Smartphones shipments from ODM/Independent Design House (IDH) companies declined by 1% year-on-year (YoY) in 2018 to 358.2 million units while those from electronics manufacturing services (EMS) companies grew 23% to 479.2 million units, according to the latest research from Counterpoint’s ODM/IDH/EMS tracker.

As a result, smartphones with outsourced designs (from ODM/IDH companies) had a 24% share of the total global smartphone shipments, growing marginally from 23% in 2017. On the other hand, smartphones with outsourced manufacturing (from ODM/EMS companies) accounted for 56% of total global shipments, rising sharply from 48% in 2017.

Exhibit 1: Global smartphone design & manufacturing operation status in 2018

Below is our detailed analysis of the market dynamics and latest developments in the global smartphone OEM/IDH/EMS industry.

Global Smartphone ODM/IDH (design outsourced) market analysis:

• In 2018, smartphone shipments from ODM/IDH companies declined despite an increase in orders from new clients Realme and Samsung, who initiated cooperation with Chinese ODMs in 2018 to minimize production costs.
• OEMs heavily relying on ODMs to design and manufacture products include Nokia HMD, Motorola, and Xiaomi. In comparison, external design accounts for less than 5% of the products from Samsung, OPPO, and Vivo. Apple and OnePlus, with their slim product portfolio targeting premium market, only outsource manufacturing to EMS companies.
• The leadership position of Huaqin and Wingtech has solidified. Together, they grabbed close to a 50% share in 2018’s smartphone ODM/IDH market. Huaqin was the leader in global ODM (design + manufacturing) market with a 25% share while Wingtech led in IDH (design only) market with 50% shares. Both Wingtech and Huaqin achieved over 10% YoY growth following the aggressive global expansion of their key clients, Huawei and Xiaomi, in 2018.
• Besides Wingtech and Huaqin, ODMs delivering positive YoY growth against the declining market trend in 2018 include Longcheer, FIH Mobile, Hipad Intelligent, and Ontim. Longcheer grew by 66% YoY thanks to increasing orders from its top client Xiaomi. However, over-dependence on Xiaomi would be risky for the sustainable development of Longcheer in the long run. FIH Mobile grew by 63% YoY following the rising sales of its major client, Nokia HMD, in 2018. Nevertheless, the growth of both Nokia HMD and FIH Mobile started slowing down since H2 2018. Shipments of Hipad Intelligent zoomed 100% YoY, albeit from a smaller base. Hipad‘s strength in global production, with its established manufacturing sites in India and LATAM, helped the company earn trust from new clients in India, China, and the US in 2018.

Exhibit 2: Global Leading Smartphone ODMs/IDHs Market Shares 2018

• According to our observation, ODM companies are increasing investment in IoT and smart wearable sectors (E.g., smart speakers, smartwatch, IP cameras, and more). These companies are trying to develop new businesses to offset the declining smartphone sales.
• As for smartphone shipments, we expect the share of smartphones with outsourced designs to remain at around 24%-25% in 2019.

Global Smartphone EMS (manufacturing outsourced) market analysis:

• Global smartphone shipments of EMS companies accounted for 32% of the total smartphones shipped in 2018.
• Robust growth of one of their key clients, Huawei Group, drove the increase in shipments of EMS companies. In fact, Huawei helped EMS to maintain growth even though sales of their top client, Apple, suffered a decline in 2018.
• Nearly 23% of the smartphone shipments of the Huawei Group come from EMS companies, up from 12% in 2017. Honor 8X, sold over four million units within H2 2018, was one of the successful models that Huawei built with its EMS partner Foxconn.
• Besides the Huawei Group, OEMs which increased outsourced manufacturing volumes in 2018 include OnePlus, Asus, Micromax, LG, and Tecno. LG aggressively launched new models through 2018, which significantly benefited its EMS partners. LG smartphones manufactured by EMS partners grew by over 400% YoY despite a decline in global smartphone sales of the brand. OnePlus, achieving 270% YoY growth in smartphone shipments during 2018, also benefited the business growth of its EMS partners.
• In terms of the competitive landscape, Foxconn, for its long-established expertise in the entire EMS value chain including components procurement, supply chain management, automated production, and globalized development, is the indisputable market leader controlling over 50% of the smartphone EMS market. Foxconn has built solid partnerships with high-profile smartphone OEMs such as Apple, Huawei, Xiaomi, and Nokia HMD.
• Following Foxconn, Pegatron, Flex, and Inventec are the other top players in the global smartphone EMS market. Pegatron, headquartered in Taiwan, is another EMS partner of Apple, apart from Foxconn. Flex, headquartered in Singapore, managed to build an extensive client portfolio covering both Chinese OEMs and international brands Motorola and Google. Inventec, also based out of Taiwan, is one of the key partners of Xiaomi.

Exhibit 3: Global Leading Smartphone EMS market Shares 2018

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