Leading smartphone brands Samsung and Huawei are ramping up consumption of their own application processor solutions in their products, causing market share to shift away from the top third-party supplier, Qualcomm.
Samsung and Huawei both expanded their in-house smartphone application processor shipments by more than 30 percent during the third quarter of 2019 compared to the same period in 2018, according to IHS Markit | Technology, now a part of Informa Tech. In contrast, Qualcomm’s share fell by 16.1 percent during the same time, as reported by the Smartphone Model Market Tracker – Q3 2019 report.
“Samsung and Huawei both are taking strategic steps to realign their smartphone product lines and supply chains away from third-party processor solutions and toward their own self-made alternatives,” said Gerrit Schneemann, senior analyst, smartphones, at IHS Markit | Technology. “Each company has its own distinct rationale for making the shift. However, the aggregate impact on the smartphone market is a major shift away from third-party processors.”
Samsung looks inward for mid-range smartphone processors
Samsung used its internally produced Exynos processor in 80.4 percent of its mid-range smartphone devices, Galaxy A Series shipped in the third quarter of 2019, up from 64.2 percent during the same period in 2018. For Samsung’s entire smartphone line, Exynos processors were in 75.4 percent of all devices during the third quarter, up 61.4 percent in the same quarter in 2018.
In contrast, the share held by third-party processor suppliers MediaTek and Qualcomm in Samsung smartphones declined to 2.3 percent and 22.2 percent respectively, down from 9.0 percent and 27.5 percent one year earlier.
“Samsung’s attention has been focused intensely on its mid-range portfolio during the past year, using its A-series smartphones to launch new features and technologies—rather than its flagship devices,” said Jusy Hong, smartphone research and analysis director at IHS Markit | Technology. “The shift in strategy requires a more pronounced reliance on in-house processor solutions to maximize cost and development efficiencies.”
Huawei seeks to decrease reliance on U.S. technology
Huawei employed its own processor chipset, dubbed Kirin, in 74.6 percent of the smartphones it shipped in the third quarter of 2019. This was up from 68.7 percent one year earlier.
Previously, Huawei used its Kirin chips mainly in flagship devices. However, the company now is expanding the reach of its in-house solution to more price ranges, including the Nova and Y-series mid-range phones.
“The U.S. government ban is prohibiting Huawei from sourcing technology from U.S.-based firms, including Qualcomm,” said Anna Ahrens, senior analyst, smartphone and mobile, at IHS Markit | Technology. “As a result Huawei is working on removing U.S.-based components from its supply chain by finding suppliers from different regions or by providing its own solutions.”
U.S.-based Qualcomm’s portion of Huawei shipments decreased to 8.6 percent in the third quarter of 2019, down from 24 percent in the third quarter of 2018. On the other hand, Taiwan’s MediaTek increased its share of Huawei phones, rising to 16.7 percent in the third quarter, up from 7.3 percent a year earlier.
Fierce competition between Qualcomm and MediaTek for second-tier OEMs
While the top two smartphone brands are expanding in-house processor adoption, Qualcomm and MediaTek are fiercely competing to maintain their market share among second-tier companies.
The top six OEMs—Samsung, Huawei, Apple, Xiaomi, OPPO and vivo—accounted for 77 percent of the global smartphone market in the third quarter. Apple uses 100 percent native application processors. This leaves Xiaomi, OPPO and vivo as the major customers of Qualcomm and MediaTek. As a result, the competition between these two chipset makers is heating up.
Xiaomi's adoption of MediaTek has gradually increased since the second half of 2018. However, Qualcomm's deployment by Xiaomi accelerated rapidly in the third quarter.
MediaTek was adopted for the Redmi 6 series, which is one of the high-volume smartphone lines released by Xiaomi in 2018. However, the Redmi 7 series adopted Qualcomm chipsets in 2019.
In contrast, Qualcomm's share of OPPO smartphones steadily declined from 82 percent in the first quarter of 2019 to 42 percent in the third quarter. MediaTek’s share of OPPO shipments accounted for 58 percent in the third quarter. This development was due to OPPO’s increasing shipments of low-end models, resulting in a higher adoption rate of MediaTek chips.
Furthermore, vivo is steadily increasing its adoption of MediaTek chipsets. Vivo shipped 46 percent of its smartphones with processors made by MediaTek in the quarter. This is a significant increase from 27 percent during the same period in 2018. Like OPPO, increased sales of mid-range and low-end series smartphones such as the S, Y, and V resulted in an increase in MediaTek's penetration rate.
Qualcomm retained the highest share in the global mobile processor market in the third quarter, with a 31 percent share, followed by MediaTek at 21 percent. Samsung’s Exynos and Huawei’s Kirin recorded 16 percent and 14 percent respectively.
The IHS Markit | Technology Smartphone Model Market Tracker
The IHS Markit | Technology Smartphone Model Market Tracker consists of a comprehensive breakdown and an in-depth analysis report, delivered on a quarterly basis, providing key insights and data on the smartphone industry. The market tracker includes detailed worldwide shipment data by OEM, model, key components, revenue and ASP, reporting the results from the most recent quarter