The smartphone market is showing an improvement in demand during the second half of this year due to the peak season for e-commerce promotional activities and the easing of COVID-19 outbreaks in regions such as Southeast Asia, according to TrendForce’s latest investigations. However, there have been significant shortages of components including 4G SoCs, low-end 5G SoCs, display panel driver ICs, etc. The persistent component gaps are constraining smartphone brands from raising device production for the second half of the year. Looking at 3Q21, the quarterly total smartphone production came to around 325 million units, a 5.7% QoQ increase. Even so, not only does the QoQ increase in smartphone production for 3Q21 fall short of the QoQ increase for the same quarter last year, but the quarterly production volume for 3Q21 also shows a weaker performance result when compared with figures from 3Q20 or from 3Q19, prior to the emergence of the pandemic.
As for the total production for the whole 2021, TrendForce has lowered the projection to 1.335 billion units with a YoY growth rate of 6.5%. The previous projection was 1.345 billion units with a YoY growth rate of 7.3%. This downward correction mainly reflects the impact of the component gaps on device production. Going forward, an important point of observation in the smartphone market is whether the pandemic will further weaken demand. Also, the other significant variables that will influence future smartphone demand include geopolitical tensions, distribution of production capacity in the foundry market, and global inflationary pressure.
While smartphone production for 3Q21 reached about 325 million units, the release of new models helped Apple retake second place in the global ranking
Samsung raised its smartphone production by 17.9% QoQ to 69 million units for 3Q21. The growth was mainly attributed to the stabilization of the capacity utilization rates of its device assembly plants in Vietnam. Samsung continued to top the global ranking of smartphone brands with the largest market share in production terms. Apple released four new iPhone models under the iPhone 13 series in 3Q21. Thanks to their contribution, the total iPhone production for 3Q21 registered a QoQ increase of 22.6% to 51.5 million units. With this result, Apple was also able to climb to second place in the global ranking. In terms of product development, Apple is staying with the plan to release its third-generation iPhone SE in 1Q22 and four models under a new series in 2H22. The third-generation iPhone SE is expected to be a major instrument in helping Apple establish a presence in the market segment for mid-range 5G smartphones. Its production volume for 2022 is forecasted to reach 25-30 million units.
OPPO marginally raised its smartphone production by 3% QoQ to 51 million units for 3Q21, thereby capturing third place in the ranking. Xiaomi held fourth place as its smartphone production for the same quarter fell by 10% QoQ to 44.5 million units. Vivo’s smartphone production for 3Q21 was relatively constant compared with the previous quarter, coming to around 34 million units. With this result, Vivo was ranked fifth. The production figures of these three Chinese brands include devices under their respective sub-brands (i.e., OPPO’s Realme and OnePlus; Xiaomi’s Redmi, POCO, and Black Shark; and Vivo’s iQoo). Looking at the three brands’ production performances in 3Q21, TrendForce notes that there is a high degree of overlap in terms of target market as well as a high degree of similarity in offerings. Hence, their production performances directly hinge on their ability to acquire enough of the components that are now in short supply.
Honor will expand into the overseas markets next year as part of its plan for a comeback
After spending the first half of this year stocking up on components and undergoing business restructuring, Honor is now on a more solid footing and will attain an annual smartphone production of 43.5 million units. In the global ranking of smartphone brands by annual production for 2021, Honor is expected to take eighth place. Also, Honor as an independent brand has obtained access to Google Mobile Services. Therefore, it plans to expand to other markets outside China next year and leverage the sales expertise that it has acquired from Huawei in order gain a bigger share of the overseas markets. Regarding Honor’s sales strategy as a whole, the main focus is still on the domestic market. As for the overseas markets, Honor will continue Huawei’s strategy and avoid India where competition revolves around low pricing. Instead, Honor will attempt to establish itself in regions such as Russia, the wider Europe, and South America. In general, Honor’s rise will likely affect the market shares of the other aforementioned brands. How much market share Honor will gain depends on its ability to have sufficient inventory of components that are now in short supply.
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Nvidia hosted its fall GTC (GPU Technology Conference) in early November, during which the company shared details regarding the progress that it had made on products and services such as AI software, data centers, automotive applications, and healthcare. In particular, Nvidia’s foray into virtual worlds and digital twins, both of which are closely tied to the metaverse, garnered significant attention from the public. By leveraging diverse simulation tools that reflect real-life circumstances, Nvidia has extended the application of virtual worlds from the local scale to the planetary scale, thereby reflecting the metaverse’s pioneering qualities and developmental progress.
