5G mobile phone sales will account for more than 75% in 2020. Solving the pain of "chip shortage" requires multiple measures

At present, 5G is penetrating and changing human life. Since the Ministry of Industry and Information Technology issued 5G licenses on June 6 last year, China's 5G has been developing rapidly, and 5G commercial products have become increasingly abundant. 5G technology has penetrated more thoroughly and the development of 5G mobile phones, which are closely related to people's livelihood consumption, has achieved "China speed". According to data released by the China Academy of Information and Communications Technology, in the first 11 months of this year, the total shipments of the domestic mobile phone market totaled 281 million units, of which the cumulative shipments of 5G mobile phones in the domestic market totaled 144 million units, accounting for 51.4%. In November, the shipments of 5G mobile phones in the Chinese market accounted for 68.1% of the total mobile phone shipments in the same period.

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Wu Hequan, an academician of the Chinese Academy of Engineering, said in an interview with the Securities Daily reporter recently: "At present, my country has built and opened more than 700,000 5G base stations, and it is expected that the annual sales of 5G mobile phones will account for more than 75% of the total mobile phone sales."

In 2020, 5G development entered a critical period, and the epidemic and new technologies brought challenges and opportunities to the entire industry. The proportion of 5G mobile phones of leading companies such as Huawei, Xiaomi, vivo, and OPPO has increased rapidly, mobile phone giants have joined the torrent of self-developed chips, and Unisoc and Datang Telecom have accelerated the construction of the 5G chip industry chain... The entire industry has jointly accelerated the layout and research and development of the 5G industry chain to promote the localization of chips.

If 2019 is the first year of the 5G mobile phone explosion and 2020 is the year of large-scale popularization of 5G mobile phones, then 2021 may become a key year for the explosion of 5G mobile phone applications.

Mid- and low-end mobile phone manufacturers are gradually disappearing

In 2020, the mobile phone market was turbulent, and 5G became a new driving force for the development of the mobile phone market.

In order to seize the key node of 5G commercialization in 2020, major mobile phone manufacturers have already begun to deploy their forces. After a year of planning, Huawei has deeply extended the 5G mobile phone industry chain, vivo has achieved 5G smartphone coverage in all price segments from 1,000 yuan to 10,000 yuan, OPPO has lowered the price of 5G mobile phones to 1,000 yuan, Xiaomi has used 5G mobile phones to sprint to the high-end, and Gree has also launched its first 5G mobile phone.

A vivo insider told the Securities Daily reporter: "5G mobile phones have become the company's normalized products, and the proportion of 5G mobile phones in total products will continue to increase in 2021."

"At present, the main change that 5G broadband has brought to ordinary households is the use of high-definition video, and it will quickly penetrate into the entire home space in the future. Huawei's 5G technology has achieved rapid coverage of multiple categories such as mobile phones this year, and will further expand in the home space in 2021." Li Yinghua, brand group manager of Huawei's data communication product line, told the Securities Daily reporter.

According to a reporter from Securities Daily, in 2020, while leading companies rapidly increased the proportion of 5G mobile phone production and sales, brands such as Meizu, Hammer, and 360 were slow to deploy in the 5G field, and many small and medium-sized mobile phone manufacturers gradually disappeared.

Data from Tianyancha APP shows that currently, there are more than 380,000 enterprises (excluding individual businesses) with "mobile phones" in their business scope and "in business, continuing, moving in, moving out" in the country. From the time of establishment, from the beginning of 2020 to date, more than 55,000 new enterprises with "mobile phones" in their business scope have been established nationwide, a year-on-year decrease of 29.37%.

"Nearly 30% of small and medium-sized mobile phone manufacturers in Guangdong Province have disappeared this year, including many low-end mobile phone assembly companies and companies that manufacture for large mobile phone manufacturers. Affected by factors such as the decrease in sales of low-end mobile phones, these small factories have been disbanded. With the rapid replacement of low-end mobile phones with higher-tech mobile phones such as 5G, it is extremely difficult for low-end small brands to survive, and most of them have been eliminated in this round of reshuffle." A local mobile phone manufacturer in Shenzhen told the Securities Daily reporter.

Data shows that the national mobile phone production in 2019 was 1.701 billion units, of which Guangdong Province produced 705 million units, accounting for 41.4% of the national mobile phone production.

