5G smartphones, thanks to their higher price compared to equivalent 4G models, have managed to capture more than two thirds of the global turnover of smartphones, 69%, despite representing less than 40% of sales in units, according to Counterpoint data for the first quarter of this year. The indisputable success of the iPhone 12 in its half year of life explains much of this mismatch between billing and units, although it will probably change throughout the second half of the year, because the predictable increase in demand for 5G smartphones will be compounded by the considerable drop of its median price, including Apple iPhones, which are all expected to be 5G starting in the fall.
The high demand for 5G smartphones in the last twelve months has been mainly due to the strong momentum of the Chinese market, favored in turn by a supply of 5G smartphones at a very affordable price and relatively similar to the equivalent 4G models. In China, the domain of domestic smartphone manufacturers, especially Oppo, Xiaomi and Vivo, is complete and their offer is very wide, covering all market segments, both 4G and 5G models.
Since the beginning of 2020, a few months after the commercial launch of 5G networks in China, the supply of 5G smartphones was very high and their price, relative to 4G models with equivalent features, relatively similar. This, coupled with the significant promotion of 5G models by operators and manufacturers in the country, caused a rapid increase in demand for 5G smartphones, especially in the mid-price range of the supply.
Apple has accounted for 34% of the units sold worldwide during the first quarter and 53% of the total turnover of 5G smartphones with a single model and its variants, the iPhone 12
In South Korea, the demand for 5G smartphones has been almost entirely dominated by Samsung in the last two years, especially since LG withdrew from the market. In Europe, Samsung’s success in 5G smartphones has also been remarkable, especially with the S20 5G model and later with the cheaper A series, but with a rather weak demand compared to South Korea. In the United States, Samsung also had a favorable reception during the first three quarters of 2020 with its 5G models, although with a market equally lethargic due to the lack of 5G coverage.
In the United States, the situation in the 5G smartphone market changed completely as of October, with the launch of the iPhone 12, Apple’s first with capabilities to connect to 5G networks. A few months earlier, Apple had managed to retain an important part of its domestic market with the iPhone SE, priced according to Apple’s parameters and with good 4G features.
With the iPhone 12, aided by the strong promotion of its operators, Apple had an indisputable success in the last quarter of 2020 and much of the first of 2021, at Samsung’s expense and despite the fact that 5G coverage in the United States is still very low, even in big cities. Apple has managed to sell 5G smartphones even if they are rarely, or almost never, used connected to a 5G network.
China dominates in units, Apple in turnover
The lower graph from the consultancy Counterpoint, corresponding to the first quarter of this year, perfectly illustrates the uneven distribution of the global 5G smartphone market, measured in units sold or in turnover. Apple has managed to monopolize 34% of the units sold worldwide during the first quarter and, what is even more commendable, it has taken 53% of the total turnover of 5G smartphones with a single model and its different variants , the iPhone 12. Half a year earlier, its share and billing on 5G smartphones was zero, because it had no offer on 5G smartphones.
Samsung’s share of 5G smartphones in the first quarter has been much more balanced, with 13% of units sold and 14% of turnover. This is because, in recent quarters, Samsung has expanded the variants of its Galaxy S20 5G model (including the S10 5G) with lower-priced models, and, above all, because it has boosted its A-range with several highly priced models. tight and excellent performance.
Apart from the predominance of Apple, the most prominent note in the upper graph is the greater prominence of Chinese manufacturers, mainly Oppo (with 13% of the units and 7% of the turnover), Vivo (with 12% of the units and 7% of the turnover) and Xiaomi (with 10% of the units and 6% of the turnover). Between the three they sell a few more units than Apple (35% versus 34%) but they invoice much less than half (20% versus 53%).
Competition in Europe will be very fierce this second half of the year in 5G smartphones, with the entry of Chinese manufacturers with mid-range prices and medium-high benefits.
In the remaining 18% of the units sold, there is Huawei (and its now independent brand Honor) and several others, which are mainly Chinese and which manage to capture 14% of the global turnover of 5G smartphones. It so happens that the Chinese group BBK is the owner of Oppo and Vivo and also of the OnePlus and Realme brands. In the Counterpoint graph, it is not clear whether OnePlus and Realme are counted within Oppo or within the other section, although little varies with respect to the predominance of medium and low-priced Chinese 5G smartphones.
With Honor, it was generally counted within Huawei as a second brand, although from the second quarter it is treated separately by becoming an independent company (and having a higher share). With OnePlus and Realme, the breakdown is more complex because, although they are part of the same group, they tend to have their own development, apart from the brand. The same thing happens with Vivo, which is totally independent from Oppo although it is part of BBK and with similar sales. Xiaomi, on the other hand, is totally independent.
In Europe, Vivo is still little known, but it is a matter of a short time, because it has great expansion plans on the European continent, the same thing that has happened recently with Oppo and its associated brands. The case of Xiaomi is a bit peculiar because it is well known in Europe, and especially in Spain, where it has come to lead sales in April, and not so much in China, as the members of the BBK group are much better known. Something similar happens with Motorola, owned by the Chinese company TCL, one of the world’s leading television manufacturers: Motorola is not known in China, but its owner takes advantage of the brand’s old notoriety to enter the United States and Europe and maintains the brand. TDL for the Asian market.
In Europe, the distribution of the smartphone market is very different from the global one for 5G smartphones. Samsung maintains a clear leadership position in units, followed by Apple, although it has grown less in the first quarter compared to the same period of the previous year compared to Apple. However, it is based on much lower sales in the first quarter of 2020 due to the pandemic and the decline of Huawei and Honor due to the United States veto, so it is foreseeable that the situation will be altered in the coming quarters. It should also be noted the strong growth of Xiaomi and Oppo and their brands in the first quarter of 2021, as seen in the graph below Counterpoint .
