The recent surges of COVID-19 cases in India, Vietnam, and other Southeast Asian countries have adversely affected the global smartphone market in terms of production and demand, according to TrendForce’s latest investigations. The global smartphone production for 2Q21 fell by 11% QoQ to a total of 307 million units. However, a YoY comparison shows an increase of around 10% for the quarter. The global production for 1H21 came to a total of 652 million units, translating to a growth rate of almost 18% compared with 1H20, when the pandemic was in the initial phase.
While fourth-ranked Apple undergoes a transition period between old and new models, and Samsung experiences a slight dip in market share, smartphone brands have improved their respective product specifications
Samsung’s smartphone production for 2Q21 reached 58.5 million units, which was the highest among all smartphone brands yet represented a 23.5% QoQ decrease. Since India and Vietnam account for the majority of its smartphone production capacity, the severe COVID-19 outbreaks in both countries during 2Q21 had a significant impact on production volume. This year, Samsung will remain as the top smartphone brand by quarterly and annual production. However, it will face increasing difficulty in preserving its steadily shrinking market share in the future. The competition will only intensify as rival brands have become excelled at smartphone design and manufacturing.
OPPO’s smartphone production fell by 6.6% QoQ to 49.5 million units for 2Q21. OPPO’s production figure includes devices from sub-brands Realme and OnePlus. Xiaomi’s smartphone production also came to 49.5 million units for 2Q21, showing a QoQ drop of 2%. Xiaomi’s production figure includes devices from sub-brands Redmi, POCO, and Black Shark. On a YoY basis, OPPO posted a growth rate of 80%, whereas Xiaomi posted a growth rate of almost 70%. The high YoY growth rates were attributed to them capturing some market share abandoned by Huawei and the recovery of China’s smartphone market. Both OPPO and Xiaomi claimed second place in the quarterly ranking. Vivo is another Chinese brand that faces a similar situation. Its smartphone production, which includes devices from sub-brand iQoo, dropped by 8.1% QoQ to 34 million units. Vivo took fifth place in the quarterly ranking. Each of these three Chinese brands has made India its second largest base with respect to production and sales operations. Hence, India’s recent COVID-19 surge affected the production and sales performances of all three brands in 2Q21.
Regarding future plans, all three Chinese brands corrected down their annual production targets at the end of 2Q21 due to the COVID-19 surge in Southeast Asia and the capacity crunch in the foundry market. Lowering the annual production target is going to alleviate the cash flow pressure by preventing the component gaps from widening and the inventory of whole devices from rising. It should be pointed out that OPPO, Xiaomi, and Vivo have been very proactive in developing innovative products in the high-end segment of the smartphone market. The high-end models from these three brands are not able to completely assume the market positions that have been held by the flagship models under Huawei’s P and Mate series. Nonetheless, all three brands have posted strong results in both the domestic and overseas markets. To capture more market share, Xiaomi and OPPO are leveraging their respective sub-brands Redmi and Realme that both offer high performance for price. TrendForce therefore believes that these two brands will be more or less evenly matched in terms of production through this whole year.
Apple’s iPhone production reached its lowest point for the year, and its rank fell to fourth place in 2Q21 because the second quarter is the transition period between last year’s and this year’s iPhone series. The quarterly total iPhone production fell by 22.2% QoQ to around 42 million units. In the aspect of product development, Apple will be releasing four flagship iPhone models this September. The major upgrades that come with the new series are the improved camera and the next-generation A15 processor that is manufactured with TSMC’s 5nm+ process. Other upgrades relate to the optimization of the existing functions. This year’s iPhone line-up can be regarded as an extension of the iPhone 12 series that was released in 2020. With regards to pricing, Apple will be maintaining its proactive approach so as to gain more market share. On the other hand, there is the possibility that Apple’s device production during 2H21 will be affected by the recent spike of COVID-19 cases in Malaysia. Due to the severity of the outbreak situation, shipments of ICs from that country have experienced delays.
