Smartphone Chipset Market Update

The smartphone market has been saturated; compound annual growth rate (CAGR) over the 2023-2030 period is estimated at only 1.6%. This is due to an increase in the smartphone penetration rate, a longer replacement cycle, an upward trend in device prices, and an expansion of the second-hand/refurbished market.

However, the smartphone chipset market, in terms of revenue, will grow bigger, thanks to the cellular standard mix change, 4G to 5G to 6G migration, cost increase along with the introduction of advanced process technology, and on-device generative AI adoption in premium and high-end smartphones. Smartphone chipset revenue market size is estimated to grow at 7.9% of CAGR from 2023 to 2030.

The smartphone chipset market share tends to be consolidated as it requires huge investment effort and technology accumulation. Though the China government supports domestic semiconductor supply chain, it will take a long way for Chinese IC suppliers to take a major position in the smartphone chipset market.

Smartphone Market Forecast

We forecast 1,153 million units of smartphone shipments in 2023, and 1,178 million units in 2024, at 2.2% of YoY growth. This is still lower volume compared to 2020 (1,272 million units). Long-term smartphone market growth is estimated to remain below 2% of annual growth.

5G accounts for 56% of the smartphone market in 2023 and 63% in 2024. 5G and 6G together will account 88% of total market in 2030. In Japan, South Korea, China, and North America, the 5G share of smartphone shipments has exceeded 80% by 2022-2023. Among other area, Indian 5G smartphone market is growing rapidly since 2023, 5G accounting for 47% in 2023 and 66% in 2024.

The future growth of 5G market will depend on the low cost 5G smartphone for emerging markets. Low end 5G smartphone prices in emerging markets are at around $120-130 in 2023-2024. The low cost 5G smartphone price could drop to below $100 by 2027. Compared to low end LTE, low end 5G chipset and RF are about $10 more expensive. If including the IPR license fee, the BOM cost difference between LTE and 5G shall be about $13-15. Considering the higher BOM cost, it is assumed that demand for LTE will remain for the time being in emerging countries.

For the long-term LTE migration, there is a discussion to adopt lower cost 5G Redcap modem in the feature phone and low-end smartphone. 5G RedCap is currently adopted in industrial module. It is anticipated to be adopted for wearables and automotive telematics in 2025-2026, and for feature phones and smartphones in 2027-2028. Since 5G Redcap will be used on 5G SA network, China, India, and USA will be the possible early adopter of 5G RedCap for mobile phones.

6G smartphone will appear in 2029, accounting for 13% share in 2030. 6G smartphone market is expected to take off more slowly than 5G, because of the increasing semiconductor cost, and the benefit of 6G for smartphone applications.

On-device Generative AI smartphone

Generative AI is the AI that can generate contents (text, music, images, videos, etc.) based on large amount of database (LLM: large language model) and computing. Contents are roughly divided into language, image (picture, video, graphics), and voice/sound. Generative AI initially used the LLM and computing on cloud, but it is moving to on-device/ hybrid (cloud + device) model.

Examples of generative AI use cases for smartphones are as follows:

• Personal assistance
• Real-time translation, text summarization
• Programming, call center, customer support, etc.
• Image, video generation, photo processing, improvement, animation
• Mobile game video, graphics generation, interactive conversation, music generation

The definition of on-device generative AI smartphone has not set yet. Here, we defined on-device generative AI smartphone with specific application processors with dedicated neural processors and on-device LLM. In the actual use of processor in on-device generated AI, it may use not only NPU, but also with GPU and CPU (heterogeneous computing) depending on application. Also, not all applications are processed 100% on-device, may be hybrid with cloud.

Generative AI-enabled mobile application processors currently released or coming to market are as follows:

• Apple: 2024 A18/ iOS 18
• Qualcomm: 2023 Snapdragon 8/8s Gen3, 2024 Snapdragon 7+ Gen3
• MediaTek: 2023 Dimensity 9300, 2024 Dimensity 8300, 9400
• Samsung LSI: 2024 Exynos 2400
• Google: 2023 Tensor G3, 2024 Tensor G4

MediaTek now supports generative AI in its 2024 sub-premium chipset, Dimensity 8300. In addition, Qualcomm also support generative AI in 2024 Snapdragon 7+ Gen 3 platform.

The generative AI smartphone market opened up in 2023 and it became popular in 2024 premium smartphones. The market size in 2023 is around 6Mil units (Snapdragon S8 Gen 3 devices and Google). However, it is estimated to grow significantly to 165Mil units in 2024. Non-premium smartphones is expected to support generative AI on local in 2025-2026, and by 2027-2028, many high-end smartphones will equip with generative AI. For mid-end and low-end chipsets, we assume that this segment does not support generative AI because of the cost constraint.

The amount of dataset and number of parameters included in LLM affects the accuracy of generated AI. The scale of LLM, NPU performance, and DRAM capacity are correlated. The future generative-AI smartphones are expected to use at least 16GB of DRAM.

Currently, machine learning and optimization are made independently by each smartphone OEM. It is anticipated that platform vendors such as Google, Baidu, and Qualcomm/MediaTek will prepare generative AI development platform, and OEMs will differentiate themselves by optimizing the generated AI content.

