China 5G interest surges 17% smartphone growth in April

The rest of the world might be working its way through a smartphone slump, but 5G is providing the catalyst for growth in the Chinese markets.

With the high street closed and the consumer tightening purse strings in preparation for what is increasingly promising to be a painful recession, smartphone shipments have been hit hard over the last few weeks, however, China seems to have turned a corner.

According to new statistics from the China Academy of Information and Communications Technology (CAICT), smartphone shipments have bounced back very enthusiastically in April, with 5G-compatible devices taking a very respectable share of the bounty. Year-on-year, mobile phone shipments were up 14.2% to 41.7 million across the month.

40.8 million smartphones were shipped during the period, accounting for 97.7% of total shipments, with more than 16.4 million being 5G-compatible devices. It almost seems like an unbelievable number, but 39.3% of the total smartphone shipments in China across April were 5G devices.

It has long been suspected that the Chinese assault on the 5G market would be a slow burner with sustained aggression. We have already seen China embrace 5G, China Mobile claimed to have 15.4 million 5G subscriptions during its last earnings call, and this enthusiasm will surely be sustained as the world returns to normal.

The question which remains is how much normality is there inside China currently? There have been murmurs of a potential second wave in the country, and the CAICT has already commented on the impact to 5G supply chains during the initial stages of the coronavirus pandemic.

Of course, it is also worth highlighting that this might only be the early adopter wave of purchasing in the country. The numbers seem incredibly large, but you always have to remember the total population of China is roughly 1.41 billion. 16.4 million is only a scratch on the potential of 5G shipments in the country.

If this is the early adopter phase of 5G smartphones, the question is how long do we have to wait for the mass market to catch on? Some might have assumed it would have been in the months following, but with 5G set back elsewhere around the world, it might be a bit more staggered.

Adoption by the mass market is more than simply having devices available. You have to have affordable devices, a market for second-hand devices, a plethora of applications to validate purchases, data tariffs which are cheap enough to ensure the full power of 5G is utilised and also a stable economy for consumer confidence to be high enough.

The global economy is having a bit of a wobble right now which is likely to have a staggering impact on the rollout of 5G around the world. There are a lot of moving parts, all of which have to function together. 16.4 million might sound like a very high number of 5G smartphone shipments, but it is probably still the early adopter wave.

If there was a good time for COVID-19 to impact Apple, it is now

Hardware sales for Apple have dipped over the last three months, but with services gaining weight and the firm still in the building stages for 5G, few seem to be worried.

Apple is in an interesting position currently. Thanks to the product roadmap, if there was a good time for sales to plunge due to extenuating circumstances, now is it.

While the team has recently announced the launch of a new device, the 2020 iPhone SE, this is only a taster of what is to come. The latter part of this year and the early part of 2021 is where the iGiant should make serious waves as it launches its own assault on the 5G era.

“Despite COVID-19’s unprecedented global impact, we’re proud to report that Apple grew for the quarter, driven by an all-time record in Services and a quarterly record for Wearables,” said Apple CEO Tim Cook. “In this difficult environment, our users are depending on Apple products in renewed ways to stay connected, informed, creative, and productive.”

Apple financial results for period ending March 31 (USD ($), millions)
  Total Year-on-year
Total revenues 58,313 +0.5%
Cost of sales 35,943 -0.7%
Net income 11,249 -2.7%

Source: Apple Investor Relations

Although iPhone sales have been hit by the pandemic, revenues are down by roughly 6.8%, as have Mac and iPad sales, decreasing 2.9% and 10.4% respectively, the wearables, home entertainment and services business units are on the up. The gains have compensated for the losses.

Apple released the figures following the close of financial markets, though share price was down by 3% in overnight trading.

Investors might not be thrilled by these figures, which were less than Wall Street expectations, there is perhaps evidence the diversification efforts of Apple are paying off.

