Apple (AAPL - Free Report) and Samsung, two closest peers in the smartphone market, are expected to clash in 2020 as the former gears up to enter the 5G-enabled device market, which is currently dominated by the latter.
Samsung recently announced that it has shipped more than 6.7 million Galaxy 5G smartphones globally in 2019, much better than its expectation of selling 4 million devices in the year. As of November 2019, the South Korean tech giant commanded 53.9% of the global 5G smartphone market.
However, although Apple is late in bringing 5G to its flagship iPhone devices, improved availability of 5G network in the United States from all major carriers and rapid 5G deployment in China can be a game changer for the company in 2020.
Notably, Apple has been ramping up hiring from Intel (INTC - Free Report) and Qualcomm (QCOM - Free Report) to work on 5G modems. Last year, the company acquired Intel’s modem unit for $1 billion to design cellular chips for future devices. The company also settled its dispute with Qualcomm, which further supports the concept of a 5G iPhone in 2020.
5G Cycle a Major Driver for Handset Makers
Smartphone shipments are expected to recover in 2020 due to the 5G upgrade cycle.
Per IDC projections, the global smartphone market is expected to grow 1.5% year over year in 2020, with shipment volumes of more than 1.4 billion. IDC expects 190 million 5G smartphones to be shipped in 2020, accounting for 14% of total estimated smartphone shipment.
China’s aggressive push into 5G is a key catalyst. The United States, Korea, the U.K. and Canada are other important markets.
Moreover, per Gartner data, cited by ZDNet, the 5G user base is expected to grow from 3.5 million units in 2020 to 48.6 million in 2023 and likely to account for 56% of the market. In fact, 5G-ready handset sales are expected to reach 324.1 million units globally, by 2028.
Samsung’s Lead is a Difficult Hurdle for Apple
Samsung is expected to enjoy a first-mover’s advantage in the 5G-enabled handset market for some time. Moreover, the upcoming launch of Galaxy Tab S6 is expected to strengthen its footprint.
Although Apple is expected to find it difficult to gain market share, its huge iPhone user base is hard to ignore.
Furthermore, the recent signing of a multi-year licensing deal with its former GPU supplier, Imagination Technologies, for graphics and AI-related technology is a major positive. Imagination’s latest IMG A-Series GPUs are claimed to be the fastest GPU to date and the first SoC devices are expected in 2020.
Further, beginning 2021, all iPhone models are expected to support 5G. Qualcomm and Broadcom (AVGO - Free Report) are anticipated to supply 5G modems and RF power amplifiers, respectively.
Apple will likely have its own modem by 2022 or 2023 that will reduce its dependence on Qualcomm.
Apple currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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