Along with the ongoing metaverse craze, Nvidia also released its Omniverse Avatar technology platform as well as its Omniverse Replicator, which is a “synthetic data-generation engine” according to the company. Both of these releases are based on the Nvidia Omniverse, a platform that specializes in virtual collaboration. Whereas the Omniverse Avatar platform enables the creation of interactive virtual characters through synergies among voice AI technology, machine vision, and NLP (natural language processing), the Omniverse Replicator constructs more realistic, lifelike virtual worlds by training DNN (deep neural networks) using such synthetic data as velocity, depth, and weather conditions.
Digital twin-based virtual factories are starting to show the first hints of the metaverse
The metaverse value chain primarily revolves around commonly seen infrastructural backbones formed by telecommunications and cloud/edge computing. The virtual space that is then built on top of this infrastructure comprises HMI (human machine interface), decentralization, application creation, and user experiences. More specifically, HMI produces an AI-empowered immersive experience by combining multiple interactive technologies with an AR/VR base layer. At the moment, companies such as Nvida, Meta (formerly known as Facebook), Microsoft (including Xbox), and Vive are heavily invested in HMI development. Application creation, on the other hand, refers to mechanisms that make the metaverse more lively, reliable, diverse, and attractive. Some examples include graphical tools and cryptocurrency technologies. Representative groups focusing on this field include Roblox, IBM, Google AI, Epic, and Unity.
Regarding the content of Nvidia’s presentation during GTC apart from the Omniverse Avatar and Replicator, the company also released CloudXR, Showroom, and other Omniverse-based tools used for optimizing immersive experiences. As well, Nvidia also released the Modulus neural network model, which is accelerates the build-out of digital twins. These releases, in turn, demonstrates Nvidia’s competency and leadership in creating AI-driven software tools for the metaverse value chain. With regards to real-life use cases, digital twins currently represent most of Nvidia’s applications. For instance, BMW and Nvidia have partnered to construct a digital twin-based factory via the Omniverse platform capable of connecting ERP (enterprise resource management), shipment volume simulation, remote-controlled robots, production line simulation, etc. This partnership is indicative of promising early-stage growth of the metaverse.
Nvidia is extending its simulation application from factories to planets
While smart city development has remained one of the main use cases of simulation in recent years, Nvidia has further extended its simulation applications from use cases previously limited to singular offices or factory facilities. For instance, BIM (building information modeling) specialist Bentley Systems has teamed up with Nvidia to apply digital twins to public property management and maintenance. Ericsson, on the other hand, is utilizing Nvidia’s technology to construct a digital replica of an entire city for the purpose of checking 5G signal coverages, optimizing base station placement, and improving antenna designs. During the GTC, Nvidia unveiled the Earth-2 system, which is a supercomputer that generates a digital twin of planet earth for weather forecasts.
As a matter of fact, most products and services announced by Nvidia during GTC represent either a partial or entry-level application of the metaverse. However, as the post-pandemic new normal continues to drive up the demand for contactless and digital transformation applications, strengthening CPS (cyber physical systems) will remain one of the most significant trends in the market. As real-world environments become increasingly complex due to interactions among an increasing number of tools and use cases, Nvidia will aim to create a comprehensive framework for metaverse development through products/services based on more intelligent, comprehensive, and instant virtual worlds. Hence, TrendForce believes that Nvidia will need to address certain major challenges going forward, including lowering its tools’ usage barriers, strengthening its ecosystem, and attracting new users.
Microsoft announced in early November that it will release the preview of Mesh for Microsoft Teams (henceforth referred to as simply “Mesh”) in 1H22 as a chat and collaborative platform for the metaverse. By providing a virtual meeting space, in which Teams users can conduct meetings, chat, work collaboratively, and share documents, Mesh is set to become an entrance to the metaverse.
Community interactions will serve as a starting point for metaverse development
Microsoft first unveiled Microsoft Mesh during its Ignite 2021 event in March. This platform supports applications including HoloLens Mesh and Altspace VR, with more Microsoft Teams services to be released in the future. By announcing ahead of time that the preview version of Mesh will be released in 2022, Microsoft is hoping to leverage the recent emergence of topics related to the metaverse in order to increase its customers’ engagement with the new functionalities of Mesh. Hence, the company is positioning Mesh as an entrance into the metaverse by first attracting users through functions such as teleconferencing, collaboration, and chat. Microsoft will then gradually add to the number of applications and services in the virtual reality, thereby eventually constructing a complete virtual world.
