Mobile Phone Sales Set to Remain Weak in 2021

But one in three phones sold this year will support 5G

The mobile phone market will grow in 2021, but shipments will remain well below their pre-pandemic level until 2022. Our latest global forecast for mobile phones expects shipments to reach 1.67 billion units in 2021, rising 6% from the weak 2020 but still 8% shy of the figure from 2019. This total will include 1.39 billion smartphones, up 9% from 2020.

Two main factors will stifle growth of the mobile phone market in 2021: global macroeconomic weakness that dampens demand, combined with supply constraints caused by the worldwide shortage of components.

The ongoing global pandemic continues to suppress the economic recovery of many major markets. Rapid vaccination offers hope that consumer spending will bounce back later in 2021 and macroeconomic forecasts are improving, but for most economies, a return to their pre-pandemic level is still some time away.

I also note that the shortage of major components has thrown a spanner in the works, preventing most phone-makers from meeting even the soft demand we expect in 2021. In our recently published Insight Report: Root Causes of the Semiconductor Supply Shortage, we explained that global manufacturing of semiconductors has been significantly reshaped over the past decade and is struggling to address the changing demand patterns.

In the past 12 months, PCs, servers, TVs, tablets and other devices have seen a surge in demand, thanks to the sudden digitization of daily life, as people spend more time at home. Add to that natural disasters like the severe weather event in Texas in February that disrupted Samsung’s manufacturing plant, and the semiconductor industry is faced with a perfect storm.

The shortage will inevitably harm the market even though mobile phone-makers are a major customer for semiconductor companies, probably ahead of other tech sectors in the queue for the limited components available. Smaller manufacturers are far more exposed than market leaders Samsung and Apple, leaving sub-scale players in a tough situation. This lack of access to components may have tipped LG to quit the mobile phone market (see The Chip That Broke the Camel’s Back).

The impact of the component shortage will be uneven: in 2021, we’re likely to see phone-makers prioritizing premium smartphones that deliver higher margins over cheaper devices, hindering markets that depend on more-affordable products.

But the clouds will start to part in 2022: we expect the component shortage to largely be resolved early in that year, coinciding with much better macroeconomic conditions in many countries. Pent-up demand will be unleashed, and suppliers should be able to satisfy this hunger, leading to a significant rise in sales of mobile phones.

Our projections are for 1.97 billion phones to be sold in 2022, tantalizingly close to the 2 billion mark the industry was aiming at a few years ago. And because the recovery from the pandemic will happen at different speeds in different markets around the world, global mobile phone sales will remain strong beyond 2022.

However, I should caution that this strong performance is not to be confused with the sales peak we witnessed in the mid-2010s. In the mid-term, the untapped potential for mobile services to gain new subscribers will be limited to certain regions like Africa and South-East Asia. In advanced markets, consumers will hold onto their phones for longer than ever, freeing up money to spend on other smart devices such as wearables, smart glasses, smart speakers and other connected home gadgets.

Within this picture, there’s a bright outlook for 5G. Already in 2021, one in three handsets sold will be 5G-enabled — this is equivalent to more than half a billion units. Demand will be fuelled by mobile operators that have launched 5G networks being keen to quickly get more 5G phones into customers’ hands.

Even markets making tentative steps toward 5G will benefit from the proliferation of more-affordable 5G-capable phones, ready to be used as 5G network coverage expands. By 2025, we forecast almost three-quarters of mobile phones sold worldwide will support 5G.

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