Smartphone production fell to 289 million units by Q3 2022

Global smartphone production totaled around 289 million units for the third quarter (Q3 2022), showing a slight quarter-on-quarter (Q/Q) decline of 0.9% and a year-on-year (YoY) decline of 11%, according to TrendForce. .

The smartphone market exhibited an extremely weak demand situation as the ‘iron law’ of positive growth in the third quarter was broken after having been in place for years. The smartphone production contraction during this year’s peak season was mainly attributed to smartphone brands, prioritizing consumption of channel inventory for complete devices and maintaining a fairly conservative production plan for Q3 2022. In addition , had continued to reduce their production targets due to strong headwinds from the global economy.

Regarding the performance of the major smartphone brands in the third quarter of 2022, Samsung recorded around 64.2 million units in device production, showing a QoQ increase of only 3.9%. This was the result of the reduction of the brand’s production from the second quarter of 2022 and the maintenance of a conservative perspective on the future situation of the market.

Due to persistent inventory pressure, Samsung is expected to post a QoQ decline again by Q4 2022. In terms of product development, Samsung has been the leader in foldable smartphones. This year, the global market share of foldable smartphones is estimated to reach 1.1%; and within this segment, Samsung is expected to have a market share of almost 90%. As for 2023, the global market share of foldable smartphones is expected to increase to 1.5%, with Samsung expected to maintain a market share of almost 80% in the segment.

Apple recorded 50.8 million units in iPhone production for the third quarter of 2022, showing a stable growth trend. Apple had benefited from the reallocation of demand that originally went to Huawei smartphones, as well as the optimal price for new iPhone models. Also, the third quarter is usually the production ramp-up period, as Apple intends to push sales of new iPhone models to their peak in the fourth quarter.

Following the release of the iPhone 14 series, much of the demand for the new iPhone models has shifted towards the Pro sub-series. Consequently, Apple has also adjusted the share distribution of the different new models in iPhone production. However, Foxconn’s EMS base in the Chinese city of Zhengzhou recently experienced a drop in capacity utilization rate due to a local outbreak of COVID-19. Since the base is also Apple’s primary manufacturing site for iPhone Pro models, this incident will affect total iPhone production in Q4 2022.

After Samsung in first place and Apple in second, the ranking of the top five global smartphone brands by production for 3Q22 is completed with Xiaomi, OPPO and Vivo in third, fourth and fifth place respectively. In this ranking, Xiaomi includes its Redmi, POCO and Black Shark sub-brands; OPPO includes realme and OnePlus; and Vivo also takes iQoo into account. Among them, only Xiaomi maintained roughly the same device production volume compared to the previous quarter, while the other two posted a quarter-on-quarter decline. All of them have been limited to raising production during the second half of this year due to pressure to correct excess inventory. They also have to deal with the COVID-19 lockdowns in the domestic market and the recent slowdown in India’s economic growth. Moving into 4Q22, these three Chinese brands are expected to post mostly flat growth in handset production.

Looking ahead, Xiaomi, OPPO and Vivo will face significant challenges. First, China, as its home and primary market, is already highly saturated. The implementation of the zero COVID policy by the Chinese government has further caused a freeze in domestic demand during the recent period. At the same time, Honor has become a direct threat in the competition for domestic market share. To sustain growth, Xiaomi, OPPO and Vivo will have to focus on overseas expansions while retaining their domestic market shares.

Samsung, Apple and Huawei have developed self-developed chips such as Mobile SOC to maintain a loyal group of customers and provide effective market positioning for their high-end device models. And because these three brands have been able to generate additional value with internal components, the other major Chinese brands are now following suit and committing to maintaining dedicated chip design teams. Xiaomi, for example, has developed the Pengpai S1 mobile SoC, the Pengpai C1 image processing chip, and the Pengpai P1 120W fast charging chip. OPPO has also introduced a discrete ISP called MariSilicon X and is expected to introduce an in-house AP in 1Q24. For its part, Vivo has launched the V1 and V2 chipsets as solutions to optimize the image processing algorithm of the smartphone camera. Looking at these examples, TrendForce believes that while Chinese brands are using internal chips to improve their profiles, their more important goal is to strengthen the domestic supply chain, as China and the US are now locked in an increasingly geopolitical competition. greater time.

Regarding the state of the smartphone market in the fourth quarter of 2022, the results of recent promotional events related to China’s Singles’ Day reveal that smartphone brands have not been particularly effective in stimulating device sales through price reduction. Consumer confidence as a whole has been hit hard by various economic headwinds. TrendForce estimates that global smartphone production will total around 316 million units by the fourth quarter of 2022, which translates to 9.3% quarter-on-quarter growth. A year-on-year comparison will still show a decline. TrendForce notes that the smartphone market began to show signs of weakening in the third quarter of 2021. Since then, it has posted six straight quarters of year-on-year decline in device production. Demand will eventually return when the channel’s inventory correction is nearly complete, but this change is not expected to occur before the second quarter of 2023.