Mid-range smartphones have considerably increased market share in Europe during the past second quarter, according to estimates by the consultancy Strategy Analytics. Chinese manufacturer Xiaomi led sales in the quarter, with 12.7 million units, overtaking Samsung, the traditional leader on the continent, with 12 million. Xiaomi’s growth has benefited from the collapse of Huawei, Samsung’s direct competitor until last year, and by the presentation of models at an adjusted price and good features.
The European market was characterized in the second quarter by a moderate increase in sales, 14%, compared to the same quarter of the previous year, which was very weak due to the peak of the pandemic, since it had a decline of 14% compared to to the second quarter of 2019. It must be borne in mind that, traditionally, smartphone sales in the second quarter have been higher than in the first quarter, except this year and the previous one, with which the 15% drop in the second quarter of 2021 compared to the previous first quarter does not bode well.
In the second quarter of 2021, according to Strategy Analytics, 50.1 million units were sold in Europe, compared to 59.1 million in the first quarter of 2021, and 43.8 million in the second quarter of last year, as reflects the consultant’s statement and the graph below. Sales would have to increase a lot in the second half for 2021 to reach a similar number of units to 2019.
The behavior of the various brands has been tremendously uneven in the second quarter, due to the economic crisis and the effects of the pandemic that plagues the Old Continent but, above all, to the virtual disappearance of Huawei, and its second brand, Honor , from the market, as a result of the US veto and the imposition that TSMC could not supply processors to Huawei, despite the fact that they had been designed by its subsidiary HiSilicon.
Close to 300 million smartphones were sold worldwide in the second quarter, more than in the same period of the previous year but much less than in the first quarter, breaking the traditional trend.
In this way, Xiaomi’s unit sales have grown 67% in Europe in the second quarter, compared to a 7% decline by Samsung. Apple’s performance in Europe has been very good, with an increase of 15.7% and the supply of almost 10 million units. The average price of Apple smartphones is much higher than that of Samsung, which in the last year has promoted its A range a lot compared to the Galaxy S, with higher performance and price. Apple has also encouraged sales of the iPhone SE compared to the iPhone 12 models with 5G, but the average price of Apple models is higher than that of Samsung, so their turnover and margins are also higher.
On the contrary, Xiaomi has increased the benefits of its smartphones in recent quarters, both in the mid-range and in the upper-middle range, with similarly adjusted prices. The Chinese manufacturer only had a very basic range less than two years ago, and consequently very inexpensive, but with its adequate combination of higher performance, good general product quality and low price, it has managed to win the favor of consumers, especially the Spanish, where in March it was the leader in sales. The disappearance of Huawei at a key moment, logically, has greatly benefited Xiaomi.
Unknowns in the second semester
The evolution of smartphone sales in the second half of the year, both in Europe and globally, is largely unknown. On the one hand, the supply problems of the multiple components of a smartphone, and not necessarily the main processor, will continue during this second half of the year and well beyond, as the CEO of Apple revealed a few weeks ago when presenting quarterly results, and Apple’s ability to manage the supply chain and pressure its suppliers is legendary.
Another important structural problem is that the Chinese smartphone market shows signs of saturation, as shown by the fact of the drop in sales in the second quarter, as will be seen later when analyzing the overall results for the period. Despite the intense promotion of manufacturers and operators in China last April and May, sales in June did not bear the expected results and many Chinese distributors have started the third quarter with a lot of stock to sell.
The situation of smartphone sales in the Chinese market will encourage its manufacturers, and not only Xiaomi, to focus even more on Europe and the United States, apart from the various markets of Southeast Asia, the Middle East and India. In fact, both Oppo and Realme managed to ship 2.8 and 1.9 million units, respectively, in Europe in the second quarter, with impressive growth rates. Oppo and Realme are part of the same BBK investment group, as OnePlus, although they maintain separate distribution and commercial channels, as is also the case with Vivo, which is beginning to enter Europe and the United States and is owned by BBK. In fact, in the Chinese market, Oppo’s sales are higher than Xiaomi’s. The increased presence of Chinese smartphone manufacturers in Europe and other markets, both 4G and 5G, is inevitable.
