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Separate studies from ABI Research and Juniper Research have outline the stark realities and potential losses that the Covid-19 outbreak will have on the mobile industry, affecting both device production and service revenue.
In a study aiming to identify the short- and long-term impacts the global pandemic will have on 5G devices, smartphones and wearables, ABI warned that the emergency is likely to lead to a huge reduction in the production of smartphones, potentially falling by as much as 30% in the first half of 2020. In the longer term, it expects the outbreak to gradually come under control by the end of the second quarter of 2020, but after that it will take some time for consumer confidence to return and for the device sector to recover.
The analyst said the ripples from China will be felt globally as the epicentre of the Covid-19 outbreak has resulted in mass disruption to production lines and a stalling of related supply chains caused by labour shortages and inactive logistics. Also, China is one of mobile’s largest markets, so that sector has been hit hardest by delayed shipments and weaker development of next-generation products.
ABI stressed that it was not clear what the full extent or lasting effect that Covid-19 would have on the mobile device ecosystem, but in the short to medium term, it will heavily affect the smartphone market. Worryingly for such a nascent market, ABI noted that, in the short term, there will be a marked adverse effect on 5G devices.
“No sooner had 5G smartphones started to gain some traction and break into the market in significant numbers, than the outbreak will now trigger a suppression of its near-term growth, pushing out the development and introduction of affordable 5G phones,” said David McQueen, 5G devices research director at ABI Research.
“This move to lower price tiers was expected to become a key driver for boosting 5G smartphone shipments in 2020, but the desired impact will now be lessened throughout the year due to the outbreak. Shipment volumes for 5G smartphones in 2020 will be much lower than previously expected, slowed by a stagnant supply chain and crippled demand.
“Undoubtedly, the market will also be faced with numerous disruptions and delays, most notably the launch of Apple’s first 5G iPhones, which are due to appear in September 2020. Importantly, with such a large proportion of the world’s mobile device market relying on China for manufacturing and component supply, which is contending with disruption on a massive scale, it has become clear that many in the chain were woefully unprepared to react quickly.
“Aside from taking its toll on both demand and the supply chain, it will particularly affect the industry’s eagerness to drive 5G to lower price points in 2020, seriously blunting its growth potential.”
In a call to action, ABI recommended that suppliers fully understand their exposure to all those along the chain, identifying and evaluating all risks related to issues such as capacity management and market demand, enabling them to react accordingly and mitigate the impact of any future market disruptions.
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But the Juniper Research analysis noted that even if the required amount of devices were available, lucrative revenue streams will not be available. It estimated that the impact of coronavirus on the international travel industry could cost mobile operators more than $25bn in lost revenue over the next nine months.
In its study, Coronavirus: The impact on mobile roaming for operators, Juniper examined two possible scenarios – a medium and high impact, believing that a low impact is no longer possible.
The high-impact scenario assumes that severe disruption to international travel will continue for nine months, with travel restrictions and reduced demand for international travel continuing. The resulting impact on operators’ international roaming revenue would be significant. This scenario also sees more than 650 million passenger trips cancelled because of coronavirus over the next nine months – over 80% of the anticipated international passenger trips that had been forecast before the pandemic.
Juniper’s research assumes that over half of all roaming revenue for the year will be affected, amounting to $25bn in lost revenue. The research also highlighted the period between June and August as of particular significance, when the demand for international travel is normally high. It forecast that operators could lose up to $12bn in roaming revenue in those three months alone.
Juniper emphasised that in terms of the overall impact on operators, global roaming revenue accounts for only 6% of total operator-billed revenue per year, limiting the hit on the industry. Also, given the nature of the international travel industry, the research anticipated there will be no strategies available to operators to mitigate this loss.
It also forecast that services such as virtual conferencing will offer businesses an alternative to international travel, but will bring no benefit to operators. Juniper also suggested that travel cancelled due to the spread of coronavirus is unlikely to be rebooked. Therefore, this loss of roaming revenue is unlikely to be recovered once the international travel industry resumes normal service.
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