In premium mobile processors, the demand for performance Neural Processor Units (NPUs) is increasing for generative AI, and this will push forward the manufacturing process migration. As the performance of generative AI increases, demand for high bandwidth, high density mobile DRAM also increases. The DRAM capacity of android premium smartphones will increase from 8-12GB (2023) to 16GB in 2024. On the other hand, process migration and increasing DRAM capacity both impacts the BOM cost. For DRAM, LP-DDR5 is about $2.5-2.7 per 1GB in 1Q/2024, so the 8GB of additional DRAM will add the BOM cost by about $20-22.

Smartphone generative AI uses on-device LLM. However, depending on the application, it also uses cloud AI, and therefore, high-speed, low-latency 5G connection is demanded.

Smartphone Chipset Market and Chipset price

Despite the maturity of the smartphone market, the chipset market continues to expand in revenue base. The smartphone chipset market is expected to grow from $50.2 billion in 2023 to $84.3 billion in 2030. The migration from LTE to 5G and 6G, and the upward trend in premium chipset price results the chipset market growth. 5G chipsets accounted for 56% in terms of shipments, but it already held 90% in terms of chipset revenue.

The average selling price of smartphone chipset was about $31 in 2020 at the beginning of 5G but is expected to rise to $48 in 2024. The average prices will rise at an annual rate of 3-6% from 2025 to 2029, but prices will increase by about 9% in 2030, when the 6G market expand. The average price of chipset is estimated to reach about $66 in 2030.

Premium smartphone chipsets (including iPhone) have a 32% share based on shipments but are expected to have a 73% share in revenue in 2023. Premium smartphone chipsets will count 31-32% of market share in shipment volume, but revenue-based share will gradually increase, to 76% by 2030.

As the cost of latest premium chipset continue to increase, lower cost, sub-premium segment (such as N+1/N+2, downgrade version) are expanding in the premium segment. In Android premium chipset market, “sub-premium” chipset accounts about 40-45% of total shipments. On the other hands, price of the latest premium chipset continues to rise, because of the increasing cost of SoC design and silicon wafer. The most advanced 3nm wafer price is about 30% higher price from previous 5nm wafer. The next generation 2nm wafer price is estimated to increase by about 30% from 3nm. The lack of competition in supply side (TSMC, ASML) is one of the factors of significant cost increase.

Because of the IC cost increase, process node migration cycle is getting longer. In android platform, 7nm to 5nm migration took about 2 years. 4/5nm to 3nm shift will take about four years. 3nm (2H2024) to 2nm (2H2027?) migration is estimated to take another 4 years. Considering the estimated IC cost, it will be the big challenge for smartphone processors to adopt next generation 1.4nm process before 2030.

For Apple, as a biggest, and lead customer for TSMC’s advanced node, it is estimated to take cost-advantages over Android SoC suppliers. Apple adopted 3nm in 2023, 1 year ahead from Android. It is estimated that Apple will adopt 2nm for 2026 smartphone processor, 1 year earlier than Android.

Non-premium 5G smartphone chipset price is relatively stabilize. In other words, non-premium 5G smartphone chipset is designed based on the cost target.

Chipset Market Competition

Smartphone chipset development requires huge investment and technology accumulation, market share tends to be concentrated among big companies with large capital bases. Three major companies, MediaTek, Qualcomm, and Apple, hold approximately 80% market share. Of the seven companies currently on the market, Apple, HiSilicon (Huawei), Google, and Samsung are developing for internal use, leaving only three suppliers on the open market: MediaTek, Qualcomm, and UNISOC. As a new supplier, Xiaomi’s subsidiary X-Ring develops mobile processor. ASR microelectronics also plans to enter low end LTE chipset market in 2024-2025.

MediaTek has maintained the top share since 2020. Qualcomm is focusing on the premium and high-end segments, and although it has a wide gap with MediaTek in terms of shipment volume, it exceeds MediaTek in terms of revenue. HiSilicon’s shipments were temporarily stopped due to sanctions, but it was revived in 2023. HiSilicon is estimated to increase the market share by around 7-8% in the medium term.

5G chipset market share is more concentrated, with the top three suppliers, Qualcomm, Apple and MediaTek accounting for approximately 90% in 2023. MediaTek is expected to increase its market share with the expansion of 5G in emerging markets. Although Apple currently uses Qualcomm’s 5G modem, it will finally start using its own 5G chip from 2025 model, and use it in conjunction with Qualcomm’s 5G chip.

Since USA-China trade conflict, Chinese government accelerate the investment to semiconductor industry to establish the domestic supply chain. However, Chinese suppliers account less than 10% share during 2021 to 2023 in smartphone chipset market. It will start to increase in 2024 thanks to the revival of HiSilicon, and UNISOC market share gain in LTE market, but still long way for Chinese IC suppliers to take major position in smartphone chipset market.

This article and data is based on our market research report “2024 Smartphone Chipset and RF Front End Module Market”, published on April 2024. Please reach us if you are interested in detail. Any feedback will be appreciated.