New Delhi, Although factories are beginning to ramp up production slowly, the first quarter smartphone sales are likely to hit by over 20 per cent in China in the first quarter, resulting in global sales going down at least 7 per cent compared to same period last year, a new report said on Thursday.
Foxconn said it is running at about half its normal low-season capacity — this equates to about 25 per cent of full capacity.
“While factories are anxious to ramp-up production, they’re also being careful that labour-intensive work does not rekindle viral outbreaks,” said Peter Richardson, Research Director, Counterpoint Research.
“Our initial expectation was that the virus would be contained within two months and take three further months for things to get back to normal. We now expect Q1 China sales to be down by around 25 per cent compared to the original forecast. This is 18 per cent lower than Q1 last year,” he explained in a statement.
This can worsen if the virus is not contained.
“Global sales will also go down 7 per cent compared to the same period last year. Overall, we think Q1 and Q2 will show negative growth both globally and in China before rebounding,” forecast Richardson.
As China gradually recovers from the initial peak of infections, the factory production will gradually return towards normal.
However, the reduced capacity is likely to continue into the second quarter.
“The impact to supply and demand was most acute in China. Supply restrictions have started to show up in other global markets,” said Richardson.
“We are now expecting to see some impact to demand in global markets as consumers moderate their economic activity in the face of personal and economic uncertainty,” he added.
According to some offline retailers, they have experienced a 50 per cent drop in sales during the late January period.
“There will be impact to new devices to be launched in the first half which have facilities in China, as factories will not function properly. Components sourced from China will also be impacted as all factories will resume operation slowly and cautiously,” said Counterpoint.
This will range from displays from Chinese electronic components producers like BOE, CSOT and semiconductors from YMTC and further on.
“So the negative impact from the supply chain side will last until end of Q2. The impact of nCoV-19 could be much more severe than many currently expect,” Richardson noted.
