Investors who had hung their best hopes on a 5G revolution may have to temper expectations, at least where smartphone sales are concerned.
With the coronavirus wreaking havoc on both supply chains and demand expectations across a swath of sectors, 5G devices could wind up another casualty of the pandemic if conditions continue to worsen.
According to Korean news outlets, Samsung has drastically slashed orders for Galaxy S20 components, having released the new 5G-focused lineup mere weeks ago at a launch event in San Francisco. Tech news site The Elec reported that Samsung is expecting its new flagship phones to sell fewer units than its predecessor, the S10, with inventory piling up.
South Korea was among the first countries outside of China to report large numbers of coronavirus cases, though new confirmed cases have tapered off in recent days after strict testing and quarantine protocols were imposed.
Samsung acknowledged the ill effects of the coronavirus on its phone sales, with mobile lead DJ Koh telling shareholders this week that "the smartphone market is contracting" because of the pandemic.
Prior to the outbreak, investors had anticipated new 5G models from Samsung and Apple (AAPL) - Get Report to breathe new life into smartphone sales, which have trended downward over the past couple of years. As of January, Gartner forecast that global smartphone sales would return to growth in 2020, with sales of 5G phones totaling 221 million this year.
Even though the planned launch of Apple's 5G models are months away -- the company is expected to release its new flagship phones this September -- ongoing supply issues could still threaten those plans.
In a note on Wednesday, Wedbush analyst Dan Ives, an Apple bull under normal circumstances, lowered estimates for Apple's fiscal 2020 revenues by 14%, and its 12-month price target for the stock to $335.
While noting the high degree of uncertainty, Ives wrote that Wedbush's scenario "assumes the 5G iPhones do not get released this Fall due to the global lockdown-like conditions with the supply chain in Asia still on a path to normalization."
"Clearly, anything can happen and this stress test exercise on Apple’s model could prove to be conservative or not aggressive enough given this fluid global pandemic," he added. "The duration and the scope of this disruption cannot be predicted, however we are taking our best calculated shot at our new model."
All is not lost when it comes to 5G in 2020, however: Areas like 5G infrastructure and cloud data center hardware could hold up well even it the outbreak persists well into this year.
As noted by RealMoney columnist Eric Jhonsa, economic stimulus packages that include infrastructure spending could give carriers a lift, with Verizon recently announcing that it is raising its 2020 capex budget by $500 million. And with more workers staying home streaming and videoconferencing, data center hardware could also see rising demand in a coronavirus-related downturn.