With an annual production of 9.4 million units for 2021, LG officially terminated its smartphone manufacturing operations in 2Q21
LG signaled that it will be selling or shutting down its mobile phone unit at the start of this year, and then the company announced that it will formally close the mobile phone unit this April. The development of new smartphone models was also suspended. According to the shutdown plan, the production of LG smartphones has ceased since the end of 2Q21. Altogether, LG produced around 9.4 million units this year and is estimated to account for about 1% of the market share. As for LG’s regional markets, the company was focusing on expanding its presence in the respective mid-range segments of the North American and Latin American markets. With LG ceasing its smartphone production, the abandoned market share in North America will be mostly divided among Android phone brands Samsung, Lenovo, and brands owned by local telecom companies. In Latin America, Lenovo and Xiaomi will likely benefit the most from LG’s exit.
Persistent uncertainties in the pandemic’s impact may continue to affect smartphone production in 2H21
Regarding the global smartphone production for the whole 2021, TrendForce has corrected down its estimation from the previous version of 1.36 billion units with a YoY growth rate 8.5% to the current version of 1.345 billion units with a YoY growth rate of 7.3%. Going forward, one of the two main focuses of observation will be on whether the pandemic will cause a further decline in smartphone sales. For instance, while Europe and the US are currently experiencing a resurgence of infections, Southeast Asian countries have also been unable to subdue the most recent outbreaks. In addition, the pandemic continues to pose a risk to the smartphone supply chain. Take Malaysia for example. It accounts for a significant share of the global production capacity for OSAT (i.e., around 15%). With the country now becoming a COVID-19 hotspot, there have been disruptions in the supply of some key semiconductor components. This, in turn, will negatively affect smartphone production during the second half of this year.
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The iPhone 13 series, which is about to be formally announced by Apple, has already had its exterior design speculated on by various media outlets and fans alike. TrendForce’s latest investigations indicate that some of the notable hardware upgrades of the iPhone 13 pertain to the SoC (manufactured at the 5nm+ node, which enables improved performance and decreased power consumption), display, and camera. In addition, iPhone handsets featuring support for 5G mmWave will be available for sale in more countries after the release of iPhone 13.
The iPhone 13 will see a shift in its charging circuit board from the previous rigid-flex PCB design to a new design featuring SiP combined with flexible PCB. The space-saving feature of this new design will also likely result in increased battery capacity. As for retail prices, the iPhone 13 series is expected to remain similar to the iPhone 12 series assuming Apple is able to effectively control manufacturing costs, since the latest models do not come with significant hardware upgrades. As a result of this aggressive pricing scheme, iPhone shipment will likely maintain its growth trajectory for two consecutive years.
Huawei’s plight led to Apple’s rising market share in the Greater China region
Owing to heavy competition from Chinese brands, sales in the Greater China region accounted for a decreasing share of Apple’s iPhone revenue, from 19.44% in 2017 down to merely 16.33% in 2020. Nevertheless, this downtrend has been gradually reversing since 4Q20, primarily because of increased sanctions against Huawei.As Huawei was cut off from its chip supply in 4Q20, shipment of Huawei smartphones underwent a massive decline accordingly, in turn leaving vacancies in the flagship smartphone market in China. At the same time, while Apple released its new iPhone 12 models, flagship smartphone buyers in China began purchasing iPhones instead. Thanks to this shift, sales in the Greater China region began accounting for a growing share of Apple’s iPhone revenue, from 14.8% up to 19.13% in 4Q20. Since 4Q20, this figure has remained above 18% for three consecutive quarters.
