Future of Devices: 5G and services shape new market frontiers - MWC Shanghai
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Future of Devices: 5G and services shape new market frontiers January 2021 © 2021 GSM Association
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Director, End-user Research1 Executive summary
2 Resetting expectations and adjusting to the new normal
3 The smartphone brands shaping the future
4 5G smartphone outlook
5 Beyond the smartphone: wearables and services
6 Methodology
3Shape of the market
Smartphone market upheaval demands a revised strategic approach. When Covid-19 appeared, the smartphone industry faced dual
pressures as supply chains were interrupted and consumer demand plummeted. Though shipment volumes recovered in Q3 2020, they were still
1 down compared to 2019 – and may not return to normal for some time. As countries begin to emerge from the pandemic, consumers still face a
tough economic outlook. Vendors must adjust to a more frugal customer base and a more crowded mid tier of the market than was anticipated
before the pandemic struck.
Beneath the surface, the vendor landscape is shifting. In recent years, several Chinese vendors have gained a significant foothold in the
global marketplace. Huawei and Xiaomi have expanded beyond their domestic market and taken their place among global market share leaders.
2 But as Huawei struggles to overcome US sanctions, rivals Xiaomi, Oppo, Vivo, Realme and even Samsung are well positioned to convert any
Huawei losses into their gains.
Outlook for 5G handsets has strengthened despite the pandemic. Consumer interest in 5G is on the rise, with intent to upgrade growing in
most markets. Although concrete consumer 5G use cases have only just begun to emerge, those who are already using 5G are highly satisfied
3 with their experience, and positive word of mouth should continue to drive already surging demand. While 5G connectivity is not yet the essential
factor determining which device consumers will buy next, among early-adopter trendsetters it is an increasingly important feature. Amid growing
enthusiasm for the new networks, we expect 5G to become a key factor driving handset purchasing decisions in the coming months and years.
Vendors will need to look beyond the smartphone to gain a competitive edge. As innovation in smartphones tends to come in small
increments, vendors should look to wearables and services to build their competitive advantage. Wearables can serve a key function of enticing
4 consumers further into a brand’s ecosystem. Some 21% of consumers now own a wearable that is the same brand as their smartphone – and
are more loyal to the brand as a result. Beyond wearables, services show great promise for future revenue growth; vendors should position now
to take advantage of the burgeoning markets for data security, cloud storage and entertainment services that will continue to shape the strategic
landscape for years to come.
41 Executive summary
2 Resetting expectations and adjusting to the new normal
3 The smartphone brands shaping the future
4 5G smartphone outlook
5 Beyond the smartphone: wearables and services
6 Methodology
5The smartphone industry adapts to a transformed
market landscape
• Covid-19 disruption – Before the pandemic struck, the world was in the midst of a prolonged period of economic growth, with global
smartphone sales holding relatively steady for several years. As economies reeled at the onset of the pandemic, the smartphone industry
faced dual challenges in the form of supply-chain disruption and a precipitous drop in consumer demand as people were instructed to stay
indoors. As a result, smartphone shipments plunged by 26% in Q1 2020.
• The path forward – With unemployment expected to remain high in much of the world, and the full impact of the pandemic on state budgets
becoming clearer, the smartphone industry faces a transformed market landscape in 2021. Manufacturers and operators will need to adapt to
new trends and reset their expectations as they adjust to this new reality.
Global smartphone unit shipments 2018–2020
450 40%
400 Pandemic impact
Units shipped
350 20%
(million)
300
250
0%
200
150
100 -20%
50
0 -40%
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
Units (millions) 363 368 380 395 341 357 380 401 295 276 366
Growth rate (QoQ) 0% 2% 3% 4% -14% 5% 6% 6% -26% -6% 32%
Source: Counterpoint Research
6Consumers anticipate longer replacement cycles
Pre- versus post-pandemic smartphone replacement rates • Operator expectations – In the months before the pandemic, operators
(Years) reported that consumers were replacing their handsets on average every
3.00 2.25 years. Given the generally bullish pre-pandemic global economic
outlook, most expected that replacement cycle would shorten over time,
decreasing to an average of just two years by 2021/2022.
2.25
• Consumers hang on – The pandemic has reversed that optimism, and
2.00 consumers facing tough economic prospects now expect to extend the
Pre-Covid-19 Forecast Likely
replacement consumer current lifecycle of their smartphones to three years, far exceeding
handset
replacement rate (operator replacement operators’ pre-Covid predictions. This is likely to drag down overall sales
rate estimate) rate
in the short to medium term, limiting recovery of the smartphone market.