Although affected by multiple factors such as the epidemic, the overall number of mobile phone companies has decreased this year through the survival of the fittest in the shuffle, but the market share has become more concentrated, and more surviving mobile phone manufacturers have focused on the high-end market.

Wu Hequan predicts that 5G mobile phone sales this year will account for more than 75% of the overall mobile phone sales, and the sales scale of the mobile phone market in 2021 may exceed one trillion yuan.

Data released by the China Academy of Information and Communications Technology showed that from January to November 2020, a total of 417 new models were launched in the domestic mobile phone market. Liu Liehong, Vice Minister of the Ministry of Industry and Information Technology, once said that there are currently 253 terminals in my country that have obtained network access licenses, including 218 5G mobile phones.

Yang Fan, director of the Terminal and Portal Application Center of Analysys International, told the Securities Daily reporter: "5G has become a standard feature of mainstream models and will penetrate into 90% of new models in 2021."

Today, China's 5G development speed and contribution rate are leading the world. IDC data predicts that in 2020, the global shipment of 5G mobile phones will be about 240 million units, and the contribution of the Chinese market will exceed 160 million units, accounting for about 67.7%. In the next five years, China will continue to occupy about half of the global market share.

Chen Fengwei, full-time deputy leader of the terminal group of China Unicom's 5G promotion leadership group and deputy general manager of China Unicom's terminal and channel support center, said in an interview with the Securities Daily reporter: "The current status of 5G mobile phone terminals is that new mobile phones are iterating quickly and on a small scale. In the 5G era, leading companies with R&D capabilities will become the main force in the market. The industry will continue to reshuffle under the influence of 5G technology. The cooperation model between operators and mobile terminal manufacturers will extend from mobile phones to content, high-definition fields and other aspects, which will make the market pattern uncertain."

"The 5G industry can be roughly divided into three stages from the start of deployment to the maturity of the industry: construction, rapid development and maturity. At present, my country is in the first stage. Smart hardware such as mobile phones are also entering the market at a high speed. It is expected that in 2021, the explosive momentum of 5G mobile phones in sales and other aspects will continue, and the benefiting industries will be 5G equipment manufacturers, mobile phone manufacturers, key components such as 5G chips and optical modules, as well as engineering design and construction units. At the same time, due to the technical characteristics of 5G such as large bandwidth, wide connection, and low latency, it may trigger large-scale applications in the fields of industrial Internet, unmanned driving, smart medical care, industrial robots in industry applications, and cloud games, smart homes and AR/VR in personal applications. The application and content of 5G mobile phones will also be richer, and even play a key role in these fields." Song Jia, director of the Innovation Center of the State-owned Assets Supervision and Administration Commission of the State-owned Assets Supervision and Administration Commission of the State Council, told the Securities Daily reporter.

Zhou Xibing, a researcher at the China Local Enterprise Soft Power Research Center, predicted in an interview with the Securities Daily reporter: "China's 5G mobile phone market is not only an important global mobile phone market, but also an important market for Chinese local mobile phone manufacturers, and it has an absolute dominant position in the global mobile phone market. In the future, especially after the 2022 Beijing Winter Olympics, Chinese 5G mobile phone users will usher in an important wave of phone replacement, during which the global mobile phone landscape will undergo major changes."

Leading mobile phone manufacturers accelerate self-developed chips

While low-end and mid-range mobile phone manufacturers are gradually disappearing, leading mobile phone manufacturers are rapidly occupying a larger market share. In order to seek more profit margins and have more say, they have begun to extend to the upstream of the industrial chain such as chips.

"Huawei is accelerating research and development in the fields of mobile phone chips and systems. Its self-developed Hongmeng system can already be used on Huawei's 5G mobile phones. Based on Huawei's Hongmeng distributed system, Huawei is also in the cooperation stage with home appliance companies such as Midea and Changhong to promote the development of smart home applications." said Li Yinghua.

In addition to Huawei, Xiaomi is currently launching self-developed, mid-to-high-end mass-produced chips. OPPO has also been active in the layout of the integrated circuit industry, establishing a number of chip-related subsidiaries and investing in chip companies. OPPO founder and CEO Chen Mingyong revealed that in the next three years, OPPO's total R&D investment in technology will reach 50 billion yuan.