Apple revenues split by product and service segments
Period iPhone Mac iPad Other Services
Q2 2020 49.6% 9.1% 7.5% 10.7% 22.9%
Q1 2020 60.9% 7.8% 6.5% 10.9% 13.8%
Q4 2019 52.1% 10.9% 7.2% 10.2% 19.5%
Q3 2019 48.3% 10.8% 9.3% 10.2% 19.2%
Q2 2019 53.4% 9.5% 8.4% 8.8% 19.7%
Q1 2019 61.6% 8.8% 7.9% 8.7% 12.9%

*Other = Wearables, Home and Accessories

With iPhone sales in particular being hit hard by the coronavirus pandemic, diversification efforts from Apple put the company in a promising position. Wearables, home entertainment and services in particular are making Apple seem like a much more well-rounded and sustainable business.

This is not a one-off either, diversification is key to navigating difficult periods. During this current crisis, Google and Microsoft are two companies who are performing admirably, another two example of organisations who have driven towards diversification from core competencies.

Perhaps the most important note to take away from this earnings call is that if Apple’s ability to make money was impacted by external influences, now is the best time for it to happen.

As with every other premium smartphone manufacturer, ambitions have been cast towards the up-coming 5G era, as well as the device refreshment cycle which is likely to accompany. 2020 was supposed to be the year of 5G, though perhaps the slowing of base station deployment has postponed this slightly.

Apple was never going to launch a 5G device in the first half of the year, it traditionally saves its flagship launch for the autumn, as consumers are preparing for Christmas purchases. There are of course reports that the launch of the Apple device in a few months will be delayed, but as long as it is before Christmas few executives will be worried. Interestingly enough, anticipation will also be extended to the telco industry.

The launch of the next Apple device could be a catalyst to launch 5G into the mainstream. Such is the power of Apple and its brand, 5G could be the new norm once the Cupertino-based tech giant makes a powerful statement. This could be a major influence in the migration of customers from 4G to 5G tariffs.

Apple is a very powerful company, and while sales have been impacted by COVID-19, its diversification efforts are compensating, and its major marketing activities are being reserved. As long as lockdowns have been eased by the end of the year, few Apple executives will be bothered by the financial impact of the coronavirus.

Vodafone asks customers to help fight COVID-19 in their sleep

In repurposing its DreamLab application, Vodafone is hoping the collective power of idle smartphones can virologists in combatting the coronavirus pandemic.

Working alongside scientists from Imperial College London, the Vodafone Foundation is repurposing the DreamLab app to speed-up research to find effective treatments for Covid-19. If successful, the Corona-AI project might reduce the time in which calculations are completed by 75%.

“We urgently need new treatments to tackle Covid-19. There are existing drugs out there that might work to treat it; and the great thing about repurposing existing drugs is that we already know they are safe and therefore could get them to patients quickly,” said Dr Kirill Veselkov from the Department of Surgery and Cancer at Imperial College London.

“However, we have to do difficult and complicated analyses using artificial intelligence and all of this takes a huge amount of computing power. DreamLab creates a supercomputer that enables us to do this important work in a relatively short timeframe.”

The concept is relatively simple. As the vast majority of smartphones sit idle during the hours the user is asleep, this is unused compute power. It might be a small amount of compute power, but thousands of devices in collaboration could add much needed horsepower. Elements of these complicated equations can be farmed out to each of the devices, using the power of the collective.

Vodafone has estimated that should 100,000 users power the app for 6 hours every night for three months they can complete vital research that would take Imperial’s supercomputers a year to process. The aim is to trawl through data and identify existing drugs and food molecules which could aid the pursuit of a vaccine.

The Corona-AI project is split into two phases:

  1. Identify existing drugs and food-based molecules with anti-viral properties that may benefit those with Covid-19
  2. Optimise combinations of these drugs and food molecules to provide potential drug treatments and nutritional advice for those with Covid-19

“We’re working hard to keep the UK connected during this challenging time. We ask everyone to come together and harness the collective power of their smartphones by connecting to DreamLab,” said Helen Lamprell, General Counsel and External Affairs Director at Vodafone UK.

