The economic toll of COVID-19, combined with handset supply delays, has impacted first half smartphone sales in 2020 with 3.8 million units sold, down 5 per cent compared to a year ago, according to new research from emerging technology analyst firm, Telsyte.

The Telsyte Australian Smartphone & Wearable Devices Market Study 2020-2024 found despite the disruptions, overall demand declined only marginally, as Australians increasingly relied on their smart devices during the lockdowns.

Telsyte found 45 per cent of smartphone users claim they are spending more time on their phones since the pandemic began. Similarly, smartphones also remained the “main” digital device for nearly half (49 per cent) of all users.

Despite declines in sales of both Apple (-2 per cent) and Android (-7 per cent) smartphones during the measured 6 months, Apple performed comparatively better with the release of the more affordable iPhone SE, increasing its sales share by 1.1 per cent to 44.3 per cent (vs. 55.7 per cent Android).

Apple, Samsung and OPPO were the top three smartphone vendors for the half, with a combined sales share of 87 per cent, up from 81 per cent in 1H19.

Telsyte estimates sales of Huawei smartphones fell 75 per cent from the first half of 2019 to under 50,000 units, mainly due to the lack of Google Play Store, and a difficult trading environment in Australia for the manufacturer.

More affordable models will drive demand in 2020 and beyond

Telsyte found consumers are increasingly drawn to more affordable smartphones that still offer quality build and features associated with more premium handsets. The average cost of Android smartphones decreased by over 10 per cent during the first half (iPhone was down 2 per cent from 1H19).

The release of the new iPhone SE helped addressed demand for iPhones at different price points and Telsyte estimates 230,000 units (or 13 per cent of total iPhone sales) were iPhone SE sales despite only being available for two months in the measured period.

The iPhone 11 remained the most popular iPhone model during the half, followed by the new iPhone SE and iPhone 11 Pro. Both Samsung’s premium Galaxy S20 and A series smartphones helped the manufacturer remain the dominant Android player in Australia.

New sales face headwinds in the second half

Telsyte anticipates smartphone sales in the second half of 2020 will still face headwinds due to prolonging economic uncertainty and potential supply issues, with a 7 per cent decline from 2H 2019 to 4.1 million units sold projected.

The current average replacement cycle for smartphones remained at just over three years, up from 2.8 years in 2018. Telsyte’s study found smartphone users are prepared to hold onto their phones for longer with 46 per cent of consumers claiming they plan to use their phone for at least four years, or until it is no longer usable.

But if Apple releases its anticipated 5G iPhone in 2020, it could spur the iPhone upgrade cycle that began with the iPhone SE in April 2020. Approximately 40 per cent of iPhone users indicated their next smartphone must support 5G technology.

Telsyte estimates less than 15 per cent of smartphones sold during 1H supported 5G, with 5G still being marketed as a premium feature. The figure could potentially double in 2H20 with the release of a 5G iPhone and spark an upward trend similar to when Apple released their first 4G iPhone in 2012 (iPhone 5).

“Consumers are spending more time on their smartphones, not just for communications but for essential services, work and entertainment. This increased usage and dependency should see the smartphone market weather the downturn better as consumers replace aging devices,” said Telsyte Managing Director, Foad Fadaghi.

Smart wearables maintain strong momentum

Telsyte research found consumers continued looking for ways to improve their overall smartphone experience by ‘accessorising’ with smart wearable devices including wrist wearables (fitness bands and smartwatches) and hearables (e.g. wireless earbuds).

More than 2.6 million smart wearables were sold during the first half of 2020, up from 1.9 million in 2019, a growth of 39 per cent, mostly driven by a boom in hearables.

Telsyte research shows sales of smart hearables more than doubled to around 1.5 million in the first half of 2020 with increasing working from home and conferencing activities lifting demand. Sales of smart hearables were more than fitness bands (411 thousand) and smartwatches (772 thousand) combined.

Apple and Samsung were the top two vendors in the smart hearables market in 1H20, with a combined 65 per cent market share.

Telsyte’s study found 4.6 million (22 per cent) smartphone users were using smart hearable devices at the end of June 2020, up from 2.6 million a year ago.

Sales of fitness bands rebounded in the first half of the year as Australians looked for ways to stay on top of their health and fitness during lockdowns.

A total of 1.18 million smart wrist wearables (combined smartwatches and fitness bands) were sold in the first half, slightly down by 3 per cent from 1.22 million a year ago.

Telsyte research found fitness band sales increased by 8 per cent from 1H19, reaching 411,000 units in the first half as more Australians turn to technology for health and fitness.

Despite strong momentum in 2019, the lack of new smartwatch releases, and a maturing market impacted the demand, with 1H20 sales down 7 per cent from 1H19.

Apple remained the clear leader in the smartwatch market, followed by Samsung, Fitbit and Garmin.

Consumer-friendly smart glasses could fire up the market

Telsyte research found around 1 in 5 Australians are interested in smart glasses that work alongside their smartphones, and those interested are on average willing to pay around $460 for a pair.

Telsyte estimates if Apple releases consumer smart glasses in 2020 that are not prohibitively expensive and are widely available, it could potentially sell upwards of 100,000 units in the first 12 months.

Telsyte has identified smart glasses as a substantial catalyst for disruption in the eyewear and prescription glasses industry if it can follow the success of smartwatches in gaining regular users and market share.

“Despite smart glasses falling off the consumer radar, the software and hardware has kept improving, and new products could reignite market interest,” said Telsyte Senior Analyst Alvin Lee.

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