The impact that coronavirus has had on the world is truly shocking. It has robbed families of loved ones, disrupted global economies and generated tremendous levels of fear and anxiety. It has most certainly affected the global mobile device industry. Since the virus emanated in China, Chinese production lines for electronic devices have been significantly disrupted – factories and retail stores have closed while authorities work fast to stem its spread.
China currently produces 70% of the world’s smartphones. South Korea, another major device manufacturing nation and the home of Samsung and LG, has also been significantly affected by coronavirus. Understandably therefore, shipments for new smartphones have fallen sharply in Q1 2020. This has limited the number of new smartphone upgrades that have been able to take place, and from a HYLA perspective, also limited the number of pre-owned devices collected.
It is becoming commonplace for global subscribers to now trade-in their existing device at the point of upgrade in return for credit to offset the price of a new smartphone. Device buyback and trade-in programs have been set up by many of the world’s largest operators, OEMs and retailers to unlock the latent value they hold as part of a lucrative circular economy. It therefore stands to reason that the success of the new smartphone market directly correlates to the success of the secondary market and vice versa.
Analytics Provides Greater Insights
But what impact is a shortage of pre-owned devices hitting the secondary market having on prices? At HYLA, we have our sophisticated Device IQ™ Analytics platform that can evaluate fluctuating market forces on pre-owned device values. We can categorize devices into various grades to determine their value. These grades range from AA+—a device that is almost brand new—through to Recycle grade—having no residual value.
When the coronavirus first started, HYLA noticed that roughly 12% of its pre-owned device inventory being offered for sale was fetching lower values than expected. The inventory was held back from sale and prices quickly recovered as supply slowed. In February, HYLA noticed an 8% decline in value for devices that had cracked screens. This fall in value was directly linked to the inability to get them repaired and refurbished while factories and other supporting facilities were closed. While these repair grade stocks were experiencing pricing pressure, we noticed (due to a lack of availability of refurbished cracked screen devices) that the price of higher-grade devices either increased slightly or held steady during the ongoing uncertainty.
Keep Calm and Carry On
At times like this, it is not unusual for scaremongering to occur, with carriers, retailers and OEMs being advised by others to dump their inventories of pre-owned devices as prices will not recover anytime soon. But our team didn’t see a reason for it and our prices held firm. In all cases, our valued customers and loyal buyers benefited from these insights. In fact, our analytics platform showed that the most popular traded device, the iPhone 7, was one of the devices that held its value best. It’s this type of insight that allows us to advise customers and limit unnecessary panic.
As the coronavirus continues to dominate headlines, there is no doubt that we will continue to feel the effects across the industry. Statista expects a 10.4% reduction in smartphone production in 2020, however China is already showing signs of recovery. Factories and retail stores are re-opening, but it will still take time to fully return to normal. At HYLA, we will continue to report on market dynamics and support our customers during this uncertain time, and ensure we are providing the very best service possible.