Although many manufacturers have made layouts in the chip field, there are still not many manufacturers that truly master chip research and development technology. Tianyancha APP data shows that in the past five years, the annual growth rate of chip-related enterprise registrations has remained above 30%. As of press time, my country has added more than 60,000 chip-related companies this year, a year-on-year increase of 22.39%. Among the companies related to the mobile phone industry nationwide, there are nearly 9,500 companies with patents, of which more than 6,000 companies have three or more patents.

For mobile phone manufacturers, strengthening independent research and development is imminent. In AIoT, chips are at the core and are also the control center for smart door locks, bracelets, etc. that extend around mobile phones. Mobile phone ODM manufacturers are greatly constrained in developing their own brand businesses at home and abroad, and the lack of self-developed core technologies is also one of the important reasons.

It is indeed not easy to develop chips. Lei Jun, chairman of Xiaomi Group, once said: "Chips are the pinnacle of mobile phone technology." The independent development of chips takes a long time and requires huge human, material and financial resources. Companies that can achieve independent research and development must have strong comprehensive strength and deep accumulation. Making chips is a long and arduous journey, but it is imperative.

Zhou Xibing believes: "China lacks companies with a complete chip manufacturing, packaging and testing industry chain. Mobile phone companies' R&D investment also needs to be increased urgently. Chips are at the top of the pyramid. Mobile phone companies must accumulate a large number of core patents to expand upstream of the industry chain. In the 5G era with higher technological content, the importance of chips will be more prominent."

"The deep integration of 5G and artificial intelligence will become the trend of the 5G era. The role of software and services in mobile phones is becoming increasingly important. The nature of mobile phone manufacturers will change in the future, and they will become innovative technology companies integrating 'hardware + software + services'." Zhang Xiaorong, director of the Deep Technology Research Institute, told the Securities Daily reporter.

Multiple measures to promote the development and application of domestic chips

In addition to leading mobile phone manufacturers such as Huawei, Xiaomi, and vivo, other domestic chip manufacturers in the upstream of the mobile phone industry chain are also increasing their R&D efforts.

Yan Shuyin, vice president of Unisoc's 5G mobile phone business, revealed to the Securities Daily reporter: "In early 2020, Unisoc launched the 5GSoC Tiger T7520 chip and developed a number of advanced technologies including communications and imaging. Currently, many brand mobile phone manufacturers are developing mobile phones based on this chip. At present, Unisoc's layout of 5G smartphone chip products has covered low, medium and high-end. In the future, we will promote the penetration of 5G into thousands of industries such as industrial electronics, home furnishings, home appliances, and energy."

"As chip companies increase their shipments, it is expected that the prices of 5G mobile phones will drop further in 2021 as chip prices fall and low-end chips become available. By then, the proportion of 5G mobile phones in China is expected to reach more than 80%. Currently, the biggest obstacles to the popularization of 5G mobile phones are tariffs and the lack of iconic applications. As these two problems are solved, 5G mobile phone sales will experience a large-scale explosion." Yang Bo, a researcher at Kandong and a senior communications engineer, said in an interview with a reporter from Securities Daily.

He believes: "From this year's Kirin incident, all major mobile phone companies have understood the truth that 'lips and teeth are cold', which is a wake-up call for us."

Speaking of my country's chip construction, Su Linlin, vice president of Unigroup Guoxin, called for: "As a capital-intensive, knowledge-intensive, and talent-intensive industry, integrated circuits require a large amount of funds for research and development and industrialization, and the investment has a long period of effectiveness. Relevant departments need to establish a continuous rolling support mechanism for key integrated circuit fields; considering the long effectiveness period of the integrated circuit industry, the integrated circuit industry policy needs to have a certain degree of stability, and the connection between previous and subsequent policies should be considered; continue to cultivate the application ecology of domestic integrated circuit products, and improve the industry's understanding of domestic chips; and use a combination of policies, finance and other measures to promote the application of domestic chips."

Zhou Xibing believes: "At this stage, all parties in the chip industry chain should unite, pool their wisdom and resources to improve my country's chip manufacturing capabilities and achieve a closed loop from design to manufacturing to commercial use. Upstream and downstream companies in the chip industry chain should work together to open up every link in chip manufacturing."