Originally Published by RCR Wireless
Author: Alan Bentley
The building of 5G networks across the globe was moving full-steam ahead until COVID-19 began wreaking havoc, triggering a worldwide economic slowdown. The immediate effects have been felt in virtually every industry, causing widespread layoffs and record unemployment, and severely curtailing consumer spending. As for 2020 5G expectations of both operators and OEMs – it is now abundantly clear that the global pandemic could mean those expectations might not be met – at least not yet – and with good reason.
Consider this: Just before the COVID-19 crisis, we surveyed 5,000 consumers around the globe to gauge their attitudes about 5G and plans to upgrade to 5G devices. The survey found that the rush to upgrade could trigger up to 810 million used devices collected globally in 2020. IDC estimates published prior to the pandemic concurred with an expectation that shipments of 5G smartphones could reach 9% market share by the end of 2020, with global shipments skyrocketing to 123.5 million units next year.
Then came COVID-19. Apple, which usually drives demand for the latest smartphone models, delayed the launch of its long-awaited 5G-enabled smartphone until at least this fall. Samsung, which had launched its 5G smartphone prior to the pandemic, reported 2020 Q1 profits were at a five-year low as a result of reduced consumer demand for electronic devices due to COVID-19. And, Counterpoint Research found that less than 2 million 5G-capable smartphones were sold; representing just 1% of all devices sold in 2019.
We clearly are living in unprecedented times, which have left even the leading carriers and OEMs unable to predict whether consumers will trade up to 5G en masse. The million-dollar question is whether the appetite for 5G-enabled devices has totally sputtered or is just on pause.
The impact of COVID-19 on the mobile device ecosystem
Not only has COVID-19 disrupted industries and personal lives, it also has impacted device supply chains. Apple, for example, faced challenges early in the pandemic as factory closures in China led to device shortages and longer wait times for replacement phones. This has caused ripple effects all along the supply chain. Although some industries are taking huge hits, we see a positive upside for the secondary market and used device supply chain with growing demand – and rising prices – for secondhand devices.
As consumers adopt a recessionary mindset, many are decreasing non-essential spending. Some are holding onto their devices longer while others choose the “good” device models as opposed to the “best” models to save money. Many, however, are shifting away from new phones and are buying refurbished devices instead. The rise in demand for used smartphones has also been driven by enterprises as they scramble to equip their newly remote workforces. This growing demand for secondhand devices has been a boon for mobile processors, the companies that repair and refurbish used devices as well as ensure no personal data is passed on to the next owner by performing secure data sanitization on each and every smartphone.
Another impact of the COVID-19 recession and consumer reluctance to invest in new devices is that buyback programs are becoming an increasingly important factor in energizing consumers to upgrade their smartphones. Carriers, OEMs and 3PLs must up their efforts to provide the best possible trade in experience. This includes offering customers the maximum amount of money back for their devices to incentivize the purchase of new devices; improving visibility at every stage of the mobile device journey; emphasizing commitments to data security and erasure best practices; and putting in place trustworthy diagnostic, grading and valuation solutions.
5G is coming, pandemic or not
After massive investments in 5G networks, carriers continue to expand 5G coverage to reach more users in more regions across the country and world. And new 5G-enabled smartphones will eventually hit the shelves, perhaps just a little later than expected. Dampened consumer enthusiasm aside, there are inherent benefits of 5G – such as the ability to power applications ranging from self-driving car communications to virtual and augmented reality, smart building solutions, telemedicine and even remote surgery.
As good as it’s been recently for the secondary device market as enterprises and consumers snap up used devices, resellers must be realistic. Eventually, the confluence of expanding 5G network availability, revitalizing supply chains, and rebounding economies and consumer spending will invigorate the demand for new 5G devices. The likely result will be an oversupply of used smartphones as consumers trade in their old phones. This positive for those who sell new devices will likely result in depressed prices for used devices.
One thing that we can be confident of is that just like countries around the world fighting the common enemy called COVID-19, the mobile market will bounce back. Make no mistake, 5G is the next big thing in mobile – the question is whether this is enough to energize consumers into buying the “best” device when “good” is available. We’ll see soon enough.
Read original article at rcrwireless.com.