[Editor's Note]
The smartphone market, which suffered significant damage last year due to COVID-19, attempted to recover in the second half of the year thanks to increased IT spending. Despite the off-season in the first half of this year, exports and sales increased, marking a full-fledged recovery. The smartphone market is expected to overcome its sluggishness and return to full-fledged growth in the second half, fueled by Apple's iPhone 13 launch, Samsung Electronics' new foldable phone, and the expansion of the 5G phone market. Furthermore, the semiconductor shortage, which had persistently plagued the market in the first half of the year, is expected to normalize, boosting smartphone production growth. Therefore, we have prepared an opportunity to examine smartphone market trends for the second half of 2021.

■ Recovery in the first half of 2021 despite COVID-19 and the off-season

Smartphone demand, which had plummeted due to the impact of COVID-19, has already recovered in the second half of 2020. Smartphone shipments in the first quarter of 2021 reached 345 million units, a 25% increase year-on-year.

Huawei continued its downward trend in shipments, recording 14.91 million units in the first quarter, a 69% decrease year-on-year. However, the top six companies—Samsung, Apple, Xiaomi, Oppo, Vivo, and Huawei—strengthened their market share in the first quarter, from 58% in the first quarter of 2019 to 62% in the first quarter of 2020 and 72% in the first quarter of 2021.

The smartphone market in April also grew 56% year-on-year, despite the resurgence of COVID-19 in emerging markets, weak demand from China, and the off-season.

Looking at market conditions by major region in April, the US saw a 99% year-over-year growth. Demand shifted to mid- to low-priced phones, with sales of the iPhone SE and Galaxy A series increasing, and the iPhone 12 Pro Max remaining bestsellers. China saw a 10% year-over-year decline, due to slowing demand for 5G upgrades and the inability of Huawei premium phone users to switch to Oppo, Vivo, and Xiaomi. India saw a significant decline in offline sales due to renewed lockdowns.

In May 2021, South Korea's mobile phone exports reached $1.04 billion, a 43% increase year-on-year, despite the semiconductor shortage and the resurgence of COVID-19. This was driven by robust exports of both finished and component products. Exports of finished mobile phone products increased for two consecutive months due to increased demand for premium smartphones in the U.S. and the European Union, while exports of mobile phone parts increased for seven consecutive months due to increased demand for high value-added parts overseas.

■ 3Q Global Smartphone Market Growth

Amidst this, global smartphone shipments are expected to grow starting in the third quarter, driven by the easing of the semiconductor supply shortage, the normalization of COVID-19, and the arrival of the peak season.

According to NH Investment & Securities, this year's smartphone shipments are expected to reach approximately 1.42 billion units, a 6.6% increase year-on-year, slightly lower than initially expected, due to the impact of a semiconductor supply shortage and the resurgence of COVID-19.

On the other hand, in the third quarter, global smartphone shipments are expected to increase 35.1% quarter-on-quarter to 378.2 million units due to the easing of the semiconductor supply shortage, the normalization of COVID-19, and the beginning of the peak season. In the fourth quarter, shipments are also expected to increase 2.9% quarter-on-quarter to 406.1 million units due to the launch of the iPhone 13 series and the beginning of the global shopping peak season.





By company, Chinese companies are expected to benefit from the US sanctions on Huawei, achieving significant sales growth year-on-year, both in China and in emerging markets. Apple is also expected to benefit from Huawei and the increase in global 5G penetration.

Samsung Electronics shipped a total of 290.4 million smartphones in 2021, up 13.6% year-on-year.Shipments are expected to decline. While shipments are expected to be sluggish in the second quarter due to a semiconductor shortage and the spread of COVID-19 in India, a recovery is expected starting in the third quarter, driven by increased shipments of low- to mid-priced smartphones and the launch of foldable smartphones.

Apple is expected to ship approximately 228 million units in 2021, its highest smartphone shipments since 2015, driven by strong sales of the iPhone 12 series and iPhone 13.



Chinese companies are also expected to record smartphone shipment growth of more than 20% in 2021.





It is difficult to expect global smartphone shipments to grow at a rate higher than low single digits in the mid- to long-term. Therefore, existing set manufacturers are expected to release smartphones with various form factors, such as foldable, sliderable, and rollable smartphones, to generate replacement demand.

The company leading the foldable smartphone market is Samsung Electronics, which is expected to release two new models in the Galaxy Z Fold 3 and Galaxy Z Flip 3 series around August 2021.

Samsung Electronics expects that the Galaxy Z Fold 3's upgraded hardware specifications, the Galaxy Z Flip 3's price cut, and the absence of the Galaxy Note series will lead to Samsung Electronics recording foldable smartphone shipments of around 7 to 8 million units in 2021, with shipments projected to increase to around 14 million units in 2022.

■ 5G penetration rate steadily increasing

Since the commercialization of 5G smartphones in the second quarter of 2019, penetration rates have been steadily increasing.

The 5G smartphone penetration rate was 7% in 1Q20 → 18% in 2Q20 → 18% in 3Q20 → 32% in 4Q20 → 36% in 1Q21.

It is expected to reach 570 million units in 2021, with a penetration rate of 38%, and 780 million units in 2022, with a penetration rate of 51%.

The cumulative 5G smartphone shipments from Q2 2019 to Q1 2021 were recorded in the order of Apple, Huawei, Samsung Electronics, Oppo, and Vivo.

However, because consumer satisfaction with 5G services is low and investment in 5G networks is progressing more slowly than initially expected, the speed is expected to be slower than when 4G smartphones replaced 3G smartphones.





Huawei's weakness, LG Electronics' withdrawal, and tectonic shifts among companies

LG Electronics' withdrawal from the smartphone market is expected to lead to fierce competition for the 24 million new customers expected by 2020. LG Electronics is strong in Korea, the US, and Latin America, and holds a strong presence in the US prepaid market in the $100-$300 price range. Samsung Electronics is expected to absorb most of LG Electronics' premium phone demand, while Samsung's A series, Motorola, ZTE, TCL, and Nokia HMD are expected to benefit in the US prepaid market.

Huawei's shipments plummeted from 240 million units in 2019 to 46 million units in 2021. Oppo and Vivo in China, and Xiaomi outside China, are expected to benefit.

In particular, Xiaomi recorded an all-time high of 14.3% market share in April 2021, jumping into the global top 3.

Despite a sharp decline in demand in its key market, India, due to the resurgence of COVID-19, Samsung is performing well in Europe, Latin America, the Middle East, Africa, and emerging Asia. In emerging Asia, Samsung Electronics, based on its strong performance in Southeast Asia, ranked third after Oppo and Vivo, surpassing Samsung Electronics and surpassing 25% market share in Eastern Europe. Led by its flagship model, the Mi 11 Ultra, Samsung Electronics holds a 3% share in the ultra-premium segment priced at $800 and above.