© TrendForce Analysis | December 02, 2020
Global smartphone production sets highest QoQ growth in recent years
In 3Q20, the smartphone industry benefitted from the gradual easing of pandemic containment measures worldwide, the arrival of year-end holiday season, and the expanded production targets by smartphone brands looking to capture Huawei’s lost market shares, according to TrendForce’s latest investigations.
These factors together drove up global smartphone production to 336 million units in 3Q20, a 20% increase QoQ, which is the highest QoQ growth in recent years. Looking ahead to 4Q20, TrendForce believes that the Huawei sanctions will continue to influence the smartphone market. The competing brands will remain aggressive in component procurement and maintain a high production level. The release of the iPhone 12 series will also inject a substantial amount of demand. The global smartphone production for 4Q20 is estimated to reach 351 million units, showing a QoQ increase of 4%. On the whole, the quarterly production volumes in the second half of this year are expected to be lower compared with the same period last year. However, the quarter-over-quarter comparisons are showing a gradual recovery from the slump caused by the COVID-19 pandemic. Nevertheless, the pandemic is still the largest source of disruption and uncertainty in the smartphone market. At the same time, the tightening of the available production capacity in the semiconductor foundry market and geopolitical uncertainties could affect the future development of the smartphone industry as well. Samsung and Xiaomi were the only companies out of the top six to increase their market shares in 3Q20 while Apple fell to fourth place due to the delayed release of new iPhones Samsung with 78 million units, an almost 42% increase QoQ, retained the top spot in the global ranking of smartphone brands by production for 3Q20. This result reflects Samsung’s continuing focus on specific regional markets such as North America and Europe. Owing to economic stimulus policies and subsidies, smartphone sales in the target markets have recovered somewhat. Moving to 4Q20, TrendForce estimates that Samsung’s smartphone production will fall to around 62 million units due to the end of the holiday stock-up activities in Europe and North America and the competition from the new iPhone devices. OPPO’s smartphone production rose by 64% QoQ to 45 million units for 3Q20, and this figure includes devices under OPPO, OnePlus, and Realme (stylized as “realme”). Xiaomi’s smartphone production also climbed 51% QoQ to 44.5 million units for the same period. Both brands are relatively on par with each other in terms of production volume and can be said to share the No. 2 spot in the global ranking. OPPO together with Xiaomi and Vivo are the main beneficiaries of Huawei’s recent loss of market share (on account of the tightening export restrictions). They have significantly raised their production targets and will be ramping up production through 4Q20. However, there is the possibility that the ambitious targets will not be met due to the lack of the available production capacity in the foundry market. Given the current situation, TrendForce estimates that OPPO’s and Xiaomi’s production volumes in 4Q20 will amount to around 47 million and 46 million units respectively. Apple posted a small QoQ increase of 2% in its iPhone production to 42 million units for 3Q20 and can be said to share the No. 4 spot with Huawei in the global ranking. This result mainly has to do with the delay in the launch of the iPhone 12 series. Regarding 4Q20, Apple will substantially improve its performance. Although the models under the 12 series have a higher BOM cost than the models under the 11 series due to the inclusion of the 5G capability, Apple uses the same proactive pricing strategy of last year to improve sales in the high-end market segment that has been impacted by the pandemic. At the same time, Apple is going to capture some of the demand that was originally intended for Huawei’s devices. As such, TrendForce estimates that Apple’s iPhone production in 4Q20 will reach 74.1 million units or potentially more. Huawei’s smartphone production and global ranking were on par with Apple’s for 3Q20. Compared with 2Q20, Huawei posted a QoQ decline of 19% to 42 million units. For 4Q20, Huawei’s smartphone production is projected to fall again by 30% QoQ to around 30 million units, as the company is not releasing any new models this quarter. However, the recent spin-off of the Honor brand has no effect on TrendForce’s projection of Huawei’s annual production volume. In view of the continuing escalation of the U.S.-China trade dispute, Huawei has been keeping its component inventory at a very high level. This strategy has helped mitigate some of the impact from the third round of U.S. sanctions that were announced on August 17. Going forward, Huawei will try to maintain a stable production level in order to deliver a consistent performance result on a quarterly basis. However, it will probably start experiencing component shortages either at the end of 1Q21 or in 2Q21 if its foreign component suppliers fail to obtain the required licenses to resume shipments. Vivo took the No. 6 spot in the global ranking for 3Q20. Its production volume climbed 13% from 2Q20 to the level of 30 million units. Like OPPO and Xiaomi, Vivo expects to gain from Huawei’s loss of market share and has stepped up device shipments. Its production will grow further to around 35 million units for 4Q20. The border dispute between India and China continues to put pressure on the sales efforts of OPPO, Xiaomi, and Vivo since they all count on India as one of their major foreign markets. On the other hand, these Chinese smartphone makers have long been cultivating a presence in the country and established a very strong brand recognition. Moreover, they have also localized their supply chains for the Indian market. So far, the progress they have made and the price competitiveness of their products seem to have helped them retain their existing market shares in India. Nevertheless, there is no doubt that the growth of Chinese brands in India will be very constrained if the Indian-Sino relations remain tense. Smartphone market is expected to shake off the grip of the pandemic and exceed 1.3 billion units in production volume in 2021 TrendForce expects global smartphone production for 2020 to reach 1.25 billion units, registering a YoY decline of 11%. The global production for 2021 is currently forecasted to increase by 9% YoY to 1.36 billion units. In the aspect of industry development, smartphone brands have been focusing on 5G this year, which will continue to be the main theme of 2021. As suppliers of mobile SoCs expand their 5G solutions for mid-range and low-end smartphones, the share of 5G models in the annual global smartphone production is forecasted to grow rapidly from around 20% this year to 40% next year.