• Mitigating factors – While the reticence around replacing devices will
not disappear overnight, as economies rebound and conditions improve,
consumers may begin to consider replacing their handsets more
frequently. Even now, 29% of smartphone owners report they are likely to
Pre-pandemic Post-pandemic replace their device in 2021. This and the lure of 5G networks and
new/improved services should be enough to rekindle demand over the
longer term.
Source: GSMA Intelligence Operators in Focus Survey (n=100) and Consumers in Focus
Survey (n=18,486)
7Industry pivots to lower-cost handsets
• Competition shifts to the mid tier – With the near-term global Average launch price of new 5G handsets by quarter
economic outlook subdued, manufacturers are rethinking their 184 devices in total. Price in US dollars.
strategies, with some shifting to compete more heavily on price $1,000
than ultra-premium features. The trend is particularly visible in the
increasingly crowded 5G handset market, where average retail
prices have fallen by roughly a third since Q1 2019. $900
32%
• Premium brands embrace value – The drop in 5G handset average price
$800 decrease
prices has largely been the result of a deluge of lower-cost
Q1 2019 – Q4 2020
handsets from China arriving on the market. While Q3 and Q4
2020 saw a brief rise in average retail prices for 5G handsets as
$700
new flagship devices from Samsung, Apple and Google launched,
even Apple (not known for its price-sensitivity) paired a cheaper
version of its iPhone 12 with its high-end flagship release.
$600
• A sign of things to come – We expect the trend towards lower-
cost handsets will continue as consumer priorities are more $500
focused on affordable devices. New technologies such as the
Qualcomm Series 4 chipset that arrived in late 2020 will help keep
base handset costs low, while allowing vendors the flexibility to $400
improve other aspects of the hardware, such as the camera, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2019 2019 2019 2020 2020 2020 2020
without pricing handsets out of consumers’ reach.
Source: GSMA Intelligence 8Despite the pandemic, consumers resist moving to
online sales channels
Consumer intention to buy their next phone online • A changed retail landscape – Covid-19 accelerated a trend already
under way: operators and smartphone vendors moved to online
65%
distribution channels for smartphones, as retail stores in many
countries closed for a significant part of Q2. Operators such as AT&T in
the US even began to permanently close some retail outlets, casting
60%
uncertainty on the future role of bricks-and-mortar stores in handset
Pre-Covid-19
operator sales.
forecast
55%
52% • Consumers slow to adapt – Consumers, however, have not been so
quick to flock to online channels. Pre-Covid-19, operators believed that
50% online would overtake bricks and mortar as the dominant sales channel
by 2021. But consumers now are no more likely to purchase a phone
45% online than operators reported in 2019 – meaning the impact of the
44%
45%
pandemic on smartphone shopping habits may be overstated.
Operator
reported Consumer
intent
40% • Old habits die hard – Even accounting for all the changes that have
taken place over the past year, in-store shopping will remain a vital
distribution channel. Operators should not expect a seamless transition
35% to online in the near future, and should plan to lead customers to online
2019 2020 2021 channels gradually.
Source: GSMA Intelligence Operators in Focus Survey (n=100) and Consumers in Focus
Survey (n=4,694)
91 Executive summary
2 Resetting expectations and adjusting to the new normal
3 The smartphone brands shaping the future
4 5G smartphone outlook
5 Beyond the smartphone: wearables and services
6 Methodology
10Chinese competitors look to make gains at Huawei’s expense
Consumer favourites Global smartphone competitive landscape 2021
• Apple and Samsung have weathered the pandemic and are
70%
relatively unscathed in terms of market share and the loyalty ‘Mavericks’ ‘Consumer favourites’
they command in their customers. Apple
• By widening their reach into new markets and building brand
loyalty that surpasses that of other brands with similar market
shares, Huawei and Xiaomi can now be considered to be
among the smartphone market leaders. Samsung
• Huawei faces a major obstacle in the form of US sanctions
blocking its access to Google apps and ARM chip designs,
which could have serious implications for its future prospects. OnePlus Xiaomi
LG
Sony
Scale players Huawei
Google Nokia
• In contrast to Huawei and Xiaomi, these Chinese vendors
have not yet built the kind of brand equity that would elevate Vivo
Alcatel Motorola
them into a market leadership position. While their distribution
ZTE Realme
remains high in raw shipment volumes, their brand reach Honor Oppo
outside their domestic market is minimal for now.
