The 5G smartphone market is now outperforming its predecessor generations on nearly every metric. Between the number of mobile devices, subscribers, and networks available at launch, 5G is the most accelerated mobile technology generation ever launched. Technical challenges, new features and functionalities, as well as new radio elements for supporting new radio bands and combinations will continue leading to substantial changes in the design of mobile devices. This complexity level is not just limited to the high end, as the availability of 5G smartphone models will become more diverse, brought to market quickly at a wide variety of price points, democratizing the 5G experience.
Market Saturation Leading to Lower Prices
Many leading Original Equipment Manufacturers are expected to push deeper into the lower-priced 5G smartphone segment. This will be the main growth driver for accelerating adoption in 2021 and beyond, aided by the continuing availability of more affordable 5G chipsets, notably those from Qualcomm, MediaTek, and UNISOC. This seismic shift to lower price tiers means that 5G at the high end will be squeezed, witnessing rapid saturation, and room at the top will quickly evaporate.
This will undoubtedly be good news for smartphone replacement cycles and technology migration in the short term, but this drastic change, particularly when compared to previous generations, is potentially detrimental to the market in the mid- to long-term. The accelerated migration of 5G to lower-tier smartphones will have a knock-on effect on Average Selling Prices and the market’s overall profitability.
Indeed, with such a relatively shortened time for those across the value chain to extract decent margins from the market, we expect OEMs to follow an aggressive pricing strategy to avoid possible declines in overall profits. The frantic pace of plunging 5G smartphone prices expects to send 5G smartphones below the $200 mark, driven by the availability of cheaper components and pricing policies of chipset vendors.
Making Sense of the Huawei Ban
Global optimism in the smartphone market was on the rise as some countries began to economically emerge from the COVID-19 pandemic, gradually witnessing supply chains, buyer behavior, and demand returning to some level of normality. Coupled with the expansion and diversity of 5G price tiers, the market should regain its track to expand rapidly in 2021. However, while the full extent or lasting ramifications of COVID-19 remain unclear, the pandemic is now overshadowed by geopolitical trade wars.
At the center of the storm is Huawei, banned from acquiring parts and software featuring U.S. technologies or selling its products in the United States and to its closest allies. In the short term, Huawei has fought back and retrenched in its own Chinese market to bolster sales, thus avoiding a significantly worse shipments performance than it may have had otherwise. Huawei’s anticipated descent at the hands of an increasingly restrictive U.S. trade ban will reach a tipping point that could see a fundamental reshaping of the supply chain and chipset market, while having a significant bearing on the global smartphone vendor landscape.
Huawei has also made some drastic decisions to keep its smartphone business afloat, notably aggressively building up stockpiles of processor chips and components to beat the trade ban, which has severely restricted its 5G innovation. The company’s survival hinges on securing a supply of chipsets, which could run out by 2Q 2021. As a lead global player with around a 20% share of smartphones, Huawei is struggling to stay in the market in the longer term and rebuild its now tainted brand outside of China.
A New Look for the Vendor Landscape
Of course, this news may spell good news to many of its competitors, with Chinese compatriots, such as Xiaomi, OPPO, Vivo, and OnePlus, not forgetting Samsung, Apple, and Google, all waiting to fill market share left across the price tiers at Huawei’s expense. In a more unexpected turn of events, Huawei’s possible demise may also see the resurrection of some once-notable vendors looking to fill the void, with brands like Motorola, LG, Nokia-HMD, and Sony all potentially stepping up volume shipments and share in 2021, giving the global smartphone market a new vendor landscape, but one with a distinctly retro feel.
For even more insight and information on what 2021 will bring to the smartphone market—and other transformative technologies such as Augmented Reality, Smart Home, and IoT—download our whitepaper 68 Technology Trends that Will Shape 2021: Predictions for What Will and Will Not Happen in The Year Ahead.