MediaTek Closed-In On Qualcomm As Chipset Market Declined In Q2 2020

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As smartphone sales took a hit because of the COVID-19 pandemic, the smartphone application processor (AP) market also contracted 26 percent year-on-year (YoY) in Q2 2020, a new Counterpoint Research report shows. Qualcomm continued to lead the market but MediaTek closed the gap on the American giant.

The Taiwanese company saw its market share jump from 24 percent in Q2 2019 to 26 percent in Q2 2020. On the other hand, Qualcomm saw its share drop from 33 percent to 29 percent during the same period.

While all vendors suffered a drop in shipment volume because of sluggish demand for smartphones, the decline in Qualcomm's market share was partially a result of the US government's trade restrictions on Huawei. The Chinese company was forced to increase the use of its in-house, HiSilicon APs after the US restrictions.

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Growth in demand for smartphones in China this past quarter means Huawei surpassed Samsung to become the number one smartphone vendor in Q2 2020. And since most of its smartphones feature HiSilicon Kirin chipsets, Qualcomm suffered a setback.

The American chipmaker saw its share in Huawei and HONOR smartphones drop from 12 percent in Q2 2019 to a mere 3 percent in Q2 2020. HiSilicon's share in the global AP market, meanwhile, jumped to 16 percent in Q2 2020 from 12 percent a year earlier.

The situation for Huawei, Qualcomm, and other global chipmakers is much worse now, though. The latest amendments to the trade restrictions on Huawei have gone into effect this week. Qualcomm and others can no longer supply chips to Huawei unless they obtain a special license from the US government. And there's little chance the Trump administration would grant anyone permission to supply chips to the Chinese company.

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The chipset market is bouncing back after the Q2 2020 slowdown

The global smartphone market has been recovering as the quarter passed. The trend has continued in the third quarter as well and the AP market is bouncing back along.

The troubles for Huawei and HiSilicon will help Qualcomm recover some lost ground in the third quarter. Shares of OPPO, Vivo, Realme, and Xiaomi phones will increase in China. This will boost the demand for Qualcomm's mid-tier and high-end chips.

MediaTek will also likely see a growth in the low-to-mid-tier segment in the third quarter. Samsung, which saw a drop in the market share for its Exynos chipsets in Q2 2020, could also benefit heavily from Huawei's troubles.

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Overall, the global AP market is expected to be on a growth trajectory for at least the next three years. According to the report, 5G smartphone sales more than doubled in Q2 2020 from the previous quarter. And as the next-gen wireless networks roll out in more countries, the demand for gaming phones is likely to increase.

Counterpoint Research estimates a massive 1011 percent growth for game-centric phones in 2020. Mobile chipset vendors have also been coming up with more tailored gaming solutions in recent times. This trend is likely to continue along with the expansion of the 5G rollout.

"Smartphone AP vendors are capitalizing on this opportunity by launching solutions with higher clocked GPUs and support for higher display refresh rates – 90Hz, 120Hz, and even 144Hz, elevating the gaming experience in the affordable segment," said Research Analyst Shobhit Srivastava. "With 5G coming to lower price segments, mobile gaming is estimated to grow further due to its low latency connectivity."

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