Hisense
• If Huawei suffers significant market share decline in the Asus
coming years due to its exit from the Android ecosystem,
Brand loyalty
Oppo, Vivo or Realme will be circling to try to capture any
HTC
customers that it sheds.
• We expect to see some movement in the coming years in the ‘Strategic crossroads’ ‘Scale players’
relatively tight cluster of Chinese competitors on the border Market share 20%
between Scale players and Consumer favourites. Source: Market share figures derived from total 2020 TAC allocations from the GSMA Device Database.
Brand loyalty (percentage very likely to stick with brand) from GSMA Intelligence Consumers in Focus Survey
(n=18,648). 11Pressure mounts for brands at a strategic crossroads
Mavericks Global smartphone competitive landscape 2021
• Many former industry heavyweights have seen their market
70%
shares decline in recent years, but some, such as Sony, ‘Mavericks’ ‘Consumer favourites’
Nokia and LG, have retained enough brand equity to redefine Apple
their positioning and target a smaller base of loyal users.
• Alongside these legacy players, OnePlus and Google’s Pixel
have built an impressively loyal following in a relatively short
period of time, and are brands to watch going forward. Samsung
• In the near term we are unlikely to see much movement within
this segment, as brands here have carved out their own
relatively comfortable and stable niches in the market. OnePlus Xiaomi
LG
Sony
Strategic crossroads Huawei
Google Nokia
• Brands here must move towards one of the other market
quadrants. Vivo
Alcatel Motorola
• The best positioned to achieve this in the immediate term are
ZTE Realme
Motorola and Honor, on the borders of all three adjacent Honor Oppo
quadrants.
Hisense
• With the imminent sale of Honor, Huawei’s discount line of Asus
phones, we expect that the brand will move laterally towards a
Brand loyalty
scale play in the market, as the prospects for increasing brand
HTC
loyalty are minimal.
• Motorola, on the other hand, can draw on its brand cache to ‘Strategic crossroads’ ‘Scale players’
move into the Mavericks corner of the market, where many Market share 20%
legacy players have found a home. Source: Market share figures derived from total 2020 TAC allocations from the GSMA Device Database.
Brand loyalty (percentage very likely to stick with brand) from GSMA Intelligence Consumers in Focus Survey
(n=18,648). 12Huawei’s third way
• Emergency response – Sanctions have restricted Huawei’s access to Google apps and ARM chip designs. In 2021, its new phones will begin
to ship with Harmony, its proprietary operating system (OS). The outlook for the new OS is mixed, but it could signal a split in the market in
China that will challenge the grip of iOS/Android, and might fundamentally reshape Huawei’s domestic market landscape.
• Huawei loyalists will drive adoption – Huawei enjoys strong brand loyalty in China, as most of its current customers intend to stick with the
brand when they replace their phone. With a reasonable potential to capture the 17% of Chinese Android users with low brand affinity,
Huawei’s new OS has an addressable market of 46% of new handset purchases in China in 2021, laying the groundwork for future expansion.
• A long road ahead – Expansion outside of China, where Huawei’s footprint is smaller and brand loyalty is weaker, will not be easy. If Huawei
remains unable to ship phones that boast the apps that Android users take for granted, Harmony faces a struggle to gain a foothold elsewhere,
and Huawei risks losing ground in the broader global smartphone market.
Harmony OS uptake opportunity in China in 2021
46% of new phone
purchases
Source: GSMA Intelligence Consumers in Focus 2020 Survey (n=1,000)
131 Executive summary
2 Resetting expectations and adjusting to the new normal
3 The smartphone brands shaping the future
4 5G smartphone outlook
5 Beyond the smartphone: wearables and services
6 Methodology
14Amid a pandemic, global 5G upgrade intent soars
• Overcoming obstacles – Despite delays to 5G rollouts in certain markets due to Covid-19, the outlook for 5G connections remains strong. In fact, our
forecast for 5G connections for 2021 is greater now than it was before the pandemic, with an average of eight new network launches per month in 2020.
• China is the new epicentre of 5G – Intention to upgrade to 5G increased in most markets, but nowhere is enthusiasm as strong as it is in China. By contrast,
South Korea remained virtually unchanged year on year.
