Owing to high sales of the iPhone 12 series as well as an aggressive device production strategy by Chinese smartphone brands in response to sanctions on Huawei, which has lost considerable market share as a result, global smartphone production for 1Q21 is likely to reach 342 million units, a YoY increase of 25% and a QoQ decline of just 6%, according to TrendForce’s latest investigations. Historically, smartphone production tends to experience a QoQ drop of around 20% for the first quarter as demand collapses from the peak-season level of the fourth quarter of the preceding year. However, the performance of the first quarter of this year is expected to defy seasonality.

Smartphone production for 4Q20 is estimated at 364 million units, while Apple ranked first in terms of production volume

Even though the share of high-end models in global smartphone sales shrank in 2020 due to the COVID-19 pandemic, Apple was able to push through the headwinds and capture market share by introducing 5G models and adopting an aggressive pricing strategy. Apple produced 77.6 million units of iPhones in 4Q20, an 85% increase QoQ, thereby overtaking Samsung and ranking first amongst all smartphone brands. It should also be pointed out that iPhone 12 devices accounted for about 90% of the iPhone production in 4Q20. For 1Q21, sales of iPhone 12 devices remain strong, and total iPhone production is expected to reach 54 million units, with iPhone 12 models again accounting for about 80% of this figure. Looking further ahead, Apple plans to launch four new flagship iPhone devices in 2H21 and is likely to adhere to its aggressive pricing strategy. Regarding hardware advances, Apple will upgrade its mobile SoC to the A15 bionic SoC. Other than that, it will optimize various existing functions of the iPhone device. On the whole, the four upcoming flagship models can be regarded as extensions to the iPhone 12 series.

Samsung posted a QoQ decline of 14% in its smartphone production to 67 million units for 4Q20, thereby taking second place in the quarterly ranking. Its performance was affected by the competition from the new iPhone devices and the end of stock-up activities that were related to the year-end holiday season in North America and Europe. Moving to 1Q21, Samsung has released the new lineup of its flagship Galaxy S21 series in advance so as to maintain its market share in the high-end segment. At the same time, Samsung has adopted promotional pricing to boost the sales of its latest devices. Samsung’s quarterly smartphone production volume will likely reach around 62 million units for 1Q21. For the whole 2021, TrendForce expects Samsung to top the annual ranking of brands by production. Nevertheless, retaining the leadership position will be increasingly challenging for Samsung as it has been losing market share to several Chinese brands that have risen rapidly over these past few years. Regarding product strategy, Samsung will likely combine the Galaxy Fold series, equipped with foldable displays, with the Galaxy Note series, which offer large-sized displays, into the same flagship lineup. The main focus of Samsung’s sales efforts will still be on the Galaxy A series that encompasses models across the high-end, mid-range, and low-end segments of the price spectrum. To effectively compete against Chinese brands that boast better price-performance ratio for their devices, Samsung will maintain high specifications and a price advantage for Galaxy A devices.

OPPO (including OPPO, OnePlus, Realme), Xiaomi, and Vivo produced 50 million, 47 million, and 31.5 million units of smartphones respectively in 4Q20, which placed them at third, fourth, and sixth places. Looking ahead to 1Q21, the three aforementioned smartphone brands are expected to maintain an aggressive production target and actively expand in both the overseas and domestic markets. Nonetheless, potential growths in their actual production volume will be limited by the current shortage of production capacities across the foundry industry. In terms of product strategies, the three Chinese brands will remain aggressive in their R&D activities for high-end models as they seek to take over Huawei’s previous position in this segment. In particular, Xiaomi and OPPO have been seizing market shares with the highly cost-effective Redmi and Realme series, respectively. Notably, Xiaomi is expected to achieve a better performance in terms of market share for the whole year due to its earlier expansion in the overseas markets.

In response to heightened China-U.S. tensions, Huawei maintained a high inventory of components, which allowed it to effectively mitigate the impact of sanctions from the Department of Commerce. As such, Huawei recorded a quarterly production volume of 34.5 million units in 4Q20, a 21% decrease QoQ. This performance was sufficient to land Huawei in the fifth place in the production ranking for the quarter. Going forward, if suppliers of relevant smartphone components are unable to obtain approval to ship to Huawei by the end of 1Q21, then Huawei is expected to experience a noticeable cutoff of material supplies by the end of 2Q21. Furthermore, after being officially sold off by its parent company Huawei in early 2021, Honor is similarly facing the issue of foundry capacity shortage, which is projected to constrain the production volume of new Honor for the entirety of 2021.