“If everyone in the UK connects, we have the potential to really make a difference in the fight against Covid-19”

TCL launches £399 5G smartphone

TCL has announced the launch of the TCL 10 Series, which will also include a 5G-capable device priced at £399.

Although the company is yet to announce what markets this 5G device will be available in, such launches are a critical component of the 5G machine. Some might turn their noses up at a device which does not break the bank account thanks to overpriced features and a desirable logo, but low-end smartphones are incredibly important to democratise connectivity and take 5G into the mainstream markets.

“As one of the world’s leading consumer electronics brands, expanding the TCL brand into the mobile space ensures that we are one of the only global manufacturers that offers a fully integrated ecosystem of smart products in virtually every aspect of your life,” said Kevin Wang, CEO of TCL.

“This makes it possible for us to provide our customers with a wide range of products capable of working seamlessly together and do so more affordably than everyone else.”

At £399, the 5G device certainly undercuts what is available currently on the market.

Manufacturer Device Price
Samsung Galaxy S20 Ultra £1199
Huawei Mate 20 X £999
OPPO Reno 5G £969
OnePlus 7 Pro 5G £649

There are of course other devices available, and TCL will be chasing after a different type of customers than many of the more well-known brands, but this is an important moment for the development and normalisation of 5G. With a £399 device on the market, 5G connectivity is no-longer a product for the rich.

It might sound too good to be true, but you have to of course bear in mind that the specs will be a downgrade for those who are used to be best and nothing else, but this is not necessarily a bad thing.

The 5G era will not be driven by premium devices alone. For the majority of individuals, these are aspirational products, something worth saving for, but there will have to be devices to fill the meantime space.

Today, 5G is only for the wealthy. Tariffs perhaps need to come down in price, but devices certainly do. Brands like TCL will play a very important part in the future of connectivity.

Specification Samsung Galaxy S20 Ultra TCL 10 5G
Dimensions 166.9 x 76 x 8.8 mm 163.7 x 76.6 x 9 mm
Display size 6.9 inches, 114.0 cm2 (89.9% screen-to-body ratio) 6.53 inches, 104.7 cm2 (83.5% screen-to-body ratio)
Chipset Qualcomm SM8250 Snapdragon 865 (7 nm+) Qualcomm SDM765 Snapdragon 765G (7 nm)
Max. internal memory 512GB 16GB RAM 128GB 6GB RAM
Selfie camera 40 MP, f/2.2, 26mm (wide), 0.7µm, PDAF 16 MP, f/2.2, 26mm (wide), 1/3.1″, 1.0μm
Battery Non-removable Li-Po 5000 mAh battery Non-removable Li-Po 4500 mAh battery

First the Entity List, now COVID-19, the semiconductor segment is picking up bruises

Having recovered from the impact of Huawei’s entry onto the Entity List, the semiconductor industry has been dealt another blow with COVID-19 impacting supply chains and product launches.

In May 2019, Huawei was added to the US Entity List. This was a nightmare scenario for numerous semiconductor firms, as the worlds’ second most popular smartphone manufacturer faced a significant threat to its existence. Suppliers to Huawei groaned, as their fortunes looked to turn to dust, though this saga was seemingly in the past.

With the US Government continuing to delay the ban on working with Huawei, while also being more generous than previously imagined with exception licences, it might have looked like business as usual. Share prices were slashed in the summer, but seemingly recovered over the latter stages of 2019 only for the coronavirus to threaten the success of the smartphone segment.

