Global smartphone market shrinks 6% thanks to shortages, and supplies for holiday shopping season will be scarce

The news: Global smartphone shipments slipped 6% in Q3 2021, per Canalys—and market dynamics are shifting as vendors navigate component shortages and struggle to meet demand.

• Samsung regained the top spot in Q3 with 23% global market share, while Apple reclaimed the number two position with 15% market share thanks to strong early demand for iPhone 13. 
• Previous leader, Xiaomi, fell to third place with 14% market share and Oppo and Vivo followed with 10% market share apiece.

How we got here: “The chipset famine has truly arrived,” said Canalys principal analyst Ben Stanton as various component shortages impact smartphone makers heading into the most profitable year-end quarter. 

• With component stockpiles depleting, the gap between orders and semiconductor deliveries has hit a record 21.7 weeks, per Susquehanna International Group. 

The number of new device models launched in the first half of 2021 declined 18% YoY to 310, per Counterpoint. 

Given that the effects of the shortage are expected to intensify, scarcity and price increases will likely get worse long before they start to get better.

• Apple is slashing iPhone 13 production targets for 2021 by 10 million units during their most profitable quarter. 
• In Q3, major smartphone vendors reported only receiving 70% of their requested components., and around 90% of the smartphone industry is expected to feel component pains in late 2021, per Counterpoint.

The shortage comes as pent up demand for new smartphones during the pandemic is heightened:

• A recent YouGov survey found 22% of US adults were very likely or somewhat likely to purchase a new smartphone in the next three months—an increase from 15% of those who said so the year prior.

What’s next? Smartphone vendors are trying various strategies to contend with the component shortages. 

• This includes delaying or cancelling product launches, slashing production, or implementing last-minute changes to devices to fulfill volume capacity per Canalys.
• Canalys adds that smartphone channel inventories are already running low, and as more customers start to anticipate these sales cycles, the impending wave of demand will be impossible to fulfill.