TAIPEI -- Total smartphone production reached 286 million units in the second quarter, a sequential rebound of 2.2% but a 16.7% drop year-over-year, TrendForce said.

The annual decrease which is the largest in history.

Samsung was the only of the top six companies to register a sequential decline.

National restrictions designed to contain Covid-19 and corresponding economic stimulus policies are expected to generate consumer demand in the second half of the year. Total smartphone production for 3Q20 is expected to reach 335 million units, a 10.1% decrease YoY. Although this figure falls short compared with the same period last year, it still represents a 17.2% increase QoQ.

Samsung was the only manufacturer among the top six to see its market share decline in the quarter, while no. 2 Huawei’s market share in China may be cannibalized by its competitors, Trendforce said.

Huawei's smartphone production rose 13% sequentially to around 52 million units but sales in overseas markets have been falling sharply since the end of 2019, the result of trade actions by the US government. These measures will make the R&D of in-house mobile processors and sourcing of components much more difficult for this Chinese smartphone brand. Given that Huawei depends on China for smartphone sales, other Chinese brands, including Xiaomi, OPPO, and Vivo, are expected to cut into Huawei’s market share.

Apple’s iPhone production rose 8% to 41 million units thanks to above-expected sales of the iPhone SE and the iPhone 11.

Xiaomi was fourth with 29.5 million units, Oppo fifth with 27.5 million, and Vivo sixth with 26.5 million. The three Chinese brands benefited from the recent recovery of their home market. Furthermore, they also took advantage of the precautionary inventory building in the overseas retail channels during the first half of the year. Retailers stocked up aggressively during that time in fear of pandemic-related disruptions. As a result, they all posted an increase of more than 10% sequentially. Recent border tensions between India and China have placed considerable pressure on the three brands’ sales efforts since they all count on India as one of their major foreign markets. Longstanding relationships combined with price competitiveness may be enough to get them through this difficult period with their market shares relatively intact. Nevertheless, Chinese smartphone brands will be very constrained in terms of growth if the relationship between their home country and India remains tense. Xiaomi, OPPO, and Vivo will continue to prioritize the entry-level and mid-range segments in their overseas expansion strategies, which include regions such as Europe, India, Southeast Asia, and Russia, over the long term. In China, the three brands will capitalize on the Chinese government’s push to commercialize 5G services by being more proactive in the development and pricing of 5G smartphones.

TrendForce forecasts a yearly smartphone production volume of 1.24 billion units for 2020, an 11.3% decrease. Assuming the pandemic can be brought under control in 2021, total smartphone production is likely to make a rebound next year. Smartphone brands are pushing out 5G models this year to maintain market share in the face of the recent demand slump. Since mobile SoC suppliers such as Qualcomm and MediaTek are also starting to provide 5G solutions for mid-range and high-end smartphones, the share of 5G models in the annual total smartphone production is projected to grow rapidly to 19.2% for 2020. This penetration rate is equivalent to around 238 million units.

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