Smartphone production goes south, drops by 11%

With the pandemic raising its head again in Southeast Asia, the number of units shipped in 2Q21 declined to 307 million, down from 344 million in the previous quarter.

By V&D Bureau

The recent surges of COVID-19 cases in India, Vietnam, and other Southeast Asian countries have adversely affected the global smartphone market in terms of production and demand. According to a recent report by TrendForce, the global smartphone production for 2Q21 fell by 11% QoQ to a total of 307 million units. However, a YoY comparison shows an increase of around 10% for the quarter. The global production for 1H21 came to a total of 652 million units, translating to a growth rate of almost 18% compared with the same period in 2020 when the pandemic was in the initial phase.

The report also points out that while fourth-ranked Apple is undergoing a transition between old and new models, and Samsung is experiencing a slight dip in market share, smartphone brands have improved their respective product specifications.

The report indicates that while Samsung’s smartphone production in 2Q21 reached 58.5 million units, the highest among all smartphone brands, yet it represented a 23.5% QoQ decrease. Since India and Vietnam account for the majority of its smartphone production capacity, the severe COVID-19 outbreaks in both countries during 2Q21 had a significant impact on production volume. “This year, Samsung will remain as the top smartphone brand by quarterly and annual production. However, it will face increasing difficulty in preserving its steadily shrinking market share in the future. The competition will only intensify as rival brands have become excelled at smartphone design and manufacturing,” the report said.

Impact on brands from China

OPPO’s smartphone production fell by 6.6% QoQ to 49.5 million units for 2Q21. Its production figure includes devices from sub-brands Realme and OnePlus. Xiaomi’s smartphone production also came to 49.5 million units for 2Q21, showing a QoQ drop of 2%. The company’s production figure includes devices from sub-brands Redmi, POCO, and Black Shark. On a YoY basis, OPPO posted a growth rate of 80%, whereas Xiaomi posted a growth rate of almost 70%. The high YoY growth rates were attributed to them capturing some market share abandoned by Huawei and the recovery of China’s smartphone market.

Both OPPO and Xiaomi claimed second place in the quarterly ranking. Vivo is another Chinese brand that faces a similar situation and its smartphone production, including devices from sub-brand iQoo, dropped by 8.1% QoQ to 34 million units. Vivo took fifth place in the quarterly ranking. Each of the three Chinese brands has made India its second-largest base with respect to production and sales operations. Hence, India’s recent COVID-19 surge affected the production and sales performances of all three brands in 2Q21.

Regarding future plans, all three Chinese brands corrected down their annual production targets at the end of 2Q21 due to the COVID-19 surge in Southeast Asia and the capacity crunch in the foundry market. Lowering the annual production target is going to alleviate the cash flow pressure by preventing the component gaps from widening and the inventory of whole devices from rising. It should be pointed out that OPPO, Xiaomi, and Vivo have been very proactive in developing innovative products in the high-end segment of the smartphone market.

The high-end models from these three brands are not able to completely assume the market positions that have been held by the flagship models under Huawei’s P and Mate series. Nonetheless, all three brands have posted strong results in both the domestic and overseas markets. To capture more market share, Xiaomi and OPPO are leveraging their respective sub-brands Redmi and Realme that both offer high performance for the price. TrendForce highlighted that it expects the two brands to be more or less evenly matched in terms of production through 2021.

Apple’s woes

The report highlights that Apple’s iPhone production reached its lowest point for the year, and its rank fell to fourth place in 2Q21 because the second quarter is the transition period between last year’s and this year’s iPhone series. The quarterly total iPhone production fell by 22.2% QoQ to around 42 million units. In the aspect of product development, Apple will be releasing four flagship iPhone models in September.

The major upgrades that come with the new series are the improved camera and the next-generation A15 processor that is manufactured with TSMC’s 5nm+ process. Other upgrades relate to the optimization of the existing functions. This year’s iPhone lineup can be regarded as an extension of the iPhone 12 series that was released in 2020. With regards to pricing, Apple will be maintaining its proactive approach so as to gain more market share. On the other hand, there is the possibility that Apple’s device production during 2H21 will be affected by the recent spike of COVID-19 cases in Malaysia. Due to the severity of the outbreak situation, shipments of ICs from that country have experienced delays.

LG calls it a day

With an annual production of 9.4 million units for 2021, LG officially terminated its smartphone manufacturing operations in 2Q21. The company had given early signals of selling or shutting down its mobile phone unit early in 2021, before announcing that it will formally close the mobile phone unit in April. The development of new smartphone models was also suspended. According to the shutdown plan, the production of LG smartphones has ceased since the end of 2Q21. Altogether, LG produced around 9.4 million units this year and is estimated to account for about 1% of the market share.

As for LG’s regional markets, the company was focusing on expanding its presence in the respective mid-range segments of the North American and Latin American markets. With LG ceasing its smartphone production, the abandoned market share in North America will be mostly divided among Android phone brands Samsung, Lenovo, and brands owned by local telecom companies. In Latin America, Lenovo and Xiaomi will likely benefit the most from LG’s exit.

Keeping in view the existing pandemic condition, TrendForce downgraded its estimation of global smartphone production for the whole of 2021 – from the expected 1.36 billion units and a YoY growth rate of 8.5% to 1.345 billion units and a YoY growth rate of 7.3%. “Going forward, one of the two main focuses of observation will be on whether the pandemic will cause a further decline in smartphone sales. For instance, while Europe and the US are currently experiencing a resurgence of infections, Southeast Asian countries have also been unable to subdue the most recent outbreaks,” the report stated, adding that the pandemic also continues to pose a risk to the smartphone supply chain.

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