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TrendForce Reports Smartphone Component Suppliers Have Stepped Up Their Production since February Due to Strong Demand from Chinese Brands

The global smartphone demand has been stagnant since the fourth quarter of 2015. All branded vendors therefore have lowered their shipment targets, and the entire market spent about three months on channel inventory digest. Avril Wu, smartphone analyst for the global market research firm TrendForce, said the stock up of Chinese branded smartphones started to pick up in the middle of February, as the inventory adjustment period came to an end. At the same time, new devices unveiled at the Mobile World Congress generated additional demand. Moreover, mobile carriers in China have increased their subsidies for high-end 4G smartphones to boost both the market penetration of 4G technology and consumer purchases.

Based on TrendForce’s latest analysis, the global smartphone shipments will grow by just 5.7% annually in 2016. However, the combined shipments of Chinese brands will register a much larger annual growth of 15.6%. Chinese vendors will continue to be the main driver of smartphone shipment growth through this year as demand rises in the emerging markets such as India and the ASEAN countries.

Looking at the Chinese vendors, Huawei’s smartphone shipments passed the 100 million mark for the first time in 2015, arriving at 108 million units in total. Huawei intends to maintain its strong momentum this year with the soon-to-be released flagship P9, which features dual camera. TrendForce estimates that Huawei will ship nearly 130 million units of smartphones this year, up 16.7% from 2015. Lenovo has undergone a difficult restructuring period following its acquisition of Motorola. Hence, the company aims to significantly raise the profit of its smartphone business this year with an annual shipment growth target of at least 20%. Xiaomi’s smartphone shipments fell short of the company’s expectation last year. In order to turn things around, the company is intensifying its efforts in India and other emerging markets. Xiaomi is also betting on its latest flagship, Mi 5, to drive its shipments. OPPO and Vivo’s combined shipments almost hit 100 million units last year owing to their vast and loyal physical retail networks. The two brands’ combined shipments for this year are projected to reach 110 million units. In addition to China, OPPO and Vivo have also successfully expanded into the Southeast Asian countries.

Avril also added that in the upstream of smartphone chain, application processor shipments from chip maker MediaTek have bounced back a bit since February. Foundry giant TSMC also reports that the capacity utilization rates of its 20nm and 16nm wafer processes for smartphone chips are currently higher than in the fourth quarter of last year. Most of the 20nm orders are from MediaTek, while Apple’s A9 processor and HiSilicon’s Kirin chips constitute the majority of the 16nm orders. These are indications that component demand from smartphone brands are gradually picking up.

The situation is also similar in the mobile DRAM market. Wu noted that contrary to the earlier projections, the decline in smartphone shipments has been moderate so far, while the mobile DRAM demand from the Chinese brands is slightly stronger. “Furthermore, smartphone makers have raised the memory density of their products, with some models planned to have as much as 6GB in the near future,” Wu added. Mid-range models are seeing their memory upgraded from 2GB to 3GB as well. Current flagship smartphones from Chinese vendors such as Xiaomi Mi 5 Pro Edition and OPPO R9 come with 4GB. The Xplay 5 from Vivo is even equipped with 6GB.

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