Share price is not a perfect measure of success, but it is a pretty accurate one. The table below demonstrates the sorrows of the semiconductor sector quite effectively:

Share Price
Company September 30, 2019 January 3, 2020 Three-month change March 30, 2020 Three-month change
Xilinx 95.90 99.31 +3.56% 77.95 -21.1%
Qualcomm 76.28 87.02 +14.08% 68.74 -20.75%
Micron Technology 42.85 54.53 +27.26% 44.68 -17.78%
Broadcom 276.07 314.19 +13.81% 239.93 -23.56%
Texas Instruments 129.24 127.85 -1.08% 102.98 -19.44%
Taiwan Semiconductor 280 339 +21.07% 267.5 -21.09%
Nvidia 174.07 236.85 +35.62% 261.95 +10.97%
AMD 28.99 48.60 +71.67% 48.27 -0.8%
Analog Devices 111.73 118.31 +5.89% 89.86 -24.01%
ON Semiconductor 19.21 24.69 +28.53% 13.06 -46.78%

NB: Share prices accurate at time of writing (4pm, March 30, 2020)

As you can see from the selection of semiconductor firms above, the only two who have escaped the last three months without too much damage are AMD and Nvidia. These are two companies who serve the gaming segment, which is proving incredibly popular in these times of self-isolation.

This success is of course driven by the continued shipments and sales of products, though as China is reopening, the immediate threat to the supply chain is contained. On the mobile side, the smartphone industry is suffering.

According to Counterpoint Research, smartphone sales across the world fell 14% year-on-year in February, which is not as bad as some may have feared, but no-one can give a definitive answer as to when this outbreak will subside.

In China, offline sales declined by 50% though these numbers were slightly offset by online sales. Overall, sales in China declined by 38% in February year-on-year, perhaps indicating what the rest of the world has to look forward to two to three months deep into the impact of COVID-19.

Looking around the industry, impact to Samsung has been minimal as much of its supply chain remains outside China, but the same cannot be said for its rivals. The Chinese manufacturers would have struggled, though companies like Apple have also suffered. Apple has been relatively quiet so far, though the fact that Foxconn, one of Apple’s most important suppliers, reported a 23.7% fall in profit this week suggests there is less demand from the iGiant.

The next couple of weeks could certainly make a significant dent in the profits of the smartphone industry, and as a result, the semiconductor segment. With the high street closed, supply chains under threat, device launches delayed and consumers spending less under the threat of a recession, the prospects do not look the most attractive.

Patent troll sets its sights on Amazon, LG, Apple, Microsoft and more

Several technology companies have been told they are at the centre of a patent complaint concerning touchscreen technology, filed by Ireland’s Neodron.

Although there is little information regarding Neodron as a company, it appears to be what some would describe as a patent troll. Having been founded in December 2018 after purchasing the patents in question, there seems to be little other point to the business than to squeeze the technology giants for licence fees. The investigation will focus on Section 337, known as ‘Unfair Import Investigations’.

Having filed the complaint with the US International Trade Commission (USITC) on February 14, the authority will now begin an investigation into the matter. The companies which will come under the microscope are Amazon, Apple, ASUS, LG, Microsoft, Motorola, Samsung and Sony.

The investigation will concern four patents relating to the touchscreen functionality of various smartphone, tablets and laptops:

US Patent No. 7,821,425

Prevents ‘key overlap’ by measuring signal strength associated with each key on the screen, mitigating confusion should a user’ finger overlap from a desired key to onto adjacent ones.

US Patent No. 7,903,092

Another patent to prevent ‘key overlap’ though this one allows for certain keys to be supressed should the user persistently wrongly select it

US Patent No. 8,749,251

Effectively measures the amount of time in which a key has been pressed, and, if the amount of time that has elapsed exceeds a predetermined time duration, a particular function or feature is initiated

US Patent No. 9,411,472

A method to measure and store the data associated with touch sensors. Also includes methods to access a stored threshold value, determine the strength of a charge return path between the touch sensor and a ground, and adjust the stored threshold value

While it is hardly uncommon for companies to prod and probe in pursuit of licensing fees associated with technology patents, the fact this complaint has been escalated to an investigation suggests there could be some credibility. For every investigation which is announced by the USITC, there are numerous complaints which are dismissed. And this is not the first time Neodron has been in the headlines as a Patent Troll.