Xiaomi prevailed in the European market for the first time last quarter to traditional leader, Samsung, in units, by a short distance, which shows the strong momentum of Chinese manufacturers in Europe
Therefore, in this second quarter, and it is already being noticed, Xiaomi will not only have to face its main rival, Samsung, but also the various brands of the BBK group that for several months have not hidden their intentions to disembark with all their capacity in Europe and occupy various price and value segments of smartphones with its different commercial brands.
No one doubts, however, that Samsung should and will know how to respond adequately to the challenge posed by Chinese manufacturers. Among other reasons, because Europe is Samsung’s main market, after South Korea, and its presence is more than testimonial in China. In the United States, Samsung’s presence is important, but it has an immense rival in Apple, which also plays a patriotic role.
The faster implementation of 5G networks in Europe and, therefore, the need to promote the purchase and use of 5G smartphones by operators adds commercial pressure. European consumers will be bombarded in the last months of the year by numerous offers to change their smartphone and, if possible, for a 5G model.
According to Strategy Analytics, however, the response of European consumers to 5G models is rather cold. In any case, if there is little price difference between a 5G smartphone model and another 4G of a similar range, it is likely that in the end many consumers will opt for a 5G model in the end, although they are not clear if they are going to use it a lot with the new networks. The evolution of the pandemic in the last months of the year will also play an important role in consumer sentiment.
The estimates of the consultancy Counterpoint regarding the sales of smartphones in Europe vary slightly in terms of the number of units, because they calculate that sales in the second quarter grew 33% compared to the same quarter of the previous year and that Samsung increased its sales by 20% and Xiaomi 151%, but both agree that Xiaomi has come to occupy the first place followed at a very short distance from Samsung (around 27% of share) and Apple is already more separated, with 20%, as shown see in the graphic below. The progress of Xiaomi, the decline of Apple and the relative maintenance of Samsung in these six months of the year is notorious.
Fuente: Counterpoint (5 agosto 2021)
300 million smartphones in the second quarter
Worldwide, the consulting firm Omdia estimates that nearly 300 million smartphones were sold worldwide during the second quarter, with a growth of close to 7% compared to the same period of the previous year. Exactly, Omdia points out, the quarterly increase was 6.9% and the number of units was 299.1 million, compared to 279.7 million in the second quarter of 2020.
Fuente: Omdia (29 julio 2021)
The figures vary a lot if you look at IDC estimates. For this consultancy, 313.2 million smartphones were shipped worldwide in the second quarter of 2021 compared to 276.6 million in the same period of the previous year, with growth 13.2%. The data is slightly different for Counterpoint as well. This consulting firm estimates that 329 million units were shipped in the second quarter of 2021 compared to 276 million in the same period of the previous year, representing an increase of 19%.
The three consulting firms fully agree that Samsung was the one who sold the most units, between 57 and 59 million units, followed by Xiaomi with 50 to 53 million and Apple in third place with between 43 and 49 million units. It is interesting to note that in fourth place is Oppo, with around 34 million units, and immediately behind Vivo, with some 33 million units.
Also Chinese companies Realme and Motorola (TCL brand) are somewhat further apart, around 11 million each, and Huawei with 10 million units. Honor, which was Huawei’s second brand and which a few months ago was sold to an investment group controlled by the Chinese government, shipped 6.7 million, according to Omdia, in the second quarter.
At first glance, it would appear that the majority of the smartphone market is controlled globally by Chinese companies that base all of their production in China, with the notable exceptions of Samsung and Apple. Actually, this is the case in terms of units, but the situation is diametrically different in terms of billing, as shown in the chart below from Counterpoint.
Apple has barely maintained the market share in units in the second quarter but has managed to monopolize 41% of the total turnover, when the previous year it was 34%. It is followed by Samsung, which has lost its share in terms of world turnover, from 17% to 15%. Xiaomi, on the other hand, has grown from 6% to 9%, the same as Oppo and Vivo, which have gone in a year from 6 and 7% to 9% each, as seen in the upper graph. The rest of the manufacturers, as is also the case in units, have lost market share in the second quarter, from 30% a year ago to 17%.
