Earnings season has already delivered plenty of signs that smartphone sales are down sharply right now in countries dealing with COVID-19 lockdowns. But there has also been a bit of encouraging news from Chinese carriers.
On Friday morning, Verizon (VZ) reported that its wireless equipment sales (dominated by phones) fell 18.9% annually in Q1 to $3.4 billion. And from the looks of things, the decline has been much larger in recent weeks, as most of Verizon's physical retail stores remain shuttered.
Verizon says that from March 15 to April 15, wireless device upgrades among consumers, SMBs and "global enterprise, public sector and other" customers fell 41%, 45% and 19% annually, respectively. Postpaid device activations rose 80% among global enterprise, public sector and other clients, but fell 44% among consumers and 33% among SMBs.
On its earnings call, the telecom giant added (not too surprisingly) that it expects the device activations to remain low "throughout the second quarter, with uncertainty around customer behavior for the remainder of the year."
For its part, AT&T (T) disclosed on Wednesday (ahead of the CEO change announced this morning) that its wireless equipment sales fell 8% in Q1 to $3.4 billion. On its earnings call, Ma Bell added that equipment sales were down nearly 25% in March.
Verizon and AT&T's disclosures fit with the downbeat comments that chip developers and manufacturers such as Taiwan Semiconductor (TSM) , Texas Instruments (TXN) and STMicroelectronics (STM) have shared about near-term smartphone demand.
TSMC, which manufactures chips for a slew of big mobile chip developers, said last week that it now expects smartphone unit sales to be down by a high-single digit percentage this year, with 5G phones accounting for a mid-teens percentage of units. TI disclosed on its Tuesday earnings call that its mobile phone-related chip sales were down by a low-double digit percentage in Q1.
But while smartphone sales in places such as the U.S. and Europe are clearly under pressure, there does appear to be some improvement lately in China, where sales fell sharply in Q1 as the country's COVID-19 lockdowns impacted both production and demand. And from the looks of things, a large percentage of the phone sales China has seen in recent weeks have involved 5G devices.
Earlier this week, China Mobile, the world's largest carrier in terms of subscribers, disclosed that its 5G subscriber base rose by 16.3 million in March to 31.7 million. And a couple days later, rival China Telecom said it added 12 million 5G subs in Q1, raising its total base to 16.6 million.
Major network investments and promotional efforts from local carriers are boosting China's 5G phone sales. So is the rival of 5G phones sporting mid-range prices -- for example, Xiaomi's Redmi K30 5G, which retails for less than $300.
Strong Chinese 5G phone demand, together with high-end 5G phone launches from the likes of Apple and Samsung, could allow 2020 5G phone sales to account for a larger percentage of unit sales than what companies such as TSMC (not to mention some industry research firms) have been forecasting. And that in turn would be a silver lining for a slew of mobile chip suppliers, given that 5G phones (on average) pack a lot more chip content than their 4G counterparts.
Qualcomm (QCOM) , which maintains a dominant position in the high-end 5G modem market and also has an RF chip business that's getting a lift from 5G design wins, would benefit. So would Taiwanese modem/processor rival MediaTek, which has a number of design wins for mid-range Chinese 5G phones.
Other beneficiaries include RF chip suppliers such as Skyworks (SWKS) and Qorvo (QRVO) , given that the addition of a 5G radio to a phone requires the addition of a decent amount of extra RF chip content.