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Global Smartphone Volume Declines by 6% But Registers Highest Ever Third Quarter Revenue

The global smartphone market grew 6% QoQ but declined 6% YoY to 342 million units in Q3 2021.
While shipments declined due to component shortages, strong shipments of mid-to high-end smartphones drove the record third-quarter revenue of over $100 billion.
Samsung retained the number one spot in Q3 2021 with smartphone shipments of 69 million.

New Delhi, Hong Kong, Seoul, London, Beijing, San Diego, Buenos Aires – October 29, 2021

The global smartphone market grew 6% QoQ to reach 342 million units in Q3 2021, according to the latest research from Counterpoint’s Market Monitor service. However, the market declined 6% YoY due to the ongoing global component shortages and slow recovery of key markets such as China and parts of Europe.

Commenting on the overall market dynamics, Research Director Tarun Pathak said, “During the September quarter, we saw supply constraints that were even more severe than those experienced during the June quarter. The global semiconductor shortage finally also took a toll on the end consumers. Due to the demand-supply mismatch, most components used in smartphones have seen upward price movements, forcing some major OEMs to increase the retail prices of some models. This led to declines in shipment volumes, especially in the entry tier segment, which limited the growth potential. As a result, market demand was met by mid- to high-tier smartphones that helped drive the quarter to a record revenue even with the declining shipments. Apple and Samsung refreshing their premium series with iPhone 13 series and Fold series respectively, added to the revenue growth”.

Commenting on the brands’ performance, Research Analyst Aman Chaudhary said, “The top 5 brands could have performed better if not for the component shortages, but they still managed to navigate the crisis through their efficient supply chain management. Samsung shipped 69 million units in Q3 2021, up 20% QoQ driven by the resumption of regular operations at its Vietnam factories and the successful launch of its new foldable series.”

Commenting on the revenue dynamics, Senior Analyst Harmeet Singh Walia noted, “Global smartphone wholesale shipment revenues exceeded $100 billion*, up 12% YoY as the brands circumvented the shortage of chipsets through an aggressive promotional push for mid-priced smartphones instead of lower revenue-generating but high-volume low-end smartphones. Furthermore, the companies also actively pushed 5G-enabled phones due to the better availability of 5G components. This provided an upgrade option to customers, thereby gaining a more robust value share. Apple led the smartphone market revenue, capturing around 37% of the market while Samsung managed to increase its revenue by 32% QoQ driven by the successful launch of its Fold series”.

Market Summary:

Apple shipped 48 million units in Q3 2021, up 15% YoY. This growth was propelled by the launch of the latest iPhone 13 series and stronger than expected performance of the iPhone SE 2020. Apple continued its push in China’s premium segment where Chinese brands such as OPPO, vivo and Xiaomi have not been able to effectively fill the gap left by Huawei’s diminishing position.

Xiaomi shipped 44.4 million units in Q3 2021, down 5% YoY and 15% QoQ as it was severely hit by the ongoing component shortages. As a result, its global market share declined to 12.9% from 16.25% in Q2 2021. In China, Xiaomi’s shipment declined 15% QoQ and the brand lost the third spot to HONOR.

OPPO^ grew 23% YoY to capture 11.1% market share with 38.1 million units. The brand saw an increase in the $400-$599 and $600-$799 price bands, mainly owing to strong shipments of the Reno 6 series, Find X3 and OnePlus 9 series. OPPO consistent performance was due to its aggressive strategies to expand its presence in international markets, particularly LATAM, MEA and Nordic countries. In India, OnePlus grew 55% YoY in Q3 2021 driven by the OnePlus Nord Series. During the quarter, OnePlus also registered its highest ever shipments in India.

vivo grew 9% YoY and 4% QoQ to take 9.8% share for the quarter. vivo continued to lead in China’s market in Q3 2021 with more than 17 million units. This impressive performance by vivo can be attributed to the stable base created by its Y series, and successful recent launches of the S10 and X70 series. The brand also continued to expand its presence in markets such as LATAM and Europe.

Huawei’s shipments further declined 84% YoY to reach 5.8 million units due to a lack of core components. However, to expand its target audience, the brand launched a 4G version of the P50 series in China. Nevertheless, with no change in the US sanctions against Huawei, the brand is expected to continue its decline.

HONOR’s shipments grew 73% QoQ driven by its market comeback in China, where it became the third-largest brand in Q3 2021 riding on the successful launch of the Honor 50 and Honor Play 20. However, its shipments outside China continued to decline.

realme achieved its highest-ever shipment performance with 16 million units in Q3 2021. This was driven by the strong and consistent performance of its 8 series and newly-launched Narzo series. The brand continued to expand its presence in new markets such as LATAM and Europe. The record quarter is coming at a time when component shortages were at their peak.

