equivalent to around 238 million units. Next year, 5G penetration rate is expected to be about 40 per cent and have more than 50 per cent by 2023.
Less room for 4G devices on shelf
“5G remains a priority for all smartphone OEMs despite the challenges with the Covid-19 pandemic and lack of consumer demand. Most channels in developed markets have set the expectation that the portfolios they carry will be dominated by 5G units by the end of 2020, leaving less shelf space for 4G,” said Ryan Reith, Program Vice-President at IDC.
However, he said that they still believe that consumer demand for 5G is “very low” and when that is combined with the economic headwinds facing the market, the pressure to drive down hardware and service fees associated with 5G will become increasingly important.
According to IDC stats, the worldwide smartphone market is forecast to decline 9.5 per cent year over year in 2020 with shipments totaling 1.2 billion units.
On a positive note, IDC expects the smartphone market will return to a full recovery by 2022, and will achieve a compound annual growth rate of 1.7 per cent over the five year forecast, largely driven by the assumption that smartphones will continue to be the computing platform of choice for most of the world.
“Although we expect year-over-year growth of 9 per cent in 2021 that is only due to the large drop in 2020. The real recovery won’t happen until 2022 when smartphone volumes return to pre-Covid levels,” said Nabila Popal, Research Director at IDC.
“Other elements beyond 5G will play a role in the market recovery, most notably the continued opportunity in developing markets. There continues to be a strong shift towards low- to mid-end 4G devices in developing regions, which make up over 80% of smartphone volumes in these regions,” she said.