China’s smart speaker market, the fastest-growing worldwide, is expected to shrink by more than one-fifth this first quarter after record shipments last year, as consumer demand wanes because of the coronavirus epidemic.

“In this critical period, consumers are expected to focus on necessary purchases in the short term and delay any non-essential purchases until later in the year,” Jason Low, a senior analyst at technology research firm Canalys, said in a report on Thursday.

Baidu’s newest smart speaker, the Xiaodu Zaijia X8, was launched in December. Baidu, Alibaba Group Holding and Xiaomi Corp are three of the world’s biggest vendors of smart speakers. (Picture: Handout)

Canalys forecast smart speaker shipments in China in the March quarter to decline 22% from a year ago because of the health crisis, but indicated that the market would bounce back in the third quarter. The research firm cut its 2020 growth forecast for the market to 8%, down from 19%.

That slowdown reflects the current difficulties for consumer electronics vendors on the mainland, where a number of communities have been locked down, travel restrictions have been enforced, many offices have staff working remotely at home, and most shopping malls and retail stores are closed as part of efforts to stop the spread of the infectious disease Covid-19.

The stakes are high for China’s leading smart speaker vendors – Baidu, Alibaba Group Holding and Xiaomi Corp – which have helped drive up global shipments of these connected devices. These companies see the potential of tapping into a huge new user base, as more consumers get comfortable with voice-command methods on connected devices at home.

“The Covid-19 issue has temporarily derailed some vendors’ efforts, especially the Chinese vendors, which are feeling the biggest impact of all,” Canalys’ Low said. With many consumers confined to their homes, sales through bricks-and-mortar retail channels have been most affected, he said.

The decline in China is projected to lower overall smart speaker shipment growth worldwide to 13%, down from the 20% previously forecast by Canalys.

Total smart speaker shipments worldwide grew 60% to 125 million units last year, up from 78 million in 2018, led by, Google, Baidu, Alibaba and Xiaomi. The December quarter saw those five vendors break their all-time best shipment records, according to Canalys. Ecommerce giant Alibaba is the parent company of the South China Morning Post.

While the outbreak has disrupted the supply chain for the smartphone industry, with the likes of iPhone assembler Foxconn Technology Group getting delayed in resuming full production at its factories on the mainland, the impact on makers of smart speakers is expected to be not as challenging.

“Smart speakers are less complex to manufacture”, compared with smartphones and personal computers, Low said. “The challenge in the second half of 2020, when we hope circumstances will have dramatically improved, is to grow without relying on major price wars and aggressive subsidies.”

(Abacus is a unit of the South China Morning Post.)