COVID-19's impact on 5G will be limited: Samsung, LG
Roh Tae-moon, Samsung Electronics' mobile chief, previews the Galaxy S20 Ultra 5G during the Galaxy Unpacked 2020 event at the Palace of Fine Arts in San Francisco, Calif., the United States, Feb. 11. EPA-Yonhap
By Kim Yoo-chul
By Kim Yoo-chul
Industry experts anticipated that offline smartphone sales would dwindle due to coronavirus concerns, keeping consumers home rather than in stores. Yet, Samsung and LG said Friday the virus will have a “limited” impact on their 5G mobile businesses.
The assumption is based on findings and observations by top-tier investment banks that the magnitude of the impact won't be as big as predicted because the ramp is backed loaded to start with.
“Even in the worst-case scenario, we don't believe the outbreak of COVID-19 will have a major impact on our 5G mobile and relevant equipment businesses. The Chinese 5G smartphone market will be hit; however, there will be more 5G handsets in the latter half of this year,” an official at Samsung Electronics said by telephone.
The official added Samsung plans to promote 5G smartphones using online channels focusing on China. Because China accounts for 25 to 30 percent of the total global smartphone market, the company may experience lower-than-expected returns ― a reduction of 6 to 7 percent ― due to the outbreak of the virus, according to estimates by major investment banks.
“The 5G global value chain isn't at huge risk. That's because of the belief that much of this year's estimated 5G handsets would be in the latter half of this year when today's damage of the COVID-19 will subside,” according to the official.
With the virus impacting global technology value chains and arriving just as 5G's possible mainstream deployment phase begun, some analysts believe the virus has the potential to disrupt 5G wireless implementation and further threaten the production of core smartphone parts that include displays and memory chips.
Another official at Samsung's display affiliate ― Samsung Display ― said its display supply chain was looking healthy, while Samsung Electronics' semiconductor division was on track to sell memory chips to Samsung Electronics' mobile business division ahead of planned 5G smartphone launches in the latter half of 2020.
Regarding the virus' impact on its 5G handset business, an official at LG Electronics also said the impact will be “more benign.”
“The 5G smartphone market is still regarded as something new and the penetration rate of such high-end handsets will stay below 20 percent out of the overall smartphone market throughout this year. Because the virus is expected to gradually die out in summer like the SARS coronavirus thanks to the development of a vaccine to quash the virus spread, the virus' impact on our 5G handset business will be short-lived,” the LG Electronics official said.
But the official added LG was “closely monitoring” how COVID-19 will impact Chinese domestic sales as weakening demand will extend to other international markets if the outbreak period lasts longer than expected.
Annual shipments of smartphones to China were expected to decline to 373.9 million units, last year, a 4 percent decrease from 390.8 million units in 2018.
The number of smartphones shipped to China annually is expected to decline to 373.9 million units in 2019, a 4 percent decrease from 390.8 million units in 2018. 5G smartphone shipments could reach as high as 223 million units this year, according to Bernstein Research, a top-tier investment firm.
On a related note, Samsung Electronics was the top 5G smartphone supplier as of last year with 43 percent of the global market share thanks to its expanded 5G product portfolio in more overseas markets. Huawei was the runner-up propelled by its huge sales in China. LG ranked third, according to estimates by CounterPoint Research, Friday.