The global smartphone market is taking a breather.
With inflation lifting the cost of daily necessities like gasoline and food, many phone owners are sticking with their current models longer, according to industry executives. Companies are making fewer phones and fewer phone parts, and they are planning for a further rough patch ahead.
China’s Xiaomi Corp., the world’s third-largest smartphone maker after Apple Inc. and Samsung Electronics Co., said Friday that it shipped 26% fewer smartphones in the April-to-June quarter compared with a year earlier, and smartphone-related revenue fell 28% to the equivalent of $6.2 billion.
Xiaomi cited shrinking consumer demand in China, which had pandemic-related lockdowns in the quarter, as well as rising food and fuel prices around the globe.
In the same quarter, worldwide smartphone shipments declined nearly 9% compared with a year earlier to 286 million units, according to research firm International Data Corp. The biggest drag on the market was China, but the U.S. and most other regions were also weaker, IDC said.
Sean Mullee, a 23-year-old economist in Washington, D.C., recently moved to the capital from Ohio and said he found the cost of living high, especially now with inflation running at more than 8%. Mr. Mullee, who has an iPhone X he got a couple of years ago, said he wasn’t planning to upgrade for now.
“When your car breaks down, it’s like, ‘OK, well I need a car, so I have to go get one.’ But until then, I’m going to keep putting it off,” he said.
The situation has changed from the first two years of the pandemic, when people staying at home were using their phones more. In that period, demand was strong and the biggest problem for the industry was the supply chain, which was hit by shipping delays, Covid-19 lockdowns and a shortage of semiconductors. Those issues haven’t gone away but are gradually easing.
“What started out as a supply-constrained industry earlier this year has turned into a demand-constrained market,” said Nabila Popal, an analyst with IDC.
The slowdown isn’t uniform. Sales of smartphones priced above $900 grew more than 20% in the first half of this year compared with the same period a year earlier, according to Counterpoint Research. The segment includes Samsung’s foldable smartphones and many of Apple’s latest iPhones.
Only about one in 10 smartphones globally fell into that premium category in the first half of the year, but it accounted for 70% of industry profits, Counterpoint said. Canalys Research analyst Runar Bjørhovde said wealthy consumers aren’t as bothered by the higher cost of daily expenses and still want to have the latest phones in their pockets.
On the flip side, some big carriers are seeing more subscribers default on their payments as inflation takes a bite out of household finances. “Naturally they’re not going to see people buying new phones if they can’t even pay for their phone subscriptions,” said Mr. Bjørhovde.
Samsung introduced budget 5G models in March, a move it said was aimed at stimulating demand, while it is also pitching foldable phones that cost as much as $1,800 in the premium market.
Apple, which is expected to roll out the latest versions of its iPhone in September, benefits from being primarily a high-end brand, but there are signs that it can’t rest easy.
The biggest iPhone assembler, Foxconn Technology Group, said this month that it saw slowing demand for smartphones, as did Qualcomm Inc., a chip supplier to Apple and others, in July.
Apple supplier Taiwan Semiconductor Manufacturing Co., a leader in advanced smartphone chips, said recently that its smartphone business is no longer its biggest revenue generator. The No. 1 spot is now held by high-performance computing chips that are used in applications such as graphics processing and autonomous driving.
China, which accounts for nearly a quarter of global smartphone shipments, is at the centre of concerns about global demand.
From July 29 to Aug. 1, Apple took the unusual step of discounting its iPhones in China and running ads online advertising the sale. It knocked the equivalent of nearly $100 off the price of its iPhone 13 Pro Max and 13 Pro models.
Wang Xiang, the president of Xiaomi, alluded to a similar situation on Friday when reporting the company’s weak results, including a 67% drop in net profit. “Due to the weak market demand, we are trying various ways to clear our inventory, which has caused a decline in profit,” he said.
Zhao Haijun, co-chief executive officer of Shanghai-based Semiconductor Manufacturing International Corp., said he saw some companies involved in making smartphones or smartphone parts suddenly cutting orders.
“That triggered a panic in the supply chain,” Mr. Zhao said on an investor call this month.
Feng Xiao, a 37-year-old sports-event organiser based in Shanghai, echoed Mr. Mullee in the U.S. when asked whether she was planning to upgrade her phone. “My iPhone 12, which I’ve used for about two years, is still just fine,” she said.
Analysts said they thought demand would likely start to improve later this year or next year and the people who say they are happy with their phones would eventually get restless. That assumes there won’t be major global disruptions such as a deepening of the U.S.-China conflict over Taiwan or a new surge in inflation.
“We continue to believe that any reduction today is not demand that is lost, but simply pushed forward,” said IDC’s Ms. Popal.
—Jiyoung Sohn contributed to this article.
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.
Sky-high pricey artworks may not be flying off the auction block right now, but the art market is actually doing just fine.
That’s a key takeaway from a 190-plus page report written by Art Economics founder Clare McAndrew and published Thursday morning by Art Basel and UBS. The results were based on a survey of more than 3,600 collectors with US$1 million in investable assets located in 14 markets around the world.
That the art market is doing relatively well is backed by several data points from the survey that show collectors are buying plenty of art—just at lower prices—and that they are making more purchases through galleries and art fairs versus auction houses.