2021 Ranking of smartphone brands by market share remains under scrutiny as LG suspends R&D of new products

LG has been considering either closing down or selling off its smartphone business since early 2021 while also suspending the R&D of new models. This has introduced additional uncertainties into the smartphone market following Huawei’s diminished presence. Although LG was relentless in innovating and developing high-end smartphones in the past, its sales performances lagged behind more competitive offerings from Samsung and Apple in the high-end segment. In the entry-level and mid-range segments, LG similarly fell short of Chinese brands, whose products enjoyed a pricing advantage. As a result, LG’s smartphone market share underwent gradual YoY declines since 2016, finally coming to ninth place in the global smartphone production ranking in 2020. Going forward, LG will concentrate its sales efforts in the Americas, while its market share is expected to fall to other brands, including Samsung, Xiaomi, and even certain telecom companies’ in-house brands.

For the rest of 2021, as the pandemic gradually slows down, the smartphone industry, which provides an essential daily necessity for the public, is likely to make a recovery as well. Given the industry’s cyclical replacement demand as well as demand from emerging regions, TrendForce projects the total smartphone production volume for 2021 to reach 1.36 billion units, a 9% increase YoY. It should be pointed out that the recent shortage in foundry capacities has led to a very limited supply of smartphone components, such as AP and TDDI. This means most smartphone brands have to make do with the materials they are able to obtain, even if such materials constitute a bottleneck in the manufacturing process. As a result, the boundaries between what would otherwise be off seasons and peak seasons will be relatively ambiguous this year, resulting in a smaller magnitude of QoQ growths.

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 lattechung@trendforce.com

Owing to the impact of the COVID-19 pandemic, global smartphone production reached a mere 1.25 billion units in 2020, a record-breaking 11% YoY decrease, according to TrendForce’s latest investigations. The top six smartphone brands ranked by production volume for 2020, in order, are Samsung, Apple, Huawei, Xiaomi, OPPO, and Vivo. The most glaring change from the previous year is Huawei’s market share.

TrendForce indicates that Honor will formally separate from Huawei and operate as an independent smartphone maker at the start of 2021. The aim behind this spin-off is to ensure the survival of Honor, which has become a major brand in the global smartphone market after years of labor. However, it remains to be seen whether the “new” Honor can capture consumers’ attention without the support from Huawei. Also, Huawei and the new Honor will be directly competing against each other in the future, especially if the former is somehow freed from the U.S. trade sanctions at a later time. With the new Honor seeking to ramp up production, Huawei will have more difficulty in regaining market share for smartphones.

Looking ahead to the rest of 2021, TrendForce believes that the global smartphone market will gradually recover as people become accustomed to the “new normal” resulting from the pandemic. Moreover, this year will likely see a relatively strong wave of device replacement demand as well as demand growth in the emerging markets. Assuming that these conditions will materialize, the annual global smartphone production for 2021 is forecasted to increase by 9% to 1.36 billion units. Regarding the annual global ranking of smartphone brands for 2021, Huawei will experience a further and significant decline in its device production. This is because of the effects of the U.S. export restrictions and the spin-off of Honor as a separate entity operating in the smartphone market. Huawei is currently projected to tumble from third place in 2020 to seventh place in 2021. The top six for 2021, in order, will be Samsung, Apple, Xiaomi, OPPO, Vivo, and Transsion. Together, they will account for almost 80% of the global smartphone market. Nevertheless, the pandemic will remain the central variable (or the biggest uncertainty) in the production projection because it will continue to exert significant influence on the global economy. Besides the pandemic, the performance of smartphone brands during 2021 could also be affected by geopolitical instabilities and the lack of available production capacity in the semiconductor foundry market.

Penetration rate of 5G smartphones is likely to rise to 37% in 2021, while production will still be constrained by limited foundry capacities

Thanks to the Chinese government’s aggressive push for 5G commercialization in 2020, global 5G smartphone production for the year reached about 240 million units, a 19% penetration rate, with Chinese brands accounting for almost a 60% market share. While 5G will remain a major topic in the smartphone market this year, various countries will also resume their 5G infrastructure build-out, and mobile processor manufacturers will continue to release entry-level and mid-range 5G chips. As such, the penetration rate of 5G smartphones is expected to undergo a rapid increase to 37% in 2021, for a yearly production of about 500 million units.

It should be noted that, under the optimistic assumption that the pandemic can be resolved within the year, shipment for various end-products, including servers, smartphones, and notebook computers, will undergo a YoY increase compared to 2020. Case in point, the number of PMICs and CIS (CMOS image sensors) contained per handset will each double in order to meet increased smartphone specifications. On the other hand, major Chinese foundry SMIC has recently been added to the Entity List once again. This is expected to exacerbate the foundry industry’s already-strained production capacity.

TrendForce indicates that smartphone brands’ recent bullish outlook towards the 2021 market and their attempt to secure more semiconductor supplies by increasing their smartphone production targets can potentially lead these brands to overbook certain components at foundries. However, smartphone brands may adjust their component inventories from 2Q21 to 3Q21 and reduce their semiconductor procurement activities if actual sales performances fall short of expectations, or if component bottlenecks remain unresolved, leading to a widening inventory gap between bottlenecked and non-bottlenecked parts. Even so, TrendForce still forecasts an above-90% capacity utilization rate for foundries in 2021.

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 lattechung@trendforce.com