*Note: Preliminary revenue, based on wholesale pricing.

^Note: OPPO includes OnePlus in Q3 2021

Feel free to reach us at press@counterpointresearch.com for questions regarding our latest research and insights.

You can also visit our Data Section (updated quarterly) to view the smartphone market share for World, US, China and India.

Some of our latest regional smartphone market analyses:

India Smartphone Shipments Cross 52 Million Units in Q3 2021 as Brands Prepare for Festive Season

China Smartphone Sales Drop 9% YoY in Q3 2021 on Weak Spending, Component Shortages; HONOR Rises to Third Spot

Online Smartphone Sales in Key SEA Countries at Record High in Aug

Background

Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry

BoM Analysis: iPhone 12 Costs 21% More Than iPhone 11

The blended materials cost for the iPhone 12 with 128GB NAND flash is nearly $415, a 21% increase over the iPhone 11.
In the iPhone 12, Apple’s self-designed components including the A14 bionic, PMIC, Audio and UWB chip make up over 16.7% of the overall BoM cost.
The shift from LCD to OLED in the iPhone 12 is a big jump, resulting in an over $23 cost increase.
Cost increases are also driven by 5G-related components, with components like 5G modem, transceiver and RF front-end system collectively contributing a $34 increase.

Producing a 128GB iPhone 12 mmWave (millimeter-wave) smartphone will cost Apple up to $431, 26% higher compared to the iPhone 11, according to the latest bill of materials (BoM) analysis by Counterpoint’s component research practice. Despite over $27 cost savings due to the simplified RF design, the BoM cost of the sub-6GHz-only model for overseas markets still increased by 18%.

Assuming a 38% mmWave mix, the blended materials cost for the iPhone 12 with 128GB NAND flash is nearly $415, a 21% increase over its predecessor. Application processor, 5G baseband, display and 5G RF components represent the major areas of the cost increase.

Exhibit 1: iPhone 12 BoM Cost Increase Over iPhone 11

First TSMC 5nm process-powered application processor

The new generation of Apple mobile processors, the A14 bionic, contains a whopping 11.8 billion transistors, up 39% from the A13’s 8.5 billion units. This provides significant performance improvements in aspects of CPU, GPU and Neural Engine. Given the much higher 5nm wafer cost (nearly double that for 7nm), the application processor alone is estimated to introduce a cost increase of over $17. Our analysis also suggests Apple’s self-designed components including the A14, PMIC, Audio and UWB chip make up over 16.7% of the overall BoM cost.

The return of Qualcomm

Qualcomm’s advanced cellular technology found its way back with Apple’s latest launch. Besides the SDX55M 5G baseband, Qualcomm also provides the paired transceivers and RF discrete components for both sub-6GHz and mmWave versions. For the iPhone 12, Qualcomm will be the second-largest electronic component supplier behind Samsung Electronics.

Display upgrade from LCD to OLED

Apple has upgraded the display of its base models to OLED, which supports high dynamic range and higher peak brightness. From the cost perspective, the shift from LCD to OLED in the iPhone 12 is a big jump, resulting in an over $23 cost increase. Both Samsung Display and LG Display are set to supply more panels to Apple.

Increased cost to enable 5G

The iPhone 12 has been equipped with more RF components to support the 5G-related spectrum. Our analysis shows the blended cost increase from the RF subsystem is around $19. Besides Qualcomm, other major content gainers are Skyworks, MURATA and Avago.

Diversified sources of supply

Apple has managed to diversify its supply sources. For the iPhone 12, the memory orders are split between industry leaders, with Samsung and KIOXIA (Toshiba) supplying NAND flash, and SK Hynix and Micron supplying LPDDR4X. The camera content shares are largely gained by Sony, LG Innotek and Sharp. NXP and Broadcom continue providing solutions for wireless connection and display/touch control. Cirrus Logic, Goertek, Knowles and AAC dominate the audio design. TI and ST are major suppliers of power and battery management IC. Apple has also expanded its cooperation with ASE/USI, leveraging the latter’s SiP (System in Package) packaging technology to miniaturize the design.

Apple: Thinking Inside the Box

Apple removes chargers and earphones from the boxes

In a unique and courageous move, Apple has disrupted the legacy packaging of smartphones by removing chargers and earphones from the boxes for its new iPhone 12 series along with the iPhone XR, iPhone 11 and iPhone SE. Most of the other OEMs provide fast chargers as a standard offering inside the box.

Apple’s Reason for Removing In-Box Accessories

Apple says the above-mentioned decision has been taken to meet its environmental goals. The company wants to become carbon-neutral by 2030. Removing chargers and earphones would mean smaller and lighter packaging, allowing “70% more boxes to be shipped on a pallet. Taken altogether, these changes will cut over 2 million metric tons of carbon emissions annually, equivalent to removing nearly 450,000 cars from the road per year”, according to Apple. This is great from logistics and environmental standpoint and probably makes sense for Apple users who are going to upgrade and already have older iPhone accessories that work well with the current models. However, there are a few other aspects to be considered here.