• Europe surges, but the West is still playing catch up – Europeans were much more likely to want to upgrade to 5G in 2020 than in 2019, however
Europeans and North Americans are still less enthusiastic about the technology than their counterparts in China and South Korea. That said, the launch of the
new 5G iPhone in Western markets, where Apple holds significant brand cache, should convert much of this latent upgrade intent into new 5G subscriptions,
laying the groundwork for a strong 2021 for 5G globally.
Intention to upgrade to 5G, 2019 versus 2020
2019 2020
62%
50% 52% 53%
38% 42%
37% 37% 38% 38% 37% 36% 35%
32% 29% 32% 26% 25%
23% 21% 25% 24% 26% 24% 22%
18% 19% 17%
France
Japan
Russia
USA
Spain
Italy
Poland
UK
Germany
China
Australia
Canada
S. Korea
Sweden
Average
regional +8 pp +4 pp +10 pp +7 pp
YoY growth
Source: GSMA Intelligence Consumers in Focus Survey (n=18,468)
Figures weighted by smartphone penetration in each market to estimate national upgrade intention 15Early adopters draw the roadmap for 5G handset uptake
• Back to basics – With economic hardship predicted in the aftermath of the pandemic, it is hardly surprising that when the time comes to
replace their phones, consumers are focusing on the fundamentals such as the battery life, durability, security and camera quality of their next
device. 5G connectivity is, for most, seen as an incidental benefit of acquiring a new phone, rather than a priority.
• Early adopters set the tone for 5G – Handset enthusiasts who purchase the latest flagship model tend to be bellwethers for upcoming
trends; their preferences point to a move towards 5G prioritisation in the near future.
• Foldables rising? Beyond 5G, it is interesting to note a rise in early-adopter preference for foldable smartphones. With 22% looking for a
foldable screen design in their next phone, these early adopters are more in line with operators, 32% of whom were keen to add foldables to
their rosters.
Top priority features for next smartphone, global Important features for early adopters
Battery life 72% Flagship phone owners Rest of customers
Durability 66%
43%
Security 65% 34%
31%
Camera quality 26%
54% 22%
5G connectivity 34% 10%
Large screen 28%
Foldable screen 13% 5G connectivity Larger screen size Foldable screen
Source: GSMA Intelligence Consumers in Focus Survey (n=14,273)
16Positive word of mouth for 5G points to strong 2021
• The reviews are in – The experience for those who have already Feedback on 5G experience from current users
upgraded to 5G has been mostly positive, with 67% of consumers
70%
reporting that the new network has met or exceeded their
expectations.
60%
• Speed is king – Not surprisingly, 5G subscribers are most likely to
remark on the network’s speed, with those impressed by the speeds 21%
50%
outnumbering those who are not by nearly 2 to 1. Coverage, often
thought to be a potential source of frustration for 5G users, is also
% of 5G users
satisfactory more often than not for current users. The most 40%
15%
polarising aspect of 5G is the services currently on offer that take
advantage of the new network, with users roughly evenly split
30%
between positive and negative impressions. That said, few make
7%
note of services one way or the other, which perhaps reflects that 12%
there are as yet few 5G-specific services available. 20% 42% Negative
31%
• Mounting evidence – As subscribers continue to use the new 24%
10%
networks, 5G becomes an increasingly important feature for their 18%
next phone: 49% of current 5G customers say that 5G capability will Positive
be a very important factor for their next phone purchase, compared 0%
to 34% among those who have not yet tried 5G. We expect uptake to Speed Coverage Value Services
accelerate as positive word of mouth starts to spread. Source: GSMA Intelligence Consumers in Focus Survey (n=458)
171 Executive summary
2 Resetting expectations and adjusting to the new normal
3 The smartphone brands shaping the future
4 5G smartphone outlook
5 Beyond the smartphone: wearables and services
6 Methodology
18Improving brand loyalty, one wearable at a time
• Apple’s appeal – Apple has built a closed ecosystem of Owning a branded wearable increases smartphone customer loyalty
wearables that connect to its popular iPhone, so it is no
80%
surprise that it leads all brands with the highest number of
users (31%) who have one of its wearables.