Judging from the current progress of development, TrendForce believes that social communities, teleconferencing, and virtual meetings will become AR/VR applications most attractive to consumers. That is also why companies currently developing AR/VR solutions regard these applications as the starting point of metaverse development. These applications’ trending importance can primarily be attributed to the two reasons of demand and supply. Regarding the demand side, not only has the emergence of the COVID-19 pandemic brought about significant growths in teleconferencing and remote interaction usages, but there has also been a gradual change in how people interact in internet-based communities. More specifically, this change refers to a shift in interactions from texts, images, and videos to virtual avatars. As a result, the consumer market is expected to have a relatively high acceptance for AR/VR-driven community interactions and teleconferences. Regarding the supply side, on the other hand, service providers that operate social media and teleconference platforms drastically differ from the typical hardware brands in terms of product strategy, since these providers generally aim to first create a massive user base rather than deriving profits from a single product. As such, these providers are comparatively more willing to invest massive resources into expanding their presence in the market during the initial phase even though doing so may potentially incur financial losses.
R&D and release of device hardware will become the most significant challenge for platform service providers
For Microsoft, Mesh represents a starting point, not only towards the development of the metaverse, but also one that requires investment in more areas, since the metaverse requires the realization of a virtual world that is more immersive and lifelike. Apart from Microsoft’s existing competencies in cloud services and OS software, the company still needs to achieve a sense of realism in the virtual avatars and interactions that it creates, and these creations need to reflect changes made by the user. For instance, the mouth and facial expressions of virtual avatars need to be able to instantly adapt as their users speak, and this process involves not only software adjustments, but also the integration of sensors and other hardware devices. As long as hardware brands require that their individual products remain profitable, Microsoft will find it difficult to hand over the responsibility of hardware-related technological R&D and product releases to the hardware brands. Unless Microsoft is willing to provide sufficiently high subsidies and absorb all financial losses, it will inevitably release its self-designed consumer AR/VR devices – for the same reason that Meta (also known as Facebook) acquired Oculus, and ByteDance acquired Pico. On the other hand, crossing over to the hardware market represents entering an industry that is yet to mature and that requires investment into multiple technologies. Platform service providers will therefore need to invest more resources into hardware development, and this remains one of the challenges Microsoft faces after entering the metaverse.
Quarterly TV shipment for 3Q21 reached 52.51 million units, representing an 8.3% QoQ increase but a 14.7% YoY decrease, according to TrendForce’s latest investigations. Demand for TVs was constrained during the quarter by the increase in various country’s vaccination rates as well as the rising retail prices of TV sets, resulting in a YoY shipment decline despite the arrival of the peak season. It should be noted that prices of TV panels began to plummet in August, and this price drop enabled Chinese TV brands to both expand sales during the Singles’ Day (November 11) shopping festival and in turn make up for deficits in their yearly sales targets. Global brands, on the other hand, will be unable to capitalize on the price drop of TV panels by reflecting this cost-savings on their TV sets’ retail prices until 1Q22 due to factors such as production, transportation, and inventory adjustments. These brands are therefore having a difficult time increasing their TV shipment for 4Q21. Quarterly TV shipment for 4Q21 is expected to reach 59.13 million units, representing a 12.6% QoQ increase but an 10.3% YoY decrease. TV shipment for 2H21 will therefore likely be among the lowest compared to shipment volumes for second halves of previous years historically.
TrendForce further indicates that TV manufacturers’ shipment performances have been weakening this year as the market approaches the year’s end. Stimulus checks issued in the US resulted in persistently high TV shipment in North America in 1H21, with brands maintaining their procurement of TV panels, thereby driving up the prices of TV panels as a result. As the COVID-19 pandemic is gradually brought under control, and everyday life returns to normalcy in Europe and North America in 2H21, the pandemic-generated upswing in TV sales subsequently lost momentum. Furthermore, while prices of raw materials and transportation/logistics services remained sky-high, manufacturing costs of whole TV sets also underwent a sharp climb and were then transferred to consumers. Taken together, these factors quickly wiped out market demand for TVs. TrendForce therefore expects annual TV shipment for 2021 to reach 210 million units, a 3.2% YoY decline.
With a forecasted annual shipment of 6.8 million units for 2021, OLED TVs have become favored by various brands amidst rising manufacturing costs of TV sets
TV brands face various manufacturing-related challenges this year. Not only have panel costs, which account for the largest share of TV sets’ manufacturing costs, undergone an increase, but port congestions have also led to rising shipping costs and an extended lead time before TV sets can be delivered for retail sale. In addition to an uneven availability of various components, these aforementioned obstacles all exacerbate the risks involved with TV brands’ shipment. In a bid to maximize profits, however, brands have been making a concentrated effort to ensure that the production of OLED TVs remained free from disruptions in an effort to maximize profits.
