China's smartphone application processor (AP) shipments returned to the traditional off-season pattern in the second quarter of 2024, with a slight quarter-on-quarter increase of 3%. According to DIGITIMES Research's latest report on AP shipments to Chinese smartphone vendors, volumes are expected to increase by more than 9% quarter-on-quarter in the third quarter as smartphone vendors enter the traditional peak season.
Smartphone vendors had already stocked up in the first quarter in preparation for the 618 shopping festival, leaving little momentum to stimulate orders for the third quarter, a period without major promotional activities.
The smartphone vendors' plans to launch flagship models in the fourth quarter will prompt them to stock up on 5G APs. Additionally, growth in 5G subscribers in overseas emerging markets and peak season effects will boost AP vendors' shipments, according to the report's latest figures.
DIGITIMES Research estimates that in the third quarter of 2024, MediaTek and Unisoc will be the only ones among the four major AP suppliers supporting Chinese smartphone vendors to see sequential shipment growth.
MediaTek's and Unisoc's shipments will be driven by demand for midrange to low-end 5G and 4G smartphones in overseas emerging markets. Furthermore, MediaTek has potential shipment momentum from upcoming flagship APs, with smartphone vendors planning to launch devices powered by Dimensity 9400 (tentatively named) in the fourth quarter.
Smartphone customers will also place AP orders with MediaTek in advance in the third quarter. Qualcomm, however, will see 4G AP shipments fall sharply in the third quarter, with a year-on-year decrease of 41.4%. With the support of 5G APs, Qualcomm's total AP shipments will still increase sequentially. Chipmaking problems using the 5nm process at SMIC are creating uncertainty for Hisilicon's volume production for its new APs in the third quarter.
Most smartphone vendors will have no inventory pressure in the third quarter of 2024, so they are keenly seeking growth momentum for their shipments.
MediaTek and Qualcomm will launch their respective 3nm flagship APs in the second half of the year, with upgraded computing performance to support generative AI applications, which is expected to fuel 5G smartphone sales.
Unisoc focuses on the midrange to low-end 5G AP segments, mainly relying on pricing to compete with MediaTek. As it becomes increasingly demanding for APs to handle generative AI applications, it remains to be seen whether Unisoc can keep up.
Hisilicon has delayed the launch of 5nm APs due to issues with manufacturing processes and is significantly behind MediaTek and Qualcomm in terms of 3nm APs. The sustainability of consumer support in China is a concern for Hisilicon's mid- to long-term development.
