In my last column here I talked about the difficulties of forecasting this year in the midst of the coronavirus crisis. This time I will focus on 5G and some precise figures from the first quarter, stemming from the latest IDC research.
Both Qualcomm and Mediatek have kept to their forecasts for 5G for this year. Despite a near 10% unit contraction in the global smartphone market, IDC research confirmed a strong start in the first quarter of the year for 5G; such smartphone shipments were up to 21 million, nearly twice the total in the previous quarter. They will still need to grow a lot more to meet Qualcomm’s estimate of 175-225 million units for the full year (Mediatek’s range is marginally lower).
A close look at the 5G numbers shows some areas of strength and some of weakness. The US had a strong start to the year, with 5G phones crossing the threshold of 10% of the smartphone market. This threshold was also breached in Australia. On the other hand, in South Korea, the first market to really turn to 5G, numbers weakened. In Europe as well they were modest.
But the numbers really turned upwards in China, where shipments more than doubled over the previous quarter to reach 14.5 million. At close to a quarter of all smartphones, that was an impressive result considering the national smartphone market contracted a fifth against Q1 2019.
Following initial success in South Korea and progress in the U.S. and Australia — a Phase One in the rise of 5G — expansion in China is set to be a key Phase Two of the technology.
It is difficult to be sure about anything in forecasting this year. However, China is at least probably beyond the major stage of the impact of the coronavirus crisis, so forecasts about the market for the rest of the year are easier to make than almost anywhere else. The government is pushing the pace of 5G as one means to get the economy rolling again. China’s ministry of industry and information technology has called on local administrations to accelerate deployment, and China’s biggest mobile operator, China Mobile, has reaffirmed its 5G rollout.
IDC believes that shipment of 5G phones in China will remain strong for the rest of the year and account for around three fifths of total 5G global shipments in 2020. (America will be the second strongest market, with about one-sixth.)
China vs. the rest of the world
There are two very significant differences between the 5G smartphone market in China and everywhere else at the moment. Firstly, the brand share is almost completely different. Despite South Korea itself no longer being the most important market outside China – the US is now way ahead – Samsung has been increasing its hold on the out-of-China 5G market. In the first quarter it took a whopping 90% of all such 5G smartphone sales. With LG hanging in there with another 3%, that leaves only 7% to the Chinese brands. Moreover, four out of five of those out-of-China 5G sales were of the new Samsung S20 range, which just shows how much 5G currently relies on flagship Android.
In China it is completely the other way round. Samsung had only 1.8% of the Chinese 5G market in Q1. Huawei is by far the market leader, but OPPO, vivo, and Xiaomi all have significant shares.
The second key difference is that the average retail price before sales tax paid for a 5G phone outside China is stable, and for Samsung it is $1,140. In China, to the contrary, this average price is falling, and was half that just quoted for outside China - $557 in the first quarter. While the average price paid for a Huawei device is over $600, it is already below $500 for its three main rivals.
While currently it is as if the two markets of inside and outside China were different worlds, this situation may not last long. Flagship phones tend to do best when they first launch, and Samsung has already acknowledged it needs to move 5G further down its portfolio with the new more affordable A51 and A71 models, announced in April, which are both 5G.
The use of the new Qualcomm 765 5G chipset, which is lower cost than the premium 865 powering most of the current top line models, will help that transition. Mediatek is aiming at the mid-market as well as premium smartphones.
The situation will also change – though not to cheaper price points – when Apple enters the fray. That could be a bit later than had earlier looked likely, with industry talk of a one-month or more delay in the launch of the 5G iPhone range in the fall.
Apple’s launch will help maintain the premium element of 5G. The impact of the coronavirus crisis will meanwhile crimp the appetite to buy mid-market 5G models outside China. That largely leaves China as the motor of 5G for the rest of 2020, a clear second phase in the rise of the new technology in the smartphone market.
Simon Baker is program director for mobile phones and consumer devices at IDC EMEA and a coordinator of IDC global forecasting for the 5G smartphone market. He is a long-time analyst in the mobile phone arena. Please contact him at [email protected]
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not represent the opinions of FierceWireless.