Shortly after Apple (AAPL) reported its iPhone revenue fell 17% annually during its March quarter, research firm IDC estimated global smartphone shipments fell 6.6% annually in Q1 to 310.8 million, a bigger decline than the 4.9% drop it estimated for Q4. Peer Strategy Analytics estimates Q1 shipments fell 4.3% to 330.4 million.
Meanwhile, on Wednesday afternoon, Qualcomm (QCOM) issued weaker-than-expected June quarter guidance and also cut its full-year device forecast. The company now expects total shipments of 3G, 4G and 5G-capable devices (including products other than smartphones) to be in a range of 1.8 billion to 1.9 billion (flat to up 6%) this year, after having previously guided for shipments of 1.85 billion to 1.95 billion. On its earnings call, Qualcomm attributed the forecast cut to "continued weakness in China and a lengthening of [the] handset replacement cycle, potentially reflecting a pause in advance of 5G rollouts."
For its part, IDC thinks Chinese smartphone demand will likely remain soft this year. The firm also estimates U.S. smartphone shipments fell 15% in Q1 thanks to lengthening upgrade cycles. It thinks Apple, Samsung, LG, Xiaomi and Oppo also saw shipments drop last quarter; two Chinese OEMs, Huawei and Vivo, bucked the trend.
Apple did note on its earnings call that its iPhone sales in China, easily its weakest large market in recent months, got a boost toward the end of its March quarter from both company-specific actions (price cuts, trade-in and financing offers) and improved consumer spending following government stimulus measures and trade talk progress. However, the company is still forecasting its iPhone revenue will (unlike the rest of its business) be down annually in the June quarter, albeit to a lesser extent than in it did during the December and March quarters.
Overall, plenty of signs point to the smartphone market, which with 2018 sales of about 1.4 billion units easily dwarfs every other consumer electronics market in existence, remaining under pressure during the second half of 2019. 5G and foldable phone launches could help change the story in 2020, and other innovations such as 3D rear-camera systems could also lend a helping hand.
However, this year, both 5G and foldable phones are set to remain niche markets. Prices and network availability remain near-term issues for 5G phones, and as Samsung's Galaxy Fold issues highlight, foldable phones are not only expensive and available in limited volumes for now, they still need a lot of hardware and software refinement.
For investors in chip and component suppliers with strong smartphone exposure, the good news is that valuations for the group are still (despite recent gains) generally not too high. However, with chip stocks in general having rallied strongly in recent months amid hopes for healthier second-half demand, some near-term profit-taking wouldn't be that surprising in light of how pressured the smartphone market still looks.