Prior to being sanctioned by the US government, Huawei had enjoyed the highest market share in the high-end smartphone segment in China. After the sanctions were put into place, this segment then became highly sought after by other smartphone brands. However, because other Chinese brands had not previously placed significant emphasis on the high-end market, the iPhone was able to seize most of the market share in the high-end segment left in Huawei’s wake. Furthermore, although other Chinese smartphone brands have started developing their respective flagship models, it takes considerable time to build up their brand images in this segment and attract customers. TrendForce therefore believes that the iPhone will continue to dominate the high-end smartphone market in China for the next two to three years.
iPhones are expected to account for 16.7% of global smartphone shipment in 2021
An overview of iPhone shipments for the past few years shows that iPhone shipment went into a nosedive starting in 4Q18 because the iPhone XS/XR series featured limited improvements yet a significant price hike over its iPhone 8/X predecessor. Alarmed by this decline, Apple immediately revamped its sales strategy for the next-gen iPhone 11, which not only underwent a total overhaul in terms of specs but also experienced a price cut of US$50 for the entry-level model (the Pro model retained its previous-gen equivalent’s price). Apple subsequently released the brand-new iPhone SE in 2020, thereby reversing the downward trajectory of iPhone shipment as a result.
New iPhones saw a deferred released schedule in 2020 owing to the impact of the COVID-19 pandemic, which led to a 14% YoY decrease in iPhone shipment for 3Q20. However, as the new iPhone 12 models equipped with across-the-board hardware upgrades, including 5G functionality, were released in 4Q20, iPhone shipment saw a massive rebound during the quarter and reached a 12% YoY increase in 4Q20 and a further increase of 42% YoY in 1Q21.
Looking ahead to the shipment volumes of the new iPhone models for 2H21, TrendForce expects Apple to maintain its aggressive pricing strategy in order to boost shipment. In addition, as the iPhone 13 series will once again return to a September release, total iPhone shipment is expected to undergo a 30% YoY increase in 3Q21, but a 5% YoY decrease in 4Q21. As such, iPhone sales for 2H21 will likely surpass 2H20 figures. For 2021, iPhones are expected to account for 16.7% of all smartphone shipment, which is a step-up compared to last year.
Owing to its enormous population, Latin America has in recent years become a hotly contested market for smartphone brands. More specifically, the penetration rate of smartphones in Latin America rose from 32% in 2014 to 68% in 2020, with smartphone usage being the highest in Chile and Venezuela and lowest in Peru.
TrendForce’s investigations indicate that smartphone penetration rate in Brazil reached 72% in 2020 owing to high demand from young consumers and to the country’s massive population, the highest in Latin America. More than 85% of the 18-34 year old population group in the country consisted of smartphone owners, making Brazil the fourth largest smartphone market in the world behind only China, India, and the US. Notably, smartphone is the primary means of internet connection for most Brazilians.
With regards to smartphone brands, the Brazilian smartphone market is currently dominated by Samsung, Motorola (a Lenovo subsidiary), Xiaomi, LG, and Apple, with Samsung possessing the highest market share. Samsung’s success can mainly be attributed to its focus on customer experience. For instance, Samsung has established service centers in major cities including Sao Paulo and Campinas, where customers can not only experience the brand’s range of products, but also enjoy such value-added services as smartphone charging and free Wi-Fi, in addition to one-to-one consultation with Samsung staff.
As such, the company was able to achieve a 43.1% market share in Brazil last year. Trailing behind the Korean brand was Motorola, which took second place with a 20.5% market share. For the domestic market, Motorola’s handsets are manufactured by the Brazilian branch of global EMS giant Flex (previously known as Flextronics). Xiaomi rounded out the top three, with an 8.9% market share in 2020. Other Chinese smartphone brands such as OPPO, Vivo, and realme (the most aggressive among Chinese brands) have been entering the Latin American market since 2021.
Physical storefronts and one-stop-shop customer experiences are the keys to success in the Latin American smartphone market
Of course, entering the Brazilian market is no easy feat. TrendForce notes that some of the challenges involved with expanding in Brazil include the drastic movements of the Brazilian Real’s value as well as the country’s sky-high import duties, which have resulted in high retail prices for smartphones. Furthermore, shifts in domestic policies regarding smartphone manufacturing and online sales mean that smartphone brands must now establish domestic facilities for smartphone assembly. Apart from the high costs of domestic labor and components, Brazil’s taxes alone are able to significantly cannibalize the profitability of smartphone sales.
