Worldwide smartphone market declines by 14% in Q1 2023

According to the latest research from Counterpoint Technology Market Research’s Market Monitor service, as a result of the post-holiday season, global smartphone shipments decreased by 14% year-on-year (YoY) and by 7% quarter-on-quarter (QoQ) to 280.2 million units in the first quarter (Q1 2023).

Senior Analyst Harmeet Singh Walia said, “Smartphone shipments declined further in Q1 2023 following the weakest holiday-season quarter since 2013, as the slower-than-expected recovery in China was marred by alarming bank failures on both sides of the Atlantic further weakening consumer confidence in the face of unrelenting market volatility. The smartphone market was also hit by some major brands supplying fewer new devices to a market struggling with high inventories at a time when consumers are choosing to renew less often, but with more durable smartphones when they do buy.”

As a result, global smartphone revenue and operating profit declined, though not as much as shipments. This was partly due to Apple’s lower-than-usual decline in shipments to 58 million units in Q1 2023.

Hence, Apple carried on to capture almost half of all smartphone revenues. On the other hand, Samsung’s shipments declined 19% YoY in spite of growing by 4% QoQ to 60.6 million units, the launch of the Galaxy S23 series enabled Samsung’s ASP to increase to $340, up 17% YoY and 35% QoQ, which, due to this, contributed to global revenues falling relatively less.

With 96% of global smartphone operating profits attributed to Apple and Samsung, the two brands remain the most profitable brands.

Research Director Jeff Fieldhack said, “Apple outperformed the market due to several factors. Firstly, the stickiness of its ecosystem prevents its customers from choosing a cheaper smartphone even in times of economic difficulty.

“Secondly, with sustainability becoming a priority for many, not only has Apple captured nearly half of the secondary market, it is also attracting users who are willing to spend more for longer-lasting devices.

“Thirdly, it is the preferred brand for Gen Z consumers in the West and is thereby positioning itself for sustained success. At the same time, it has been filling the void left by Huawei in China’s premium market. So, Apple is able to weather economic and other fluctuations better than its rivals while enjoying unflinching loyalty.

“This also meant Apple was able to meet the demand for the iPhone 14 series which spilt over Q4 2022, when it had problems at its Zhengzhou factory, rather than that share dissipating or transferring to rivals.”

Additionally, even the largest global smartphone brands from China, Xiaomi, OPPO and vivo, will take longer to recover since each saw double-digit annual declines in Q1 2023.

As the Chinese economy recovers, the company has also faced challenges in overseas markets. It has been forced to exit the German market after losing a patent lawsuit with Nokia.

Moreover, each of the three brands is struggling to increase revenues and profitability. In Q1 2023, OPPO and vivo saw both shipments and ASP declines, resulting in double-digit revenue declines, whereas Xiaomi saw its ASP grow slightly but could not prevent a decline of double-digit revenue.

Overall, the smartphone market is also likely to struggle in the coming quarters. Research Director Tarun Pathak stated, “The persistent issues affecting the smartphone market are unlikely to abate anytime soon. Moreover, the recent decision by OPEC countries to cut oil production may lead to higher inflation rates, causing a reduction in consumers’ spending power. As a result, even if the decline in smartphone shipments stabilises, a significant recovery is unlikely before the year-end holiday quarter.”