Smartphone sales are riding out the global chip shortage - ZDNet

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The primary driver of growth in the smartphone industry is the growing consumer interest in 5G devices.  

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Despite some unfavorable circumstances, including the ongoing global health crisis and a shortage of semiconductors, the smartphone's bumper year continues. According to technology research firm Gartner, global smartphone sales totaled almost 329 million in the second quarter of 2021, an increase of 10.8% year-on-year – and sales are set to keep growing. 

Consumer interest in buying new phones started in the first quarter of this year, which saw shipments reach 378 million units, triggering what analysts expect to be months of recovery for the industry. 

Last year effectively marked a huge dip in smartphone sales, with shipments down 10.5% compared to the previous year. This was largely caused by cautious consumer spending amid unpredictable economic conditions in the context of the COVID-19 pandemic. 

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But much of that spending, which was put aside in 2020, is now ready to be used this year. "Demand for smartphones continued to be strong in this quarter as buyers preferred higher specifications and better user experience. The pent-up demand from 2020 continues to drive advantage for global smartphone vendors in 2021," said Gartner senior research director Anshul Gupta. 

The primary driver of growth in the smartphone industry is the growing consumer interest in 5G devices. In a separate analysis, market research firm IDC predicted that 5G device shipments will grow to reach 570 million units this year – up more than 123% compared to 2020. 

IDC also anticipates that by the end of 2022, 5G units will make up more than half (54.1%) of all smartphone shipments.  

Consumers' interest in 5G can explain the success of Samsung, which expanded its 5G smartphone lineup this quarter and retained its position as the market leader with a 17.6% share of sales.  

The South Korean giant was closely followed by Xiaomi, which registered an 80.5% growth in its smartphone sales compared to the same time last year and now claims 15.5% of the market. Xiaomi has overtaken Apple in the second position for the first time, which the company's CEO Lei Jun has hailed as a "major victory", and which has contributed to the manufacturer reporting record quarterly revenues. 

Apple isn't trailing far behind, with a 15% market share and sales still growing for the much-sought-after iPhone 12, a 5G-enabled device released at the end of 2020 and which succeeded in convincing many loyal customers to upgrade their devices this year. 

Despite the encouraging numbers, Gartner's report acknowledges that sales have slowed down this quarter due to the ongoing impact of the COVID-19 pandemic. "Reinforced shelter-in-place instructions and factory shut-downs in India and Vietnam due to the second wave of COVID-19, along with closure of retail businesses and restrictions on online deliveries affected smartphone sales negatively in the second quarter after a strong start in beginning of 2021," said Gupta. 

Another development that has the potential to worry smartphone manufacturers is the global shortage of semiconductors that is now affecting the delivery of most products that require electronic components.  

A combination of exploding demand and limited supply has contributed to the shortage of chips, which Gartner has forecasted will last well into 2022, and analysts reckon that bottlenecks in the supply of components will eventually restrict growth in the smartphone market. 

Samsung, which is one of the largest manufacturers of semiconductors, has reportedly warned that the issue could delay the release of a new Galaxy Note smartphone until 2022, while Apple acknowledged that growth rates would slow down in the next quarter, partly due to the shortage of components. 

SEE: The best Samsung phones: Which model should you buy?

Nevertheless, Gartner has previously forecast that this year will see 1.5 billion devices sold around the world, an 11.4% increase compared to 2020. The prediction aligns with that of IDC, which anticipates that even though the supply chain situation isn't improving, the smartphone market is in a good position to withstand the shortages and still deliver products.  

"The smartphone market was better prepared from a supply chain perspective heading into 2020 given almost all regions were expecting to grow and vendors were preparing accordingly," said Ryan Reith, group vice president with IDC's Mobility and Consumer Device Trackers. 

"2020 was a bust due to the pandemic but all of the top brands continued forward with their production plans with the main difference that the timeline was pushed out," added Reith. "Therefore, we are at a point where inventory levels are much healthier than PCs and some other adjacent markets and we are seeing the resilience of consumer demand in recent quarterly results." 

While IDC's forecast is slightly more conservative than Gartner's, it is still optimistic: the firm predicts that shipments of smartphones this year will reach 1.37 billion units – a 7.4% growth compared to 2020 – and will continue to increase in 2022 and 2023. 

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