How COVID-19 May Bolster Projected Smartphone Demand

The used smartphone industry is countercyclical in nature, given that when economies contract and consumers have less money to spend, they tend to opt for used devices. While the coronavirus will likely constrain the supply of devices in the used phone market for the rest of the year, it will likely have the opposite impact on demand. Given that the 2020 smartphone demand forecast issued by International Data Corporation (IDC) back in January was already aggressive, the used phone market seems poised for substantial growth in demand for the foreseeable future. 

What the Industry Experts Are Saying

IDC’s numbers place the smartphone growth forecast for used and refurbished smartphones in 2019 at 206.7 million units. That figure represents an increase of 17.6 percent over the 175.8 million units of global used smartphone shipments during 2018. IDC used that increase to estimate that used smartphone shipments will reach a record-breaking 332.9 million units by the time we get into 2023. The firm places the anticipated compound annual growth rate for the period spanning from 2018 to 2023 at 13.6 percent.

Phone Pricing

IDC sees a growing demand for used smartphones primarily because of cost-saving desires among consumers. Generally, the trend in consumer desire is moving toward devices that offer savings when compared to current-year models. 

This trend has been able to gain traction largely due to a failure on the part of original equipment manufacturers (OEMs) to hit a sweet spot between newly introduced features and “reasonable” pricing. Ultimately, it means that more consumers are willing to sacrifice “newness” for good value. The only way to achieve this when sourcing certain features is to simply opt for legacy models instead of upgrading to the newest release. This trend will likely accelerate due to COVID.

5G Networks and Smartphones

IDC also speculates that the “mainstreaming” of 5G networks and 5G-enabled smartphones will create ripples in the used market. Notably, smartphone owners may begin to trade in 4G devices when moving into the 5G space. This is going to potentially infuse many more high-quality, in-demand phones into the used market than the industry typically sees during “rollout” seasons for products like the iPhone. While 5G will certainly have an impact over time, it is important to note that WeSellCellular does not believe that the 5G rollout will impact the second-hand market until 2021 or 2022 at the earliest (see our earlier post about how 5G will impact smartphone industry growth).

2020 iPhone Releases

Another significant development that is helping to define the used market for 2020 was the release of the iPhone SE on April 24. There was uncertainty regarding whether or not Apple would be able to pull off the release amid fears of manufacturing delays related to COVID-19. However, the launch came through. This is a big deal for the used market because trade-in volume stemming from the release has helped support otherwise anemic supply over the last few months.

Thoughts on Demand Forecasts from WeSellCellular

In January, the overall view was that the used industry showed no signs of slowing down at any point soon. Has that changed since COVID-19? 

At WeSellCeullar, we’ve been in a position to closely monitor used smartphone industry trends. We shared back in April that shortages of parts used in refurbishments were causing major insurance companies like Asurion and Assurant to turn their attention to used phones when seeking replacement devices. As a result, we saw the supply of high-grade devices decline dramatically. And with the shut down of economies throughout the world, we reported that used smartphone supply had been reduced by 50-75 percent from peaks reached in January and February.

Now, many manufacturing operations are back up and running. However, the impact of COVID related closures will likely impact supply through the rest of the year. However, as mentioned above, it does appear that some of the shortage was mitigated by trade-ins related to the iPhone SE launch.

The WeSellCellular team is observing industry trends closely to be able to meet the supply needs of our clients in the months to come.  We continue to believe that the potential of a recession caused by COVID-19 will increase the demand for used phones even further while decreasing the supply. This means upward pressure on pricing. We have seen this throughout the summer as pricing has risen at an unprecedented rate. Economic fears are likely to drive customers to continue to take price-sensitive approaches to sourcing their phones, meaning used devices are likely to be in higher demand throughout the rest of 2020.

Looking Forward at Smartphone Demand

WeSellCellular echoes the industry consensus that demand for used smartphones will continue to rise through 2023. We are as committed as ever to providing consistent inventory in order for our customers to meet this demand. One of the key industry drivers we are currently monitoring is the potential for a September iPhone launch. The current speculation is that these phones will ship out in October following a September release.

Keep an eye out on our blog for further updates and predictions, and check our inventory today to find the phones you need to serve your customers today and throughout the rest of the year.