May 05, 2020

Connected Devices - Consumer Demand for 5G Phones

005930 KS
By Hartmut Leuschner
Consumer demand for 5G smartphones remained low in North America and Europe during 1Q20, constrained by limited consumer interest, but was significantly higher in China.
  • North America: 5G represented just 2%-5% of sources’ 1Q20 smartphone sales; Samsung (005930 KS) main 5G smartphone vendor for all 4 sources
  • Europe: 5G represented 1%-4% of sources’ 1Q20 smartphone sales, limited by lack of perceived use cases and greater focus on good connectivity than new technology
  • China: 5G represented 28%-31% of sources’ 1Q20 smartphone sales, in line with expectations in December; Huawei No. 1 supplier for all 14 sources

Europe and North America: 5G Phones Not Yet Focus
Demand for smartphones with 5G technology was low for most buyers in North America and Europe during 1Q20. No source in North America or Europe said 5G smartphones represented more than 5% of overall 1Q20 smartphone sales. A U.S. buyer said he is slowly building out the carriers’ 5G portfolio, and a European buyer said that he does not see any use cases for 5G in the countries that he covers that would drive demand. Another European buyer said during the coronavirus (COVID-19) pandemic, most customers are just interested in good connectivity and not whether the device has 5G capability. Two European sources had started to sell 5G phones in some smaller regions that were built as 5G testbeds before moving to countries with larger population.

North American sources said the 5G devices they were selling during 1Q20 were primarily from Samsung Electronics Co. Ltd. (005930 KS), and two said they were also planning to sell 5G devices from LG Electronics Inc. (066570 KS), BBK Electronics Corp. Ltd.’s OnePlus and Lenovo Group Ltd.’s (992 HK) Motorola. Likewise, European buyers focused mainly on Samsung 5G smartphones (all S20 series) during 1Q20 but also added 5G phones from Huawei Technologies Co. Ltd., Xiaomi Corp. (1810 HK) and BBK’s Oppo.

5G Phones’ Share of Overall 1Q20 Smartphone Sales
(number of sources)
 North AmericaEuropeChina
31%-40%--1
16%-20%--1
11%-15%--4
6%-10%--5
1%-5%373
Less than 1%-1-
0%1--
No response-2-
Weighted average2%-5%1%-4%28%-31%

China: Demand in Line With Previous Expectations
Chinese sources said 5G phones represented 28%-31% of their overall 1Q20 smartphone sales, in line with expectations in OTR Global’s Dec. 2 note.

All 14 Chinese sources ranked Huawei as their top 5G phone vendor, based on brand reputation and its growing portfolio of 5G devices. BBK’s Vivo was also mentioned as a top 5G brand by 10 of 14 buyers, who said Vivo’s 5G price levels are attractive. Eight sources who cited Xiaomi as a top brand also highlighted its attractive pricing for 5G smartphones.

Top 5G Phone Suppliers
(number of mentions)
 North AmericaEuropeChinaTotal
Huawei-51419
Samsung48-12
Vivo--1010
Xiaomi-5813
Oppo-145
OnePlus11-2
LG1--1

Additional Quotes
North America and Europe

“Consumers don’t understand why they should buy a 5G phone. What does it do better than my current 4G phone? ... And prices are probably still too high.”

“You are the only person who I have a conversation with about 5G phones.”          

“It is a tiny percentage, under 1%. Some suppliers are forcing us to take 5G devices.                   

“We expect our total second quarter smartphone sales to be down about 60% year over year. We are forecasting this number currently. We have to prepare for the worst and believe retail outlets will be closed for at least two months during the quarter. Online smartphone sales are not picking up or offsetting the in-store sales. People like to have their phone turned on and be shown how to use it in the store. They don’t want to buy something [like a 5G phone] they don’t know how to use.’“      

“No one is really buying LG devices just because they are 5G phones. They are expensive and people don’t like the OS.”

“Ninty-five percent of [5G] sales are [Samsung’s] S20, as [Huawei’s] P40 5G just came in.”     

China
“For 5G smartphone above 4,000 yuan, Huawei has the about 70% share in our channels. In the high end, customers care more about brand reputation.”   

“Of all 5G smartphone vendors, only Huawei has its own 5G chip. I think this advantage far exceeds other smartphone vendors.”     

“Huawei is best positioned for strong technology and brand reputation. Xiaomi and Vivo are in a good position for lower-priced 5G handsets.”                          

“I think Huawei is the only 5G smartphone vendor that supports SA and NSA dual mode.”         

“The [BBK] OnePlus 5G has really taken over. It is super popular with people looking at 5G phones.”