The most notable note of recent months in the 5G smartphone market has been, as noted, the blazing growth in Apple’s sales with the iPhone 12 from the fourth quarter of 2020. As can also be seen in the graph below From the consulting firm Counterpoint, the global turnover of 5G smartphones became 62% in the last quarter of 2020 and 69% in the first quarter of 2021, when a year earlier it was barely 5% or in the third of 30 %, thanks in large part to the release of the iPhone 12 on the market. The increase in units has not been so high, but it is still remarkable.
Important changes in 5G smartphones
In the coming months, and especially with a view to the Christmas campaign, important changes are expected in the distribution of sales of 5G smartphones. At a minimum, some manufacturers will try to maintain their leadership while others, especially Chinese companies, will want to capture more share, either in units or in turnover or both. And, in China at least, Honor and probably Huawei will want to recoup some of their sales of yesteryear. The struggle to increase sales and turnover, at least from Chinese manufacturers, is expected to be fierce.
One of the most important unknowns for year-end sales will be the availability of enough product. It is well known that car manufacturers and other sectors of activity, such as white goods (large and small appliances) and brown line (televisions) are struggling due to the global shortage of semiconductors, which is currently forecast which will continue at least throughout 2022.
So far, thanks to their high purchasing power and higher margins, smartphone makers have managed to get around supply problems by buying early and paying more. But the situation of the supply of chips is so serious that it will be necessary to see what happens at the end of the year with the supply of smartphones. Especially if the demand for 5G models skyrockets, as is likely, and given that they require many more chips than an equivalent 4G model.
The other main factor is the evolution of Apple’s sales; not so much in units, but also in billing. According to sources consulted last week by the Japanese newspaper Nikkei Asia, all the iPhones that Apple will sell in 2022 will be compatible with 5G networks, including the iPhone SE, its most popular model because it is the cheapest and represents more than half of the company’s billing. It is also expected that the iPhone Mini will disappear from the catalog, because consumers prefer a large screen.
The floods that hit the Chinese region of Hunan last week, where Foxconn manufactures most of the iPhones on behalf of Apple, raised production problems in the coming weeks, when production of the new models was to begin (traditionally it begins the production of the new models in August and they are announced towards the end of September to be available in stores in October). But, as Foxconn announced, the production of iPhones will not be fundamentally affected by the floods.
Apple’s expertise in buying the components it needs and its willingness to pay a higher price suggests that it will have the necessary products for the Christmas campaign; In any case, the operating margin can lower the company by increasing the cost of supplying components and not being able to further stress the supply chain with greater discounts.
Competition from Samsung and Chinese manufacturers will make Apple have to adjust the price of all its models, because 5G will no longer be a novelty. For Apple, convincing its American compatriots of the benefits of its products will not be very difficult, especially with the passage of 5G in its most popular models, although T-Mobile is promoting a lot the low-end 5G models, between 100 and $ 250, unlike Verizon and AT&T, which focus on the mid-range and high-end 5G smartphones, and iPhones in particular. A few days ago, T-Mobile launched a promotion of the OnePlus N200 5G for $ 216 and the Motorola Revvl V + 5G for $ 199.99. T-Mobile also offers the Samsung A32 5G with 64MB for $ 282 (taxes aside, as always in the United States).
European consumers are looking for the mid-range
Samsung and Apple may find it more difficult to maintain their significant market share enjoyed by 4G smartphones in the coming quarters. The strong momentum of the aforementioned Chinese brands (Xiaomi, Oppo and adjacent brands and lately Vivo) promises them a notable increase in share, especially in the segment of mid-range and medium-high range 5G smartphones. Its good relation between benefits and price and its wide range of products, both 4G and 5G, also favors them. The high-end range, however, will continue to be limited terrain for Apple and Samsung, relatively small but with very high profit margins.
Increased competition will also push down the price of all 5G smartphones. In Europe, the increased presence of Chinese manufacturers, who have been able to take advantage of Huawei’s forced gap in the market, has resulted in a strong increase in sales in two increasingly popular segments. The mid-range ($ 250 to $ 499) and the mid-range ($ 500 to $ 699). These two price bands now represent a third of the total for Chinese brands, four times more than twelve months ago.
Increased competition in Europe will not only mean greater choice for consumers, but they will be able to purchase better-performing smartphones, including 5G, at a somewhat lower price. In the first quarter, mid-range 5G smartphones accounted for half of the models sold in Europe, up from 20% in the third quarter of 2020 and nil a year ago, when Samsung’s S21 5G was practically only available for more of 1,000 euros.
In the graph above you can see that the share of Chinese manufacturers in mid-range smartphones has gone from being one third in the first quarter of 2020 to two thirds approximately a year later, while Samsung’s share has barely changed (thanks to its A range) and Apple’s has sunk. In the upper-middle range, between 500 and 699 dollars, the share of Chinese manufacturers has also doubled between the first quarter of 2020 and 2021, mainly thanks to Xiaomi, as in the mid-range, but barely 20% of the total, while Apple had about 70% of this band and still retains half, despite strong competition from Samsung.
In the data for the second quarter of this year, about to be released, the film will already be somewhat different and a major turnaround is expected in the second half and especially in the Christmas campaign and with 5G smartphones. 5G smartphones are called to be an important driver in the European mid-range and upper-middle-range market, although it remains unclear what they are for, or what they contribute more than equivalent 4G smartphones. If the price difference between a 4G model and another equivalent 5G is small, it is most likely that in the end the consumer will opt for the latter. Provided, of course, that there is enough product availability that does not distort prices and that the pandemic remits.