Conventional wisdom states that about 1.2 billion cell phones shipped in 2008, with 80% of these units coming from the so-called Big Five handset makers: Nokia, Samsung, LG, Motorola, and Sony-Ericsson. According to The Linley Group research, however, 1.43 billion cellular baseband chips shipped in 2008, almost all into handsets. These numbers simply don't add up.
We believe that most handset-market estimates are missing the large number of unlicensed handsets produced in China. These "shanzhai" phones are produced by many small suppliers, some even operating out of apartments. This market is largely supplied by MediaTek, which provides complete handset chip sets and reference designs to the shanzhai vendors. After accounting for MediaTek's shipments to licensed handset makers, we estimate the size of the shanzhai market in 2008 to be 150 million units. This estimate corresponds with reports from others who have studied this phenomenon.
As a result, we believe the entire handset market last year was 1.36 billion units. This figure breaks down as 71% from the Big Five, 18% from second- and third-tier manufacturers, and 11% from the shanzhai makers. Again contrary to conventional wisdom, the market share of the Big Five has been declining rather than growing. This decline is due to rapid growth in shanzhai shipments, which were only 20 million units per year as recently as 2005. Shanzhai growth slowed in 2008, however, because the market for cheap phones is becoming saturated. We forecast future shanzhai growth at 8% per year (CAGR) through 2013.
Using these handset numbers, the baseband math works much better. After accounting for data cards and embedded devices, we calculate a total of 1.41 billion cellular devices shipped in 2008. Normally, due to wastage and inventory expansion, the number of baseband chips shipped in a given year exceeds the number of cellular devices by 5% to 10%. In late 2008, however, handset makers reduced inventory, fearing a market meltdown. This reduction hampered growth in 2008.
For 2009, we forecast baseband chip shipments to decline by only 2.5%, despite the down handset market. This forecast assumes restocking of inventories, growth in the shanzhai market, and improving economic conditions in the second half of the year. Through 2013, we forecast average growth of 6.1% per year, bringing total baseband shipments to 1.923 billion in that year. Although the handset market itself will grow more slowly, additional baseband growth will come from cellular-enabled PCs, netbooks, e-books, navigation devices, handheld gaming devices, and similar products. --Linley
Linley Gwennap, president and principal analyst
Complete unit and revenue forecasts for cellular baseband chips appear in our recent report "Mobile & Wireless Semiconductor Forecast 2008-2013."
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2 comments:
Linley should be able to post a clear definition of the word 'licensed'.
Sorry to omit that. The Chinese government keeps tabs on handset companies to ensure that they follow regulations and pay taxes. When the Chinese authorities report the number of handsets produced or sold in China, they count only the data reported by these "licensed" vendors. The unlicensed handset makers do not report their sales to the authorities and therefore tend not to be counted. Some sources try to estimate the size of the shanzhai market by the proportion of such phones sold in China. We instead look at the inflow of chips into this market, after subtracting other known consumption of handset chips.
I am curious as to whether this corresponds with your experience with the market.
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