As brands shift the focus of their sales efforts to OLED TVs, OLED TV shipment for 2021 is expected to reach 6.8 million units, a 72.8% YoY increase. This growth can primarily be attributed to an increase in OLED TV supply due to the expanded production capacity of LGD’s production line in Guangzhou, as well as the narrowing difference between LCD panel prices and OLED panel prices due to the sharp rise in the former in 1H21. In particular, LGE is set to take leadership position with an over 60% market share and a 91% YoY growth in its OLED TV shipment. Trailing behind in second place is Sony, which has been sourcing OLED panels from LGD. The Japanese company is expected to register a 53% YoY increase in shipment and possess a 20% market share. Panasonic, on the other hand, comfortably took third place with a 7% market share. Notably, Xiaomi and Sharp are the two dark horses with regards to OLED TV shipment this year with explosive YoY growths of 900% and 140%, respectively.
Major brands will concentrate on the high-end and large-sized segments, while smaller brands will continue to steadily develop mainstream products
While demand in the TV market recovers as the pandemic runs its course, TrendForce expects 45% and 55% of the total annual TV shipment for 2022 to take place in 1H22 and 2H22, respectively. TV shipment for 2022 will likely reach 217 million units, a 3.3% YoY increase, as brands are able to aggressively ramp up their TV shipments thanks to not only an undisrupted supply of panels, but also gradually stabilizing prices. For major brands, their focus will be on medium-sized and large-sized products and on products with substantial added values. Hence, the market share of large-sized TVs (including 65-inch and above models) will for the first time ever surpass 20%, with medium-sized (40-inch to 59-inch models) TVs remaining at a 55% market share. Although major brands are gradually exiting the small-sized segment, and smaller brands will have an easier time expanding their presence in emerging markets owing to gradually stabilizing prices, small-sized (39-inch and below models) TVs will see their market share drop by 1.8% next year to 25%. In any case, the primary target markets for major brands and smaller brands will not overlap next year.
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TrendForce expects global notebook shipment for 2021 to reach 244 million units, with 49% and 51% of the annual shipment taking place in 1H21 and 2H21, respectively. This distribution would seem to indicate that, although the growth momentum of consumer notebook models that began in 1H21 has gradually waned, strong performances from the commercial notebook segment are able to provide some upward momentum for the notebook market’s shipment performance in 2H21.
The first half of the year saw tight supply of materials, strong upside demand, and a market driven primarily by consumer models
Despite the shortage of materials from the supply chain, global notebook shipment for 1H21 still reached 119 million units. During this time, the COVID-19 pandemic caused considerable worldwide impact. Given the important role played by notebook computers in bringing business, education, and entertainment from the real world to the virtual world, shipments of commercial notebooks, Chromebooks, and gaming notebooks, which respectively fulfill the three aforementioned functions, remained strong.
Take Chromebooks as an example; shipment of these products reached 25.94 million units for 1H21, primarily thanks to a wave of procurement demand for educational notebooks, which are primarily produced and sold in response to tender offers, by the US, Japanese, and western European governments in an attempt to immediately kick off distance learning initiatives. The bullish Chromebook market also incidentally resulted in a 70% increase across the 1Q20-2Q21 period in the ASP of 11.6-inch notebook panels, which are used in mainstream Chromebook models.
Shifting demand and stabilizing supply of materials in 2H21 mean commercial notebooks have now become the primary driver of market growth
As the supply chain’s availability of materials gradually stabilizes in 2H21, global shipment of notebooks for the period will still likely reach 125 million units, a 5.7% increase compared with 1H21. Regarding quarterly shipments, market demand peaked in 3Q21, during which a total of 62.73 million notebooks were shipped. Following this peak, demand has remained mostly unchanged in 4Q21, reaching a forecasted 62.71 million units in shipment for the quarter. This slight decline can primarily be attributed to an estimated shipment of 11.62 million Chromebooks for 2H21, which is a 55.2% decrease from 1H21. The downturn of Chromebooks indicates that the educational notebook market, which is mostly driven by Chromebooks, no longer has sufficient momentum to keep up its high shipment in 2H21. Instead, demand has now shifted to commercial notebooks as the pandemic’s slowdown resulted in a corresponding return to physical offices and schools for work and study, respectively.
Fortunately for notebook manufacturers, commercial notebooks, which are primarily aimed at servicing enterprise customers, are able to shore up the weakening demand for other product categories in time in 2H21. On average, up to 34% of the product mixes offered by notebook brands such as Dell, HP, and Lenovo now consist of commercial models during this period. As such, TrendForce expects commercial notebook shipment for 2021 to reach 65.61 million units and account for 26.9% of total notebook shipment for the year.