COVID-19 causes decline in Aussie smartphone sales

Tuesday, 08 September, 2020

COVID-19 causes decline in Aussie smartphone sales

Research from technology analyst firm Telsyte has found that the economic toll of COVID-19, coupled with handset supply delays, has impacted first half smartphone sales in 2020 with 3.8 million units sold, down 5% compared to 2019. The study found that despite the disruptions, overall demand declined marginally as Australians increasingly relied on their smart devices during the lockdowns.

Telsyte found 45% of smartphone users claimed they spent more time on their phones since the pandemic began. Similarly, smartphones remained the ‘main’ digital device for 49% of all users. Despite declines in sales of Apple (-2%) and Android (-7%) smartphones during the measured six months, Apple performed comparatively better with the release of the more affordable iPhone SE, increasing its sales share by 1.1% to 44.3% (compared to 55.7% Android).

Apple, Samsung and OPPO were the top three smartphone vendors, with a combined sales share of 87%, up from 81% in 1H19. Telsyte estimates sales of Huawei smartphones fell 75% from the first half of 2019 to under 50,000 units, primarily due to the lack of Google Play Store and a difficult trading environment in Australia for the manufacturer.

Consumers are also increasingly drawn to more affordable smartphones that offer quality build and features associated with more premium handsets. The average cost of Android smartphones decreased by over 10% during the first half, with iPhone down 2% from 1H19. The release of the iPhone SE helped address demand for iPhones at different price points, with Telsyte estimating that 230,000 units (or 13% of total iPhone sales) were iPhone SE sales, despite only being available for two months in the measured period. The iPhone 11 remained the most popular iPhone model during the half, followed by the iPhone SE and iPhone 11 Pro. Samsung’s premium Galaxy S20 and A series smartphones helped the manufacturer remain the dominant Android player in Australia.

Telsyte predicts that smartphone sales in the second half of 2020 will struggle, due to ongoing economic uncertainty and potential supply issues, with a 7% decline from 2H19 to 4.1 million units sold projected. The current average replacement cycle for smartphones remained at just over three years, up from 2.8 years in 2018. The study found smartphone users are prepared to hold onto their phones for longer, with 46% of consumers claiming they plan to use their phone for at least four years, or until it is no longer usable.

However, if Apple releases its 5G iPhone in 2020, it could spur the iPhone upgrade cycle that began with the iPhone SE in April 2020. Approximately 40% of iPhone users indicated their next smartphone must support 5G technology. Less than 15% of smartphones sold during 1H supported 5G, with 5G still being marketed as a premium feature. The figure could double in 2H20, with the release of a 5G iPhone, sparking an upward trend similar to when Apple released its 4G iPhone in 2012 (iPhone 5).

Telsyte Managing Director Foad Fadaghi noted that consumers are spending more time on their smartphones, for communication, essential services, work and entertainment. The increased usage and dependency should see the smartphone market weather the downturn better, with customers replacing ageing devices.

Research showed that consumers continue to look for ways to improve their overall smartphone experience by ‘accessorising’ with smart wearable devices including wrist wearables (fitness bands and smartwatches) and hearables (wireless earbuds). More than 2.6 million smart wearables were sold during the first half of 2020, up from 1.9 million in 2019, a growth of 39%, driven by a boom in hearables.

Sales of smart hearables more than doubled to around 1.5 million in the first half of 2020, with increasing working from home and conferencing activities lifting demand. Sales of smart hearables were more than fitness bands (411,000) and smartwatches (772,000). Apple and Samsung were the top two vendors in the smart hearables market in 1H20, with a combined 65% market share.

The study found 4.6 million (22%) smartphone users were using smart hearable devices at the end of June 2020, up from 2.6 million a year ago. Sales of fitness bands rebounded in the first half of the year, with Australians looking for ways to maintain their health and fitness during lockdown. A total of 1.18 million smart wrist wearables (combined smartwatches and fitness bands) were sold in the first half, down by 3% from 1.22 million a year ago.

Fitness band sales increased by 8% from 1H19, reaching 411,000 units in the first half as more Australians turned to technology for health and fitness. Despite strong momentum in 2019, the lack of new smartwatch releases and a maturing market impacted the demand, with 1H20 sales down 7% from 1H19. Apple remained the leader in the smartwatch market, followed by Samsung, Fitbit and Garmin.

Around one in five Australians are interested in smart glasses that work alongside their smartphones, with those interested willing to pay around $460 a pair. Telsyte estimates if Apple releases consumer smart glasses in 2020 that are not prohibitively expensive and are widely available, they could sell upwards of 100,000 units in the first 12 months. Smart glasses were identified as a substantial catalyst for disruption in the eyewear and prescription glasses industry if they can follow the success of smartwatches in gaining regular users and market share.

“Despite smart glasses falling off the consumer radar, the software and hardware has kept improving, and new products could reignite market interest,” said Alvin Lee, Telsyte Senior Analyst.

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