Last year, several US companies were targeted for a similar series of patents. Samsung, Amazon, Microsoft, Dell, HP, Lenovo and Motorola were the respondents during that investigation. This investigation is scheduled to end on March 27 and is focused on four different patents; US Patent No. 8,432,173; 8,791,910; 9,024,790; 9,372,580. These patents are also focused on touchscreen technologies, though more directional related than pressure.

Should Neodron be successful in its venture it could prevent the import and/or sale of devices which are in breach of the patent, though we suspect that a large enough cheque might make the complaints disappear.

Coronavirus shuts down Samsung manufacturing site

Having forced the hand of the GSMA to cancel this years’ Barcelona bonanza, the coronavirus is now making itself known in Korea.

While the majority of a Samsung factory is now open, the floor where in infected employee worked will remain closed until the morning of February 25, according to Reuters. The impact should not be too significant to the Samsung business as this site only accounts for a small proportion of the total manufacturing output, it is another example of how the coronavirus outbreak could dent global supply chains.

“The company has placed colleagues who came in contact with the infected employee in self-quarantine and taken steps to have them tested for possible infection,” a spokesperson said.

Samsung might play down the impact of the closure on its business today, though it is also worth bearing in mind the coronavirus outbreak seems to be accelerating in Korea. The South Korean government has put the country on the highest threat level, after the number of cases just to 763 over the weekend.

As it stands, there has seemingly been little material impact to the industry, aside from limitations to travel and cancellations of conferences. Minimised facetime with partners and customers will of course impact business, though should manufacturing sites start to shut down, the consequences could be very expensive.

The telecoms and technology industries are under particular risk, considering the majority of manufacturing activities are concentrated in China.

“In line with recommendations from the Chinese authorities related to the Corona virus, Ericsson’s production and offices in China were closed until 9 February and this will result in limited to no impact on our customers,” an Ericsson spokesperson said.

“We continue to follow the situation and recommendation from the Chinese authorities and WHO [World Health Organisation], as we assess our supply chain.”

Ericsson is one company which is seemingly in a more comfortable position. Some products are manufactured in China, though the company also has sites in Estonia, the US and Brazil. Each of these sites can see production ramped up to compensate for any short-falling elsewhere.

As it stands there are more than 70,000 coronavirus cases in China, though the Hubei province has felt the greatest impact. Xiaomi is one company in the TMT space which has been impacted in a material way, its second headquarters is located in Wuhan, though as much of the telco industry is located in the Guangdong province, supply chain impact has been minimised for the moment.

Huawei is another company which was forced to close its doors in early February, though the company has suggested this was an extended holiday period for employees, and it is now back to 100% manufacturing capability.

“In short, we are doing an industry assessment,” said Ryan Ding, President of Huawei’s carrier business unit. “But we can say, for the next 3-6 months there will not be an impact on our global supply chain.”

Right now, the company has stockpiles of product and components which will ensure there is no complications to supply, both in terms of smartphones and telecoms network infrastructure equipment. As the sites are now functional again, it does look like the most serious consequences can be avoided, though this is based on the presumption the coronavirus outbreak will not continue to escalate.

The immediate risk to the closure of manufacturing sites is an inability to meet demands of customers with products, but also sourcing materials and components. Scarcity of components would only increase the price of products, meaning companies would have to either accept lower profit margins or pass the increased cost onto customers.

While the Chinese companies are the most obvious risk to the global supply chain, let’s not forget China is the manufacturing hub of much of the TMT industry. Ericsson, Nokia and Apple can also trace their supply chain back to Shenzhen. Currently, the delicately balanced supply chains are remaining intact, though this should be viewed as a significant risk to the telecoms industry.

Essential’s attempt to reinvent the wheel has predictably failed

When Android creator Andy Rubin started a new company, big things were expected, however it now appears the ideas were far too glorious to have any basis in reality.

