Before the outbreak, the world’s biggest smartphone maker was expecting demand to grow this year. But with the pandemic showing signs of “being prolonged, the smartphone market is contracting,” DJ Koh, head of Samsung’s mobile division, said at a shareholder meeting on Wednesday. Koh added that he still expects demand for 5G smartphones to rise compared to last year.
The pandemic has brought major cities around the world to a virtual standstill. South Korea, where Samsung(SSNLF) is based, has for weeks been dealing with one of the largest outbreaks outside of mainland China. The virus has now spread to Europe, North America and elsewhere, prompting officials to impose strict work and travel restrictions on millions. People all over the world are now hunkering down and avoiding crowded places.
Samsung’s warning on Wednesday comes just days after Apple(AAPL) said it was shutting down all stores outside of Greater China in an effort to contain the virus. Apple warned last month that it would miss its first quarter revenue guidance, after it had to shut down stores in mainland China and its main contract manufacturer Foxconn(HNHPF) was forced to close factories in the country. Apple has since reopened all of its China stores.
Even as their factories return to normal, Samsung, Apple and other smartphone makers are bracing for a steep hit.
Earlier this month, before the full scale of the crisis in Europe and the United States became apparent, research firm Strategy Analytics said it expected global shipments of smartphones in 2020 to be 10% lower than expected “due to the fear and paralysis caused by coronavirus.”
“No one wins. All major [smartphone makers] will take a hit and ship [fewer] smartphones than pre-coronavirus outbreak,” the firm said in a report.
It’s not all doom and gloom for Samsung. The company is also a major supplier of memory chips, a market that has been in a slump in recent years due to falling prices and a glut of inventory.
Samsung Electronics chief executive Kim Ki-nam said on Wednesday that the company expects chip demand to increase this year thanks to growth in markets such as artificial intelligence, driverless cars and 5G phones and networks.