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Smartphone Sales To Grow 5.3% In 2021 Despite Chip Shortages

Samsung Galaxy Z Flip 3 5G AM AH 13
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Despite a strong start to the year, the global smartphone market is staring at a meager overall growth in 2021. According to the latest data estimates from research firm IDC, smartphone sales will grow about 5.3 percent year-on-year (YoY) this year. Total shipment volume will reach 1.35 billion units.

A 5.3 percent YoY growth wouldn’t have been bad a couple of years back. But considering the massive slowdown that the smartphone market experienced last year due to the coronavirus pandemic, there were bigger expectations this year. And the first quarter did set the tone for strong growth. Global shipments grew a staggering 20 percent YoY in Q1 2021.

However, an unprecedented semiconductor shortage, which has disrupted production and caused supply shortages globally, has crushed all the hopes of a strong 2021 for the smartphone industry. Shipments in the second half of the year have been far less than what was projected early in the year. As such, IDC has lowered its overall YoY growth expectations from 7.4 percent to 5.3 percent. Another research firm Counterpoint Research also recently similarly adjusted its estimates in October.

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“Although we expected a slowdown in the third quarter, the market declined by almost twice the projected rate as the supply chain and logistical challenges hit every major player in the market,” said Nabila Popal, a research director at IDC.

The ongoing chip shortage issue isn’t expected to get resolved anytime soon. IDC sees it affecting smartphone shipments next year as well. The firm has lowered its estimated YoY growth for 2022 from 3.4 percent to and 3.0 percent. This sustained growth for the straight years means the smartphone market could return to pre-pandemic levels in 2022.

5G smartphone sales are on the rise, of course

As carriers all over the world gradually roll out 5G networks, demand for 5G-equipped handsets is on the rise. Shipments of 5G devices grew 117 percent YoY this year, while that of 4G devices declined 22.5 percent YoY. However, despite OEMs making 5G devices more affordable, their average sale prices (ASPs) have grown 1.7 percent from 2020 to $643. And that’s because of the popularity of the iPhone 13 series that comes with 5G cellular connectivity. While the overall Android ASP for 2021 came in at $265, iOS climbed to a staggering $950. No wonder 5G ASP grew as well.

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Going forward, IDC expects the 5G ASP to drop to $416 over the next five years. This decline in prices, coupled with the continued transition from feature phones to smartphones, means DC is estimating a 3.5 percent compound annual growth rate (CAGR) for at least five years from 2023 and beyond.