Cutting Corners to Maintain Reasonable Pricing

Apple has added 5G, mmWave and OLED screens across the iPhone 12 line-up. There are improved cameras as well. This is an added cost, which normally translates into an increase in price to maintain margins. However, any big increase in the latest iPhones’ prices would have negatively impacted the demand, especially in these COVID-19 times. By removing chargers and earphones, Apple was able to price the devices reasonably, increasing the price by just $100 for the iPhone 12 as compared to the iPhone 11 last year. It also launched the iPhone 12 mini at the iPhone 11 launch price. Stacking of 70% more boxes in a single pallet would likely also lead to a reduction in logistical costs, thus helping margins. Reasonable pricing and a significant pent-up demand for 5G will help Apple’s October-December 2020 line-up sales exceed the iPhone 11 family’s September-December 2019 sales by 1% (Source: Counterpoint Market Outlook). Reducing the iPhone 11 price has also strategically placed Apple at another price point while maintaining some margins after the removal of accessories.

A Cost Burden on Users in the Emerging Markets

The removal of accessories makes more sense in regions like the US,UK where the installed base of Apple is high (Source: Counterpoint Installed Base Tracker) and over time these accessories have become redundant. However, this might not be the case in emerging economies like India and LATAM. Apple devices are already priced higher in a lot of countries outside the US due to complicated distribution and higher taxes. Removal of accessories will be an added cost for users, especially if they are switching from Android.

Another factor to consider here is the mode of the upgrade. The advanced economies are operator-driven with a mature refurb ecosystem in place. Users generally upgrade their devices by trading in their older ones. These trade-ins generally do not provide extra value for chargers or earphones, and a user ends up keeping them. However, in the emerging economies, according to Counterpoint Research Refurbished Handset Tracker, the “sold as is” is much higher than the trade-ins. Users generally sell their devices consumer-to-consumer. In the “sold as is” scenario, the buyers in some cases expect the accessories along with the device, especially if the buyer is coming from Android. In this case, one of the parties will have to bear the cost of accessories.

Encouraging More Users to Go Wireless?

If we delve into each of the accessories separately, in terms of earbuds, Airpods have been leading the TWS category, according to Counterpoint Global Hearables Tracker. Apple pioneered the segment and now it is gaining popularity, which, unlike the smartphone market, is likely to grow in 2020. The removal of the headphone jack by Apple was probably more of a decision to increase the development of the TWS and earbud ecosystem, which is led by Apple.

Source: Apple

Removing Charger – A Step Closer to Increasing Adoption of Wireless Charging?

A charger is a more critical need for a smartphone user. Removal of the charger means these premium devices are now not capable of functioning out of the box. Apple is providing a USB C t0 lightning cable with the 12-series. Only the iPhone 11 Pro and Pro Max are the ones that have shipped with the supporting charger. For all other devices, the user’s charging brick will not support the cable. Removal of the charger could also be potentially a move of Apple to develop a wireless charging ecosystem of its own.

Source: Apple

How Soon Will Android OEMs Start Following Apple?

Now, another important question here, which is probably the most important one, is whether the other OEMs will follow Apple in removing the charger. We have seen this before when Apple removed the headphone jack and others followed. However, removing earphones and especially charger is a much trickier decision. While removal of the headphone jack was a modification of an existing product feature, with the functionality and earphones being retained, this is not the case with the removal of chargers and earphones. This is straight out taking away the accessories from consumers, which had become an industry standard.

Key growth markets such as India and the MEA are Android-dominated. There is also a large base of feature phone users who will eventually upgrade to smartphones. Removing the chargers across the portfolio will be an extra added cost which will impact the entry- and mid-level segments in particular. These markets are also very price sensitive. If OEMs decide to remove accessories, it will only make sense if they reduce the device cost, especially in the lower price bands. Price sensitive users would also probably start buying cheaper third-party chargers if the chargers are removed.

Then there is product differentiation. While the specs have become standardized across the industry, we have seen Android OEMs launching large marketing campaigns to promote various competing fast-charging standards to differentiate their products. Different models from different OEMs are packed with chargers having different charging speeds. Therefore, it will be harder for the Android ecosystem to remove the chargers. A charger from one OEM might not be optimized to perform well on a device from other OEM. On the other hand, everything is optimized in the Apple ecosystem.

Overall, it will be a more challenging task for Android OEMs to remove these accessories from the box even if there are cost reductions to be gained.

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Global Smartphone Volume Declines by 6% But Registers Highest Ever Third Quarter Revenue