Mobile market to recover 12% this year. No, not you, small smartphone outfits

Analyst: Big 5 manufacturers should be able to shoulder ongoing semiconductor shortage

2020 was a dismal year for the smartphone industry, with sales tanking in the face of the pandemic. But things are now looking up, with Canalys expecting a 12 per cent recovery this year, albeit one not evenly shared by vendors.

The analyst predicted shipments will increase to 1.4 billion units, up from 1.26 billion in 2020, when shipments fell by seven per cent compared to the prior year.

Canalys said it expects this recovery to be somewhat fettered by the semiconductor shortage, with research manager Ben Stanton describing an increasing build-up of pressure across all vendors and price brackets.

"Backorders are building," Stanton said. "The industry is fighting for semiconductors, and every brand will feel the pinch."

In practice, Canalys said it expects vendors to direct output to more lucrative markets, with the US and Europe ahead of Africa and Latin America in the queue. These regions are comparatively more affluent, and thus less sensitive to price hikes.

"As key components, such as chipsets and memory, increase in price, smartphone vendors must decide whether to absorb that cost or pass it on to consumers," said Canalys veep of mobility research Nicole Peng.

Canalys isn't the only analyst concerned about the potential impact of tightening supply chains on the mobile industry. Earlier this month, Gartner warned smaller vendors would see their market share of shipments decline against the big five manufacturers (Apple, Samsung, Xiaomi, OPPO, and Vivo) as they struggle to obtain crucial components.

Whereas the "big five" can use scale to their advantage when negotiating foundry time or access to scarce chips, and are able to pay a premium to skip the queue, smaller outfits like Blu and Intex can't.

Still, no matter how bad this shortage gets, it won't be as bad as 2020.

The mobile sector faced unprecedented challenges last year. Consumer confidence (and thus sales) fell off a cliff during the early months of the pandemic, as punters deferred nonessential purchases like handset upgrades.

Things got worse for manufacturers. Shifting units from Asia to foreign markets became increasingly difficult. Compounding matters, many production facilities in China opted to temporarily suspend production during the early months of the pandemic as the Middle Kingdom imposed strict lockdown measures.

Logistics remain tough, with the world facing a shortage of shipping containers, as well as freak events like the blockage of the Suez Canal, and all vendors fighting for space, a point Dell and HP acknowledged before Christmas.

It didn't take too long for phone production capacity to return to normal levels, and, as economies reopened, consumers started buying phones again. Per Canalys's own figures, shipments returned to growth during Q3 and Q4 of last year, and have continued on their upward trajectory ever since.

That continued recovery is now in the hands of the semiconductor manufacturers. ®

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