The U.S. Smartphone Market Got Crushed Last Quarter

It might not be nearly as bad as the Indian smartphone market, which got cut in half last quarter, but the U.S. smartphone market also got crushed due to the COVID-19 pandemic and related lockdowns. Total sell-through unit volumes declined by 25{cb3fe4c54de06d7c4b8dceae281fb32e521027d1659af7adec2f427d2f5333d9} in Q2, according to estimates released this week by Counterpoint Research.

Apple‘s (NASDAQ:AAPL) second-generation iPhone SE, which launched during the period, has been selling particularly well thanks to its affordability.

Black iPhone SE

The second-generation iPhone SE launched in April. Image source: Apple.

The iPhone SE is a hit

Many wireless carriers were forced to close retail stores during the quarter, but those lost sales were partially offset by a surge of online orders. Carrier retail stores remain one of the most important distribution channels for smartphone makers. As those restrictions eased, sales started to recover each month. Additionally, government stimulus efforts helped put cash in people’s pockets, boosting discretionary spending.

“There was also a bit of pent-up demand created by the weeks of store closures,” Counterpoint North America Research Director Jeff Fieldhack said in a statement. “Many consumers who may have wanted a new device but still had a functioning phone simply put off their purchase.”

Companies that have stronger online presences, such as Apple and Samsung, were able to mitigate some of the declines, according to Counterpoint. Samsung’s sell-through dropped by 10{cb3fe4c54de06d7c4b8dceae281fb32e521027d1659af7adec2f427d2f5333d9} while Apple’s fell by 23{cb3fe4c54de06d7c4b8dceae281fb32e521027d1659af7adec2f427d2f5333d9}, which was far better than other companies like Motorola and ZTE, which saw sell-through plunge by 62{cb3fe4c54de06d7c4b8dceae281fb32e521027d1659af7adec2f427d2f5333d9} and 68{cb3fe4c54de06d7c4b8dceae281fb32e521027d1659af7adec2f427d2f5333d9}, respectively.

However, Samsung was hurt by bad timing. The South Korean conglomerate typically releases its flagships in the spring, with this year’s Galaxy S20 launching in early March — right as the coronavirus crisis was escalating. Samsung had been selling inventory into distribution channels like retail stores just as many of those locations were closing. Some of those sales are simply being delayed, but Counterpoint believes that “some will be lost.”

Apple’s iPhone SE launch was relatively quiet. The Mac maker didn’t host a virtual event or have any of the fanfare typically associated with more prominent product launches. The second-generation model was mostly an internal refresh, putting state-of-the-art components into an existing chassis and pricing the midrange handset at an aggressive $399. Counterpoint says that the iPhone SE is selling better than expected across both postpaid and prepaid channels.

Apple is also going after a different target customer with the iPhone SE: Buyers of this model are more price conscious and hold on to their smartphones for longer. Counterpoint estimates that over 30{cb3fe4c54de06d7c4b8dceae281fb32e521027d1659af7adec2f427d2f5333d9} of iPhone SE customers were upgrading from iPhones that were at least four years old.

“Our checks show that iPhone SE sales are unlikely to be cannibalizing fall 5G iPhone sales,” Fieldhack said. “iPhone SE buyers are more pragmatic about price, less concerned with 5G, and the smaller display is not considered a hindrance.”

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