UBS analysts — Gareth Jenkins, Steve Milunovich and colleagues — this afternoon informed clients they've cut their estimates for expected smartphone sales, writing that reports from vendors show "the slowdown has been more marked than expected."
The firm cuts its total mobile handset forecast — including smartphones but also simpler devices such as "feature phones" — to shipments of 1.64 billion this year and 1.67 billion next year, down from 1.68 billion and 1.73 billion estimated previously.
In smartphones specifically, they estimate 1.32 billion this year and 1.39 billion next year, down from a prior 1.406 billion and 1.56 billion.
The authors cite multiple reasons why, with the exception of Apple's (AAPL) iPhone, and China's privately held Huawei (who were the top gainers in the latest smartphone market share reports), most other vendors have been struggling:
Our work shows that with the exception of Apple and Huawei, since the start of the year, almost all device OEMs have seen expectations fall which we believe reflects 1) a weaker macro environment than expected 2) a move to an aspirational upgrade market (a sign of market maturation) in emerging markets 3) the structural shift seen in US tariffs/subsidies and 4) Chinese smartphone vendors having been too aggressive in their market share expectations (bar Huawei) and the potential of the export market, while the China market itself is saturated.
Regarding the Chinese situation, the authors emphasize they don't want to be "overly pessimistic" because they actually believe that inventory of phones will be cleared from retail distribution and that things may improve for all vendors in Q4:
At the Q1 stage, inventory levels remained healthy globally across Mobile OEMs but we believe Inventory China may have been higher than normal and we expect the inventory to clear out in China post investment in FD-LTE networks. In Q2 it remains to be seen how this has trended but we believe Apple's headline unit forecasts may have been impact by as much as 3m units from channel work down, possibly ahead of new releases. The wider industry is now operating at such fast cycle times that inventories tend to be cleared reasonably rapidly even if painful.
Source: Smartphones: UBS Cuts Numbers as China Clears Inventory
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