The iPhone 12 Should Meet Strong Demand For 5G
Apple is a step behind in the 5G trend. The Cupertino company has yet to release a smartphone version that is compatible with the new technology. Meanwhile, key peers Samsung and Huawei have been dominating the market for over a year.
While it has taken Apple longer to join the party, it may not be too late for it to reap the benefits of the upcoming supercycle. A look at a few important market numbers suggests that this year’s iPhone 12 should meet strong demand for 5G-capable devices later in 2020.
5G market heating up fast
In the first quarter of 2020, and despite the COVID-19 challenges, global shipments of 5G smartphones reached about 24 million units. Some context is needed here:
- First quarter unit 5G device sales were about 25% higher than all 5G sales in 2019
- 5G accounted for 9% of all smartphone shipments in the quarter, in a very fast-growing trend
These numbers are impressive, especially considering the global pandemic that probably put a damper on demand for new tech gadgets in the first few months of 2020. Keep in mind that, last year, 5G-related purchases accounted for only 1% of total smartphone shipments.
It is not unreasonable to think that, come this year’s holiday season (and assuming Apple finally launches its own 5G model around September), these devices could account for the lion’s share of the total demand in developed markets.
US should be Apple’s key opportunity at first
The graphs below depict 5G smartphone market share by vendor, both globally (left side) and in the US (right side). Samsung and Huawei have become the undisputed leaders in the space. The Korean company is the dominant force in the US, with over one-third of its global shipments having come from this country.
Source: DM Martins Research
I believe the US will be precisely Apple’s main battleground in 2020 and early 2021. To be fair, the country has moved much more slowly towards 5G adoption than China: 3.4 million vs. 14.1 million smartphones shipped in the first quarter of 2020. But I think that the absence of Apple in the 5G space justifies these less-than-impressive numbers in North America.
Therefore, holding all other variables constant (see risk discussion below), a spike in 5G sales in the US should be expected in the next six to twelve months.
Key risks exist
While the narrative above bodes well for Apple, I still see some risk to the bullish supercycle thesis.
First, the extent of this year’s global recession is still a big question mark. I question how strong the holiday quarter will be if employment and economic activity remain under severe pressure.
Also, as I discussed recently, the release of a 5G-enabled iPhone 12 could be delayed. If the production challenges push the launch well into the fourth calendar quarter, Apple’s phone sales might be weak out of the gate.
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