Key takeaways

• Total smartphone sales expected to grow from 1.355 billion devices in 2021 to 1.440 billion devices in 2025
• Sales of 5G smartphones exceed the 50 percent mark in 2022, and we expect it to reach 72 percent of the total smartphone shipments by 2025.
• 176 mobile operators in 70 markets worldwide launched commercial 5G services in 2021, expecting to attain approximately 1 billion 5G subscribers in 2022.
• The smartphone ASP (Average Selling Price) is 3.5X that of a 4G smartphone because of the rising component costs, logistics and continuous demand for premium smartphones in developed markets.
• Apple has leading market share of 34 percent in 5G, driving overall ASP up to USD 830 and increasing Apple’s iPhone revenue by 39 percent YoY(Year on Year) to USD 191 billion in 2021.

#1. The 5G footprint continues to expand worldwide at varying rates.

In most emerging countries, 4G penetration is still below a fifth of all connections. Operators are speeding up efforts to transition current 2G and 3G consumers to 4G networks. Yet, we expect 4G adoption to account for only 55 percent of total connections by 2025, much lower from the high peak of 58 percent that 4G had in 2021.

This anticipated decline marks the growth of 5G adoption (Exhibit 1). As seen, 5G adoption is rapidly growing in the US, China, South Korea and Japan, implying the decline in 4G adoption. Also, we expect the total number of 5G subscribers to exceed 1 billion in 2022.

Exhibit 1

5G adoption (percent of total connections)

Key drivers for momentum in 5G adoption

• Increased coverage and global network rollout
• Growing availability of mid-range phones, particularly in China
• CSP initiatives to grow 5G through subsidies and leasing programs/marketing efforts carried out by mobile operators.
• Economic recovery from the pandemic

#2. 5G shipments will be the key driver of revenue growth for smartphones, accounting for 72 percent of the total by 2025

Geo-political issues, inflation and ongoing supply chains have slowed smartphone sales in 2022. Despite this, Apple is still coming out strong in the smartphone vendor ecosystem. Moreover, with better control over its supply chain, Apple can lock in most of its consumers in the premium segment. Exhibit 2 shows the outlook on the overall global smartphone shipments over the next few years.

Exhibit 2

Global smartphone shipments (in millions)

• 5G adoption will boost the total smartphone volume in 2023, but will still remain lower than the 2021 total due to global recessionary trends.
• Global smartphone shipments will reach the 1.4 billion mark by 2024.
• Sales penetration of 5G smartphones surpassed the 50 percent mark in 2022. The growth is attributed to the OEMs (Original Equipment Manufacturers) supplying 5G smartphones at competitive price ranges for consumers and subsidies from the operators.

#3. Apple is the biggest beneficiary of 5G smartphone sales

Exhibit 3

Market share in 2021 (based on shipments)

• Apple
  • The iPhone 12 and iPhone 13 catapulted Apple’s market share to 34 percent in 5G, driving the overall ASP up significantly to USD 830 in 2021.
  • iPhone revenue increased 39 percent YoY to USD 191 billion in 2021.
  • High prices of Apple smartphones support higher ASP for 5G smartphones.
• Samsung
  • A broad portfolio of Samsung devices across multiple price tiers helped the company experience healthy demand across various regions for its smartphones.
  • Samsung’s smartphone revenue increased 11 percent YoY, reaching USD 72 billion in 2021.
  • Sales of new models helped grow the ASP to USD 266 in 2021.
• Oppo
• Oppo is rolling out 5G phones across price ranges to meet the needs of different consumers and actively applying new technologies to its latest models.
• Vivo
  • Vivo has become one of the leading providers due to its growing market share in the mid-price segment and high demand in the Chinese market.

Exhibit 4:

Market share in 2021 (Overall vs 5G)

#4. Premium iPhone user upgrades to 5G, drive the overall ASP

Exhibit 5

Smartphone ASP (in USD $)

• 5G smartphones experienced higher ASP in 2021 due to the massive success of Apple’s devices.
• The smartphone ASP is slightly high in the short term due to the rising cost of components, logistics and the continuous demand for premium smartphones in the developed markets.
• The trend will remain downwards long-term, further accelerated by the rollout of 5G in markets like South Asia by the end of the decade.
• Android 5G smartphones were initially launched in the mid to high price segment ($250-$400) and are now declining to the $150-$250 price range.

Read our upcoming report to understand how the operators strategize, subsidise and position the 5G smartphones to gain adoption.