Chinese manufacturers with a recognized brand account for more than half of the units sold but only 30% of the turnover. On the other hand, Apple sells about 15% of the world units and invoices 41% of the total. Apple’s dominance in terms of turnover is quite disconcerting, especially considering that all its products are manufactured, assembled, verified and packaged in Asia and, increasingly, the company resorts to integrating components made in China by Chinese companies , as highlighted by a Nikkei Asia report on Aug. 4.
The explanation, of course, is that Apple’s main and most important market is the United States, where consumers and investors in general have a special reverence for the company’s products and are willing to pay more to have, in this case, a iPhone model than other brand. The following graph from the consulting firm Omdia shows the evolution of sales in units in the last ten quarters.
Source: Omdia (published on the blog telecoms.com, from the same group)
An examination of these shows that sales in the second half of last year and the first quarter of 2021 were very high, almost as before the pandemic, but in the data for this second quarter the upward trend has been broken, therefore that it will be difficult to reach 1,479 million smartphones sold in 2019 this year. They will probably be around 1,400 million units, much more than in 2020 and less than in 2019.
The Chinese smartphone market down
The main cause of the drop in sales in the second quarter compared to the first has been the poor performance of the Chinese market, the locomotive of the sector in recent quarters, especially in terms of units. In the second quarter of 2021, sales in the Chinese market were 75 million units, 6% less than the same quarter last year and 13% less than the first quarter of this year, according to Counterpoint.
As the graph below shows, Vivo, Oppo, Xiaomi and Apple increased their share by more than a third each of them on average, but it has not offset the sharp fall of Huawei, which had a third of the sales of the Chinese market and its participation has been reduced to 10%. The rest of the manufacturers, who had 19% of the market in units, fell to 15%, which has resulted in a 6% decrease in the quarter compared to last year. Xiaomi’s performance in China in the second quarter in China has also been excellent, with annual growth in the quarter of 70%, although the higher share from Vivo and Oppo means that they are still well ahead of Xiaomi in the competitive Chinese market.
It remains to be clarified what will happen to the sales of Huawei and Honor, now a completely separate company, this second half of the year. On July 30, Huawei presented several versions of the P50, currently intended only for the Chinese market. Huawei’s new high-end smartphone runs on the Harmony operating system, which the company says is already used by more than 40 million users, but without the ability to work with 4G networks.
The price of the entry model is 4,488 yuan, about $ 695 to change, and 10% more than its predecessor, the P40. Richard Yu, CEO of Huawei’s consumer division and tasked with introducing the new device to a Chinese audience, said it provides excellent performance and opens a new photographic era. We will have to see the support provided by the three major national operators and the real price in a few weeks, but from the outset it does not appear as a winner.
The P50 works with the 888 4G chipset from Qualcomm, of course without a 5G modem, although some models of the P50 Pro will carry the Kirin 9000 4G designed by HiSilicon and manufactured by TSMC, of which it still has several units. According to Yu, the performance of the P40 will be similar to a 5G model thanks to the combination of 4G, WiFi6 and artificial intelligence. It would be paradoxical if, in the country where more 5G stations are installed, a 4G smartphone model would achieve equivalent performance, although the situation of 5G networks is so strange that anything is possible.
In the US market, Google presented a few days ago new models of its range of Pixel smartphones, this time not with a Qualcomm processor but with its own model, Tensor, developed by Google. It is also not clear in this case that Google’s new Pixel model does much competition with Apple’s iPhones, but it is clear that the competition is increasingly fierce.
On the processor side, competition from Qualcomm, once the king of high-end smartphones, is also fierce. MediaTek, rival of Qualcomm and whose designs are also manufactured by TSMC (although some of qualcomm is now made by Samsung), has a range, the Dimensity, which is increasingly powerful and has nothing to envy from Qualcomm, both in terms of 4G as in 5G and now with models that work with millimeter waves. In units, MediaTek already leads Qualcomm, thanks to its models with a more adjusted price and good performance. Consumers will surely have multiple possibilities of choice if they want to renew their smartphone this second half of the year; if anything, the problem with which to stay.