The Consumer Technology Association (CTA) has published new forecasts for smartphone, laptop and TV sales in the US, which do not look the most attractive.
While it has been rightly assumed economies will take a material hit throughout the COVID-19 pandemic, some might have assumed the TMT industry would be slightly immune considering how integral technology is in today’s world. But the CTA is offering a reality check, which could have a detrimental impact to the telco industry, especially when it comes to upgrading consumers to 5G data tariffs.
“Unemployment and downward pressure on consumer spending caused by this pandemic will bring significant headwinds to the tech industry outlook this year,” said Gary Shapiro, CEO of the CTA.
“The tech industry has weathered many economic storms over the last few decades but as a whole the tech sector remains resilient and plays an indispensable role in our lives. Technology will be a catalyst for America’s comeback from crisis.”
|Category||2020 Shipment Forecast||Year-on-year Range|
|Smartphones||138-153 million||-15% to -6%|
|TVs||34-37 million||-14% to -8%|
|Laptops||46-51 million||-12% to -4%|
While the fortunes for devices and electronic goods might be dampened over the next twelve months, the CTA is forecasting profits elsewhere. Online streaming video services, for example, are expected to bring in revenues between $24-$25 billion which would represent an increase between 29-35% on 2019.
The upshot for the streaming segment might not be a surprise to many, as Netflix exceeded analyst expectations during its earnings call last week. Revenues for the three months ending March 31 stood at $5.768 billion, a 27% year-on-year increase, while subscriptions surged 22.8% globally to 182 million.
Walt Disney is another which is likely to profit from the outbreak with its Disney+ service. The numbers from the first few months have been very attractive, though we’ll have to wait until May 5, the Q2 2020 results, to see how the service has been received in European markets.
What is worth noting is that while an increase in broadband usage might sound beneficial to the telecoms industry, revenues in this segment rarely follow increases in data usage. With unlimited data packages becoming more common, some might upgrade though many will simply continue with the services currently in place. However, there will be a consequence for lower smartphone and laptop sales.
With connectivity being embedded in more devices and products nowadays, the introduction of SIM-embedded laptops would certainly add incremental growth to telco revenues. It would not be lifechanging by any mean, but every little counts. Dampened demand for smartphones is certainly something which should be a concern for the telcos, however.
2020 was supposed to be the year of 5G. Not only are there extortionately expensive flagships being launched throughout the industry, there are also more affordable devices from the likes of TCL and Lenovo-owned Motorola, to democratise 5G. With the launch of these devices, a refreshment cycle would have been expected. With a smartphone refreshment cycle, the telcos could have expected a material number of customers to upgrade to 5G data tariffs.
By migrating customers to 5G contracts, ROI could be realised on very expensive deployment projects, offsetting expenditure. These revenues are of course still on the horizon, being deferred not deleted, but for financial strained telcos where business models are balanced ROI, it is an uncomfortable truth.
The longer this outbreak persists, the less confident consumers will be in spending cash, especially as more employees face the prospect of unemployment. In the UK, the risk has been slightly offset by the furlough programme (The Coronavirus Job Retention Scheme), where the Government agrees to pay 80% of an employee salary up to £2,500 a month in an attempt to reduce redundancies, however such schemes are not available in the US where 26.453 million people (16.2% of workforce) have filed claims for unemployment benefit during the coronavirus outbreak.
The telecoms industry has been somewhat protected from the outbreak, thanks to work-from-home and remote learning pick-up, though the prospect of growing revenues and realising the potential of 5G is significantly weakened during this period. Revenues might be cut, but a strained telco industry will have to persevere for a bit longer.