An appropriate case in point is Xiaomi’s 2015 venture into the Brazilian smartphone market. Xiaomi made its exit within a year of entering Brazil. Aside from the aforementioned high import duties, the company’s premature exodus took place because its online-based sales strategy was ill-suited for Brazil, where smartphone customers made purchases predominantly through major retail stores, and fewer than 20% of customers bought smartphones online.
Combined with Brazil’s prohibitive transportation costs, Xiaomi found itself unable to leverage its advantage of affordably priced handsets. Fast forward to 2019, however, as the Latin American market saw increased smartphone penetration, Xiaomi once again made its entrance, this time by focusing on developing its offline presence, including physical storefronts (called “Mi Stores”) in Colombia, Uruguay, Mexico, and Chile, which allowed it to score its first win in the Latin American smartphone market.
Thanks to the increased adoption of AMOLED panels by major smartphone brands including Apple and Samsung, the penetration rate of AMOLED panels in the smartphone market is expected to reach 39.8% in 2021 and 45% in 2022, according to TrendForce’s latest investigations. As AMOLED panels see increased adoption, the consumption of AMOLED DDI will undergo a corresponding increase as well. However, not only are the process technologies used for AMOLED DDI manufacturing currently in short supply, but some foundries are also yet to finalize their schedules for expanding their AMOLED DDI production capacities. Given the lack of sufficient production capacity, the increase in AMOLED panel shipment may potentially be constrained next year.
Regarding process technologies, the physical dimension of AMOLED DDI chips is generally larger compared to other chips, meaning each wafer yields relatively fewer AMOLED DDI chips, and more wafer inputs are therefore needed for their production. The vast majority of AMOLED DDI is currently manufactured with the 40nm and 28nm medium-voltage (8V) process technologies. In particular, as 40nm capacity across the foundry industry is in tighter supply compared to 28nm capacity, and TSMC, Samsung, UMC, and GlobalFoundries are the only foundries capable of mass producing AMOLED DDI, an increasing number of new wafer starts for AMOLED DDI are being migrated to the 28nm node instead.
Regarding wafer supply, the foundry industry is currently unable to fulfill client demand for 12-inch wafers. Hence, 12-inch capacities allocated to AMOLED DDI production are relatively limited as well. At the moment, only TSMC, Samsung, and UMC are able to allocate relatively adequate wafer capacities, although their capacity expansion efforts are still falling short of growing market demand. In addition, while SMIC, HLMC, and Nexchip are developing their respective AMOLED DDI process technologies, they have yet to confirm any mass production schedules. TrendForce therefore expects that the additional AMOLED DDI capacities to be installed next year will remain scarce, in turn further limiting the potential growth of the AMOLED panel market.
AMOLED DDI suppliers must overcome the issues of limited production capacity and technological difficulties in R&D
Other than the issue of tight production capacities, the difficulty of AMOLED DDI development is further compounded by the fact that each panel manufacturer has its unique specifications of AMOLED panels. For instance, panel manufacturers differ in terms of their display image uniformity (including the calibration of on-screen picture quality via eliminating display clouding, poor color/brightness compensation, and sandy mura). Hence, in order to address the discrepancies among panels manufactured by different companies, IC suppliers must adopt different compensating solutions and account for different parameters. Panel manufacturers therefore are likelier to adopt DDI from IC suppliers whose solutions have already been in mass production.
If prospective IC suppliers were to enter the AMOLED DDI market, they would need to overcome various difficulties in AMOLED DDI development, including long processes of validation and revision, in order to mass produce at scale. As well, each individual panel supplier requires its own different set of IP cores (referring to the various functional modules in an IC) and specifications, making it difficult to manufacture AMOLED DDI that is universally compatible with all AMOLED panels. For instance, ICs that are supplied to Korean panel manufacturers by AMOLED DDI suppliers are incompatible with AMOLED panels from Chinese panel manufacturers, which require new wafer starts with their own requirements.
