In the wake of the decision by the U.S. to ban businesses from working with Huawei, research firm Canalys has slashed its forecast for the global smartphone market by almost 5%.
The firm now projects smartphone shipments of 1.35 billion units in 2019, a year-over-year decline of 3.1% from 1.3931 billion units in 2018. That compares to the previous forecast of 1.417 billion units in 2019, or what would have been a projected 1.7% increase. That 2019 forecast is lower by 4.7%.
“It is important to note that market uncertainty is clearly prompting vendors to accelerate certain strategies to minimize the short- and long-term impact in a challenging business environment, for example, shifting manufacturing to different countries to hedge against the risk of tariffs,” said Nicole Peng, VP of Mobility at Canalys in a statement. “But with recent US announcements on tariffs on goods from more countries, the industry will be dealing with turmoil for some time.”
While the order issued by U.S. authorities is still officially on hold during a 90-day reprieve, Canalys expects it to go into effect. As a result, the order will strike a blow to Huawei’s ability to roll out new devices.
In recent years, Huawei had seen meteoric growth. While Apple iPhones shipments fell 23% in Q1 2019, for instance, Huawei’s shipments had surged over 50% year-over-year. The company had set a goal of overtaking Samsung in 2020 to be the world’s top smartphone seller.
Now, Huawei is scrambling to implement contingency plans. In the short term, it’s unclear whether other smartphone makers will benefit.
The report says Samsung might be in the best position to profit from Huawei’s woes, given the South Korean company’s ability to boost production and compete on price. By 2020, with the expanded introduction of 5G phones and more time to adjust sales strategies and supply chains, Canalys is optimistic global smartphone sales will increase slightly.
Still, Huawei had stood out as a lone bright spot among a broader global market that had stalled and gone into decline. Without Huawei’s ambitious growth plans, the smartphone market overall will likely remain less than robust, Canalys says.
“Smartphone fatigue and a lack of meaningful innovation are still major market forces,” said Rushabh Doshi, Research Director at Canalys in a statement. “Consumers are holding onto phones for longer. But as device lifecycles move toward a new equilibrium point, the rate of quarterly shipment decline will ease.”