Essential has announced it has taken its ideas as far as it can, and it will now cease operations.

In years gone, Rubin was known as a revolutionary. The founder and creator of Android was held in high esteem, with a reputation which grew each year the operating system become more dominant in the mobile world. This was the enthusiasm which was placed in Essential, but it has been a disastrous journey.

The company was founded in 2015, with funding from Playground Global, and in 2017 Rubin revealed the company was working on a new smartphone which was dubbed the Essential Phone. The delivery of this device was full of chaos thanks to the Meltdown and Spectre vulnerabilities, supply shortage, a customer data leak and accusations of trade secrets theft. But this was only the beginning of the disaster.

Despite the rocky start, it was reported that Amazon, Tencent and Foxconn had invested in the company in August, valuing it at more than $1 billion. The belief was there, but it wasn’t until October 2018 that Rubin teased the world with the launch of another device, known as Project GEM. Unfortunately the world had to wait a year for any more information, and it was not good.

The device attempted to reinvent the shape of the smartphone, creating a device which was much slimmer. The smartphone was also designed to be more of a voice-interface device, a novel idea but perhaps miles ahead of what is technically capable or what the consumer wants.

This is the issue which Essential seems to have been facing. Rubin tried to invent a device which he believed was revolutionary rather than listening to what the consumer wants. Sometimes you have to ignore popular opinion to redefine an industry, Henry Ford famously said “if I was to listen to my customers, I would be breeding faster horses”, but this is not one of those cases.

Video consumption and mobile gaming are two of the biggest trends of the mobile world today, especially for the younger generations, those more likely to spend the big bucks on devices. However, Rubin’s devices ignore these trends, not offering enough screen real estate for such content to be relevant.

Essential’s vision got in the way of understanding what the consumer actually wants, and now the company will soon be non-existent. This should perhaps be a lesson to the innovators in Silicon Valley; revolutionary ideas have to be built on the realities of today.

MediaTek adds momentum to 5G mid-tier with Dimensity 800 launch

After launching its assault on the premium market in November, MediaTek has unveiled its Dimensity 800 Series 5G chipset for mid-tier devices.

The 5G euphoria is of course very exciting, or at least we have been told to be enthralled, but in reality, it means next to nothing without the devices to connect the data-frenzied consumer to the freakishly-fast digital super-highway. MediaTek’s announcement is a step in the right direction.

Announced at the Consumer Electronics Show (CES) in Las Vegas, the Dimensity 800 Series 5G chipset is MediaTek’s answer to the Qualcomm Snapdragon 765; a product for mid-tier smartphones, the segment critical to fuelling mass market adoption in the 5G world.

“MediaTek already launched its flagship 5G smartphone solution, the Dimensity 1000, and with the 800 series 5G chipset family, we are bringing 5G to the mid-tier and mass market,” said TL Lee, head of MediaTek’s wireless business unit.

“Everyone should have access to great technology. The Dimensity 800 Series will power the New Premium segment for 5G, bringing consumers flagship smartphone features and performance at midrange price points.”

While most people in the developed markets would turn their nose up at the prospect of buying a mid-tier smartphone, such are the eye-watering prices of today’s 5G-compatible smartphones, few would consider the small loan which would be needed to purchase one. 5G compatible, mid-tier devices will be crucially important in fuelling momentum towards mass-market adoption of 5G smartphones.

The chipset supports two carrier aggregation for, what MediaTek claims offers, 30% wider high-speed layer coverage and improved handover, as well as both stand alone and non-standalone sub-6 GHz connectivity. Four big Arm Cortex-A76 cores operating up to 2 GHz, have been paired with four power-efficient Arm Cortex-A55 cores operating at up to 2 GHz to improve performance for intensive applications such as mobile gaming.

While this chipset might not have the horsepower of the flagship Dimensity 1000 Series, it is not supposed to. This is a product which is designed to accelerate the launch of devices in the mid-tier market, a critical area to drive through widespread adoption of 5G data connectivity.