Qualcomm is the leading supplier of smartphone system-on-chip (SoC) for modem-to-RF-antenna systems and has been extending this lead in the fast-growing 5G smartphone segment as well. 5G smartphone sales grew a massive 1327% globally in June 2020, according to Counterpoint’s Monthly Handset Model Sales Tracker.
With the launch of 5G capable Snapdragon 6- and 7-series platforms, the share of high-tier ($250-$400) is set to soar further in the second half of 2020. As a result, 5G capability in smartphones will be in the mainstream market this year. This is the fastest ever uptake of any new generation technology in the first two to three years of its rollout. The next obvious step is to bring 5G to the mass market ($100-$250) smartphones and that has been the big question this year – how soon will we see a sub-$150 5G smartphone and shipping in volumes?
There is a pent-up demand for advanced mobile connectivity experiences as smartphones become central to consumers’ lives. Mobile operators are also looking to quickly roll out the 5G network to boost capacity and coverage and reduce the “cost per bit” to efficiently satisfy the ever-growing data consumption. Considering all this, at the recently concluded IFA 2020, Qualcomm announced that it was expanding 5G capabilities to its affordable 4-Series Snapdragon mobile platforms available early next year.
The $100-$250 mass-market segment contributes to more than 600 million units of smartphones sold per year. This is a significant opportunity for Qualcomm and its customers to tap into. Qualcomm dominates this segment, controlling more than 40% share. It will look to build on this stronger position to empower these users with 5G smartphones starting next year.
The majority of these mass-market smartphone volumes are driven by emerging markets across Asia, Africa, Latin America and Eastern Europe. So, Samsung, OPPO, Vivo, Xiaomi, Motorola and Huawei have been the key brands driving these volumes with a combined share of more than 90% at the end of June 2020. While Huawei has gained strength in this segment in China via its Honor sub-brand and older models in African and Eastern European markets after the US trade restrictions, the future looks uncertain with the newer set of restrictions. We believe that Xiaomi, OPPO and Samsung will be the major beneficiaries in filling up the big gap to be left by Huawei in these markets next year. In the prepaid markets of North America and Latin America, Motorola has seen growth in its market share and will be important in bringing 5G to the mass market. In Asia, Xiaomi, OPPO, and Realme remain the key brands to drive 5G in the sub-$250 smartphone segment.
The first wave of partners that have committed to rolling out the sub-$250 5G smartphones with Qualcomm’s upcoming 4-series platform, includes Xiaomi, OPPO and Motorola. These are important wins for Qualcomm to kickstart the 5G adoption in this highly affordable segment in a scalable way starting Q1. This should also ignite Qualcomm’s competitors to bring their affordable 5G solutions to the market.
We look forward to more details on how Qualcomm will be pushing down other 5G-centric features and capabilities to these lower-tier SKUs in the coming months. Our initial estimate is that the first set of 4-series 5G models to be launched will be sub-6GHz only, considering the target markets and the OEMs on board for the first wave of these models. However, we estimate a 5G mmWave-based smartphone powered by Qualcomm’s 6-series Snapdragon platform should launch in the coming months, bringing advanced 5G experiences to mainstream consumers.
Qualcomm is already on its third generation of 5G Modem-RF System, including the 5G mmWave module (QTM535), and a clear leader with 100% market share with its solutions. This has also helped it gain a lion’s share of BoM costs in the mmWave designs. As 5G mmWave networks roll out across key markets, especially high-scale markets such as China and the US by early 2022, we could see a rapid proliferation of mmWave designs across the OEM portfolios, targeting differentiation initially in those markets. Further, we estimate the fifth-generation designs should help 5G mmWave capabilities to scale down more. We can expect a first Snapdragon 4-series mmWave model in H2 2022. This will drive the inflection point for affordable 5G mmWave smartphones and newer experiences to mass-market levels, it is a big moment for the mobile phone industry!