It’s also backed by the perception of a “robust art market feeling,” which was evident at Art Basel Paris last week, says Matthew Newton, art advisory specialist with UBS Family Office Solutions in New York.
“It was busy and the galleries were doing well,” Newton says, noting that several dealers offered top-tier works—“the kind of stuff you only bring out to share if you have a decent amount of confidence.”
That optimism is reflected in the survey results, which found 91% of respondents were optimistic about the global art market in the next six months. That’s up from the 77% who expressed optimism at the end of last year.
Moreover, the median expenditure on fine art, decorative art and antiques, and other collectibles in the first half by those surveyed was US$25,555. If that level is maintained for the second half, it would “reflect a stable annual level of spending,” the report said. It would also exceed meet or exceed the median level of spending for the past two years.
The changes in collector behaviour noted in the report—including a decline in average spending, and buying through more diverse channels—“are likely to contribute to the ongoing shift in focus away from the narrow high-end of sales that has dominated in previous years, potentially expanding the market’s base and encouraging growth in more affordable art segments, which could provide greater stability in future,” McAndrew said in a statement.
One reason the art market may appear from the outside to be teetering is the performance of the major auction houses has been pretty dismal since last year. Aggregate sales for the first half of the year at Christie’s, Sotheby’s, Phillips, and Bonhams, reached only US$4.7 billion in the first half, down from US$6.3 billion in the first half a year ago and US$7.4 billion in the same period in 2022, the report said.
Meanwhile, the number of “fully published” sales in the first half reached 951 at the four auction houses, up from 896 in the same period last year and 811 in 2022. Considering the lower overall results in sales value, the figures imply an increase in transactions of lower-priced works.
“They’re basically just working harder for less,” Newton says.
One reason the auction houses are having difficulties is many sellers have been unwilling to part with high-value works out of concern they won’t get the kind of prices they would have at the art market’s recent highs coming out of the pandemic in 2021 and 2022. “You really only get one chance to sell it,” he says.
Also, counterintuitively, art collectors who have benefited from strength in the stock market and the greater economy may be “feeling a positive wealth effect right now,” so they don’t need to sell, Newton says. “They can wait until those ‘animal spirits’ pick back up,” referring to human emotions that can drive the market.
That collectors are focusing on art at more modest price points right now is also evident in data from the Association of Professional Art Advisors that was included in the report. According to APAA survey data of its advisors, if sales they facilitated in the first half continue at the same pace, the total number of works sold this year will be 23% more than 2023.
Most of the works purchased so far were bought for less than US$100,000, with the most common price point between US$25,000 and US$50,000.
The advisors surveyed also said that 80% of the US$500 million in transactions they conducted in the first half of this year involved buying art rather than selling it. If this pattern holds, the proportion of art bought vs. sold will be 17% more than last year and the value of those transactions will be 10% more.
“This suggests that these advisors are much more active in building collections than editing or dismantling them,” the report said.
The collectors surveyed spend most of their art dollars with dealers. Although the percentage of their spending through this channel dipped to 49% in the first half from 52% in all of last year, spending at art fairs (made largely through gallery booths) increased to 11% in the first half from 9% last year.
Collectors also bought slightly more art directly from artists (9% in the first half vs. 7% last year), and they bought more art privately (7% vs. 6%). The percentage spent at auction houses declined to 20% from 23%.
The data also showed a shift in buying trends, as 88% of those polled said they bought art from a new gallery in the past two years, and 52% bought works by new and emerging artists in 2023 and this year.
The latter data point is interesting, since works by many of these artists fall into the ultra contemporary category, where art soared to multiples of original purchase prices in a speculative frenzy from 2021-22. That bubble has burst, but the best of those artists are showing staying power, Newton says.
“You’re seeing that kind of diversion between what’s most interesting and will maintain its value over time, versus maybe what’s a little bit less interesting
and might have had speculative buying behind it,” he says.
Collectors appear better prepared to uncover the best artists, as more of those surveyed are doing background research or are seeking advice before they buy. Less than 1% of those surveyed said they buy on impulse, down from 10% a year earlier, the report said.
Not all collectors are alike so the Art Basel-UBS report goes into considerable detail breaking down preferences and actions by individuals according to the regions where they live and their age range, for instance. The lion’s share of spending on art today is by Gen X, for instance—those who are roughly 45-60 years old.
Despite a predominately optimistic view of the market, of those surveyed only 43% plan to buy more art in the next 12 months, down from more than 50% in the previous two years, the report said. Buyers in mainland China were an exception, with 70% saying they plan to buy.
Overall, more than half of all collectors surveyed across age groups and regions plan to sell, a reversal from past years. That data point could foretell a coming buyer’s market, the report said, or it “could be indicative of more hopeful forecasts on pricing or the perception that there could be better opportunities for sales in some segments in the near future than there are at present.”
In the U.S., where 48% of collectors plan to buy, Newton says he’s seeing a lot of interest in art from wealth management clients.
“They’re looking for ideas. They’re looking for names of artists that can be compelling and have staying power,” Newton says. “That’s definitely happening from an optimistic standpoint.”
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.