Huawei drops out of top-six ranking for smartphones

After a tough year for smartphone vendors, annual production is expected to increase to 1.36 billion units in 2021, says TrendForce

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 percent 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 labour.

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 US 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 materialise, the annual global smartphone production for 2021 is forecasted to increase by 9 percent 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 US 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 percent 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 percent in 2021, while production will still be constrained by limited foundry capacities

Thanks to the Chinese government’s aggressive push for 5G commercialisation in 2020, global 5G smartphone production for the year reached about 240 million units, a 19 percent penetration rate, with Chinese brands accounting for almost a 60 percent 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 percent 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 percent capacity utilisation rate for foundries in 2021.