In recent months, vendors redirected some allocation to other regions due to the COVID-19 outbreak in India, but this is not sustainable as the world returns to normal
The worldwide smartphone market will grow 12 per cent in 2021, with shipments reaching 1.4 billion units, of which 610 million units will be 5G smartphones, as per a new report. However, as vaccine roll-out continues around the world and the pandemic is subdued, component supply will emerge as the new bottleneck for the smartphone industry.
As per Canalys’ latest forecasts, the growth represents a strong recovery from 2020, when shipments fell 7 per cent due to major market constraints caused by the pandemic. In addition, the report also expects that 5G smartphone shipments will overtake 4G ones in 2022.
Canalys Research Manager Ben Stanton said, “There is strong momentum behind 5G handsets, which accounted for 37 per cent of global shipments in Q1, and are expected to account for 43 per cent for the full year (610 million units).”
“This will be driven by intense price competition between vendors, with many sacrificing other features, such as display or power, to accommodate 5G in the cheapest device possible. By the end of the year, 32 per cent of all 5G devices shipped will have cost less than US$300. It is time for mass adoption,” he added.
Component supply bottlenecks will limit the growth potential of smartphone shipments this year
“The industry is fighting for semiconductors, and every brand will feel the pinch,” as per Stanton.
In recent months, vendors redirected some allocation to other regions due to the COVID-19 outbreak in India, but this is not sustainable as the world returns to normal. Vendors will first turn to regional prioritization, focusing the flow of units into lucrative developed markets such as China, the US and Western Europe at the expense of Latin America and Africa.
But even in these better-served regions, they will still be constrained, and will then turn to channel prioritization, pushing a greater allocation of units into fast-activation channels, such as carriers, and fewer into distribution and the open market. This will have interesting side-effects and may open doors for challenger brands to gain share in key open market channels if the incumbents are unable to fulfil, added the report.
“The other angle to this is pricing,” said Canalys VP of Mobility Nicole Peng. “As key components, such as chipsets and memory, increase in price, smartphone vendors must decide whether to absorb that cost or pass it on to consumers.”
But as there are major constraints around LTE chipsets, this will cause challenges at the low end, where customers are particularly price-sensitive. The report added that smartphone vendors must look at improving their operational efficiency while lowering margin expectations in their low-end portfolios for the duration of the constraints, or risk hemorrhaging market share to their competitors.
Region-wise, Greater China will dominate the industry with 394 million shipments, followed by Asia-Pacific (381 million), EMEA (355 million), North America (159 million), and Latin America (126 million).