71% %
70% smartphone
67%
users with
• Creating stickiness – Having a wearable makes customers branded
more loyal to their smartphone brand. While Apple excels in 60% wearable
58%
this department, the bump in brand loyalty is not unique:
customers with a branded wearable are more likely to stick to 50% 50%
48%
their brand when they replace their phone across all the major 45% Brand
Brand loyalty
smartphone vendors. loyalty WITH
41% with
40% 40% wearable
wearable
• Finding the balance – While the temptation may be to mimic 32% Brand loyalty
30% 29% without wearable
Apple and drive retention by locking customers into a 31%
wearables ecosystem, it is worth remembering that the 24%
20% 23% Brand
interoperability of Android-based wearables is a big part of 20% loyalty
Percentage of
what has allowed this market to grow. The key for Android- 16% WITHOUT
smartphone
based brands in the coming years will be to incentivise 10% wearable
users with
branded
customers to purchase their wearables with perks and wearable
features while avoiding the creation of brand silos that would 0%
Apple Xiaomi/Mi Samsung Huawei Other
limit the growth of the category as a whole.
Source: GSMA Intelligence Consumers in Focus Survey (n=4,478)
19Services will be the main battleground of the future
Top value-added services to bundle with mobile subscription • Beyond the smartphone – As a mature product category,
innovation in smartphones is mostly incremental rather than
Biggest
Digital security revolutionary; the overall device form factor has remained
opportunity:
12% 45% 57%
services Low adoption, remarkably consistent for many years. In the absence of new
high interest technical innovations, both vendors and operators have the
opportunity to offer their customers new services in order to
differentiate themselves over the next decade.
Video streaming 21% 37% 58%
Broadest
appeal:
Cloud storage 20% 36% 56% pleasing the • Unmet needs – Across services, consumer demand far
mass market outpaces current adoption, suggesting a market that is ripe
Music streaming 19% 36% 54% with low-hanging fruit. For example, consumers are perennially
concerned about privacy and security, yet few have a value-
added security service bundled with their device.
Live sports
8% 25% 33% Targeted play:
content • Alliances win the day – Strategic partnerships with service
Smaller but devoted
following providers can provide a competitive advantage for future
Gaming services 8% 22% 29%
success. Samsung’s recent agreement with Microsoft to
deliver cloud gaming on its new devices serves as an example
Already bundled with device Interested in adding of a possible path forward for vendor/provider partnerships.
Source: GSMA Intelligence Consumers in Focus Survey (n=18,468)
20Increases in mobile service usage likely to continue beyond
the pandemic
• A permanent shift? The pandemic saw a dramatic increase in Percentage using mobile internet services, 5G versus 4G
mobile service usage in nearly all markets. The increase is not
unexpected given the circumstances, but questions remain as to 5G 4G
whether it will be sustained as consumers emerge from the
75%
pandemic.
70% 71%
70%
• The new normal – As more consumers migrate to 5G networks, 67%
65% 65%
current trends suggest mobile services that have become essential
during the pandemic will remain an integral part of their lives. Those 60% 60%
who have already transitioned to 5G are now making greater use of
55% 56%
various entertainment services such as gaming, music and video 55% 55%
streaming, as well as accessing services for day-to-day tasks such
50%
as online shopping and mobile banking more frequently.
45%
43%
• The shape of things to come – Though the increase in usage could
40%
be partially driven by the fact that early adopters of 5G tend to be 39%
more engaged with mobile as a category, as the new network 35%
increasingly becomes the default for connectivity in countries around
the world, consumer engagement with mobile services is 30%
Video Music Mobile Mobile Online
nevertheless expected to increase. streaming streaming banking gaming shopping
Source: GSMA Intelligence Consumers in Focus Survey (n=18,648)
211 Executive summary
2 Resetting expectations and adjusting to the new normal
3 The smartphone brands shaping the future
4 5G smartphone outlook
5 Beyond the smartphone: wearables and services
6 Methodology
22Methodology
About the report Consumers in Focus coverage
• This report is the third in an annual series on the future of devices.
• The research is based on a combination of results from our 2020
Consumers in Focus Survey, our Operators in Focus Survey
series, and secondary analysis.
Consumers in Focus 2020 survey scope
• Online survey
• 20 countries
• 20,000 respondents
• Fieldwork conducted in October 2020
• Representative samples: results weighted by national census data
for gender, age, income, education and other demographic
attributes
Operators in Focus 2020 survey scope
• Telephone survey
• Global
• 100 operators
• Fieldwork conducted in December 2019
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