With workers and students likely to be stuck at home until next year, we might assume that smartphone sales are surging. After all, remote school and business operations will be the new norm, not to mention people would want to upgrade their entertainment at home, too. But that didn’t seem to be the case, according to recent market data.

The first quarter of 2020 has actually yielded a historic low for the smartphone industry. It turned out that instead of new phones, it’s cloud services that prospered in demand amid the pandemic.

As per Counterpoint Research, the smartphone market experienced a 13% year-on-year loss in Q1, its fastest decline in history. The pandemic has made two impacts on the market, one being the negative growth, and the second a rapid shift to online device purchases. On the bright side, the former is likely to be temporary and should return to favorable outcomes now that lockdowns have been lifted.

Besides, with online classes being currently held in many parts of the world, smartphone sales must be rising again. But is that really the case?

How the Pandemic Collapsed the Smartphone Market

But why did smartphone sales collapse if people had nothing to do in quarantine but browse their feeds? The reason isn’t that smartphones became less useful. Rather, the recession that followed the pandemic changed the consumers’ priorities. Indeed, people won’t likely buy a new phone if they’re worried about their income. 

Considering that the unemployment rate in the US reached 14.7% during the pandemic, roughly 20 million people have lost a stable income. Even those with secure jobs set aside their phone-buying plans, with the economic uncertainty still looming over them.

Another contributing factor was the decreased production. Since governments have imposed lockdowns, shipments were put to a halt. In April, Samsung had cut down its monthly production to approximately 10 million units, which is less than half of their monthly output.

But not all hope was lost for the smartphone industry. Affordable brands like Xiaomi benefited from the trend of making economical choices because consumers, particularly in Africa, shifted their sights to entry-level and mid-range devices. While most popular smartphone brands declined, Xiaomi was able to drive growth.

Furthermore, despite the decreased production and demand for new phones, smartphone usage rose to peak levels as people started to rely more on instant messaging. People also browsed their feeds more often, making smartphones a prominent asset than ever before.

As such, smartphone companies can enjoy small financial gains, particularly from app and accessory sales. The growing data consumption can make up for the lost sales, too.

Rise of Second-hand Smartphones

It appears that people aren’t refusing to buy smartphones at all during the pandemic. They just prefer second-hand units now, or least, the people in India do.

As the country prepares for online classes, parents started looking for affordable devices their children can use. And they found that second-hand smartphones and refurbished devices can do the job. According to Mandeep Manocha, co-founder, and CEO of Cashify, she’d seen a completely new pocket of demand where parents are purchasing devices for their kids.

Manocha stated that the demand for pre-owned phones is coming from entire India, but consumers from tier-3 and tier-4 cities are dominating it. Before the pandemic, those cities accounted for 20% of the demand for Cashify, but it has now jumped to 35%.

Other pre-owned sellers are seeing an increase in sales as well. Olx India’s mobile category experienced a 109% growth in July, with brands Samsung, Apple, RealMe, Xiaomi, Vivo, Oppo, and Oneplus selling out the most.

But aside from the pandemic, the increased demand for pre-owned phones could also stem from the rising prices of brand-new units. While top-tier brands like Samsung and Apple have always been pricey, other entry-level phones are getting more expensive, too. Manocha noted that if we look at the price trends of devices over the years, we’ll be surprised that figures are actually rising.

Hence, with brands like RealMe and Xiaomi — two relatively affordable brands — starting their price points at Rs 8,000, consumers are just veering towards used phones to save money. In Xiaomi’s case, though they want to be seen as the people’s brand, their company is growing fast in terms of pricing and product portfolio, driving their prices up.

But the spiked demand for used phones may just be temporary, just like the decline of brand-new smartphone sales. Once the world goes back to the normal we’re used to, smartphone dependence may dwindle because face-to-face work and classes will resume.

But until then, people are likely going to maintain their newly-acquired frugal behavior. If their phones break down, they would most probably take it to a phone repair shop instead of immediately replace it with a gleaming new unit.

Meta title: Are People in Quarantine Buying New Smartphones?

Meta description: When quarantines and lockdowns were implemented, we might assume that people would buy new phones to upgrade their entertainment indoors. But market data seemed to show the opposite. Read on to learn how COVID-19 affected the smartphone industry.