Slightly a week after Canalys put out its report on the smartphone industry performance for Q4 2022, Qualcomm in its Q1 2023 earnings call has come to the same conclusion, the world will not be buying many smartphones this year.
Qualcomm, which develops chipsets used by a wide range of OEMs, says that it is expecting “broadening demand weakness among handsets and IoT products”. Basically, they do not expect their customers to ship as many phones in the second and third quarters of 2023 because not many people will be buying them.
The signs of a difficult 2023 were already there. The overall smartphone shipments for Q4 2022 fell 17% year-on-year according to Canalys with Qualcomm recording similar numbers, an 18% drop in the number of phones shipped powered by their chipsets for the same period.
For Q1 2023, Qualcomm does not believe we will see a further dramatic drop in demand. However, the numbers will be underwhelming compared to the same period last year. The company believes things may start looking up towards the end of the year.
In terms of how Qualcomm expects smartphone manufacturers to behave in this challenging market. Rather than delaying the announcement and release of new phones, Qualcomm believes OEMs will prefer releasing the new products in smaller quantities to ensure the market is not flooded with unsold inventory.
By limiting the supply of new products, those willing to upgrade will do so, while the rest of the market continues to slowly chip away at the unsold inventory of last year’s devices, which is still high given the drop in demand.
Reducing the number of new smartphones in the market also negates the need for manufacturers to offer steep discounts for their older devices in order to clear them out, which would further eat into their diminishing profits.
Finally, just like Canalys did, Qualcomm CEO Cristiano Amon said that demand for new smartphones is weakest in the middle and low tiers of the market, which makes sense given that those shopping at the high end are least affected when it comes to things like inflation and other external factors the world is currently dealing with.
