According to the latest results from the International Data Corporation (IDC) Worldwide Smartphone Qview, due to weakening channel demand, worldwide smartphone ODM/EMS (Original Design Manufacturer/Original Equipment Manufacturer) assembly shipment volumes dropped 6.2 percent year-over-year during the fourth quarter of 2018 (4Q18) with total shipments of 356.7 million.
“Longer duration of smartphone usage has led to slow demand in the hot season, causing global smartphone production to drop in 4Q18,” said Sean Kao, senior research manager with IDC’s Worldwide Smartphone ODM Research Group. “Worldwide smartphone ODM/EMS assembly shipment volumes showed a year-over-year decrease of 6.2 percent and only a slight quarter-over-quarter growth of 0.3 percent.”
The object of IDC’s Worldwide ODM & Display Research is the compilation of manufacturers who provide ODM and EMS services to their clients — branded vendors. The ODM/EMS manufacturers are in the upstream of the industry supply chain, as the red mark in Figure 1. ODM/EMS manufacturers include Foxconn, Huaqin, Compal, Quanta, Compal, Wistron, and others. Their clients are branded or white-box vendors, such as Apple, Amazon, Lenovo, Huawei, Oppo, and others.
With many assembly factories having a huge inventory on hand, component suppliers are likely to receive no orders in 1Q19 and face financial distress due to inventory pileup and funding shortage. On the other hand, first-tier ODMs will transfer their resources to different customers such as HMD, OPPO, Samsung, due to adjustment of outsourcing policy by Huawei and Xiaomi.
Looking ahead, IDC expects smartphone ODM/EMS assembly volumes to gradually recover after slowing in 1Q19. Beyond 2019, IDC expects to lengthen life cycles, caused by a lack of new features, better quality of low-tier products, the expectation of slow economic growth, and deferred purchases in anticipation of 5G products will continue to have a negative impact on developed markets. In addition, high market and industrial concentration rates will weaken low-tier vendors’ ability to adjust component inventory. Smartphone component suppliers may face drastic changes in demand from manufacturers.