On the whole, other than certain DDI suppliers which have their own subsidiary foundries or have longstanding foundry partners capable of DDI production, TrendForce believes that fabless AMOLED DDI suppliers must not only secure a stable and sufficient source of foundry capacity, but also possess sufficient technological competency for mass production, in order to successfully expand their presence in the AMOLED DDI market.
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This year, the US and Europe, which are Apple’s main markets for iPhone devices, are seeing an easing of the pandemic and expecting an economic recovery. Furthermore, Apple is expected to benefit from Huawei’s abandonment of some market share for high-end smartphones, and the sales of the new iPhone devices in 2H21 will likely be boosted thanks to this development. On the whole, the outlook on Apple’s performance in the smartphone market for the whole year is positive, according to TrendForce’s latest investigations. Although the ongoing capacity crunch in the foundry industry will have a constraining effect on Apple in terms of ramping up its iPhone production and growing its market share in the future, TrendForce is still maintaining a cautiously optimistic view and forecasts that the annual total iPhone smartphone production for 2021 will grow by around 12.3% YoY to 223 million units, with additional room for a slight growth going forward.
Apple will prioritize the optimization of existing functions with the iPhone 12s series, while retail prices are expected to remain on par with last year’s release of iPhone 12 models
Apple plans to unveil the next generation of iPhones, tentatively called the iPhone 12s series (official name has yet to be revealed), in September 2021, and the smartphone market has placed the spotlight on the new handsets’ physical appearances as well as retail prices. Regarding the general outward appearance of the upcoming iPhone devices, the notch on top of the screen will shrink due to the decreased size of their sensor housings. Apart from this, other upgrades will mostly relate to the optimization of existing functions and features. All in all, the degree of innovation is not particularly significant in terms of appearance, and the four new models can be regarded as an extension to the iPhone 12 series. Because of this, TrendForce also believes that Apple will continue the proactive pricing strategy that it adopted in 2020 so as to maintain its market share for high-end smartphones. Even though prices of some key components have risen due to tightening supply, Apple is taking into account of the growth in the revenue of peripheral services in relation to the growth of iPhone sales. This means that the starting price of the upcoming iPhone series will likely be relatively on par with the starting price of the iPhone 12 series.
For the latest iPhone models, Apple has made certain upgrades to the handsets. TrendForce here summarizes the key components of the latest iPhone models, including the processor, display, memory, and camera. The iPhone 12s series will feature the A15 processors manufactured at TSMC’s 5nm+ node. Regarding the display, the new models will be equipped with flexible AMOLED panels with On-cell touchscreen technology; the two Pro models will also feature a 120Hz refresh rate. Judging by the iPhone 12s series’ starting prices as well as the differences among various models’ retail prices, TrendForce expects the new handsets’ memory capacities to remain the same as their iPhone 12 counterparts. On the camera front, Apple has upgraded all iPhone 12s handsets’ main cameras to include sensor-shift image stabilization technologies. For the Pro models, not only are their ultra-wide cameras now equipped with 6P lens (which is an upgrade over the previous generation), but they are also capable of autofocus functions. Notably, it should be pointed out that LiDAR scanners are available in the Pro models only.
On the whole, TrendForce expects the latest iPhone devices to account for about 39% of Apple’s total annual production volume for 2021. As all iPhone 12s handsets contain 5G modems, the share of 5G models in the overall iPhone production is projected to expand massively from 39% in 2020 to 75% in 2021. Furthermore, Apple is expected to focus on driving sales of the three non-mini models in the iPhone 12s series in view of the fact that the iPhone 12 mini (which reached End-of-Life ahead of time in 2Q21) suffered disappointing sales performances compared to other models in the iPhone 12 family.
For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at email@example.com