Can 5G save the smartphone market?

Global smartphone volumes are expected to drop 11% this year before bouncing back 10% in 2021 thanks to 5G.
The post Can 5G save the smartphone market? appeared first on Motley Fool Australia. –

This article was originally published on All figures quoted in US dollars unless otherwise stated.

This article was originally published on All figures quoted in US dollars unless otherwise stated.

The global smartphone market has had the worst year in its history, primarily on account of the COVID-19 pandemic that has decimated discretionary spending while simultaneously disrupting consumer electronics supply chains. Total shipments have seen the biggest drops in history throughout 2020, with some markets like India even getting cut in half.

Some smartphone manufacturers have already started to release handsets equipped with 5G, and Apple Inc‘s (NASDAQ: AAPL) highly anticipated foray into 5G this year could help save the market.

Bouncing back in 2021

Canalys released its latest estimates for the worldwide smartphone industry this week, with total unit volumes for 2020 expected to decline by 11%. Total 5G smartphone shipments this year are forecast to be approximately 280 million, driven by relatively affordable 5G handsets being sold in China, the largest smartphone market in the world. Hopefully, 5G product releases at the end of 2020 will spur momentum heading into 2021, when total volumes should bounce back by 10% to 1.3 billion.

“Gradual reopening of offline stores, improving logistics and production have provided necessary uplift for most markets to move into a more stabilized second half of 2020,” Canalys senior analyst Ben Stanton said in the release. “And with the holiday season about to kick off, there is no doubt 5G is about to be thrust into spotlight.”

Commoditisation of 5G phones in China, which helps bring prices down, will be crucial in boosting demand this year, according to Canalys. 5G smartphones that cost $400 or less are expected to account for nearly 60% of total smartphone volumes in China in 2021, a much higher proportion than in other mature markets like North America or Europe. Note that Apple tends to have a stronger position in developed markets and its flagship 5G iPhones this year will cost well above $400.

“Fairly aggressively-priced 5G devices are already available in Europe, such as the Motorola G 5G Plus, and the Xiaomi Mi 10 Lite 5G,” Stanton added. “But with many Apple-centric markets, such as the UK, there is a large base of customers willing to wait for an iPhone with 5G.”

Average selling prices (ASPs) of 5G handsets sold in Europe should steadily decline as well due to competition, with Canalys modeling that figure at $765 in 2021 and $477 in 2024.

Even though many wireless carriers around the world are still in early stages of 5G deployments and there are important nuances regarding the types of speeds that 5G can offer, carriers and smartphone manufacturers are doing a good job in creating interest and hype around the next-generation technology, which will push 5G penetration higher. Canalys analyst Shengtao Jin expects 5G penetration in China to top 80% within the next year.

Canalys estimates that total 5G shipments will soar by 95% to reach 544 million in 2021, which would represent over 40% of all units sold.

This article was originally published on All figures quoted in US dollars unless otherwise stated.

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Evan Niu, CFA owns shares of Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Can 5G save the smartphone market? appeared first on Motley Fool Australia.

This article was originally published on All figures quoted in US dollars unless otherwise stated.

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