Second-quarter 2023 smartphone application processor (AP) shipments to China-based brand vendors amounted to 132 million units, growing 10% from the prior quarter but plunging 33.4% from the prior year, and will rise further in the third quarter, according to DIGITIMES Research's latest China smartphone AP report.

The sequential growth was driven by smartphone brands' inventory preparation for the 618 shopping festival in China. The more than 30% on-year decline was an indication that smartphone AP demand remained in a slump amid China's weakening macroeconomic environment. Looking into second-half 2023, as smartphone vendors exert efforts to deplete their inventory, their AP inventory level will significantly fall back.

On top of new product launches, inventory preparation for Singles' Day in China and year-end holiday demand in overseas markets, third-quarter 2023 smartphone AP shipments to China-based vendors are estimated to surge 45.2% sequentially. On a year-over-year basis, the volume will enjoy a 6.8% increase, the first on-year growth since third-quarter 2021, the report's figures show.

With respect to individual AP suppliers' performance in second-quarter 2023, MediaTek secured the largest market share, at 46.6%, followed by Qualcomm with a 42.4% market share. Going into third-quarter 2023, MediaTek's market share will further climb to 47.4%, buoyed by the launch of its new entry-level 4G AP targeting overseas markets as well as year-end holiday demand. Qualcomm's market share will decline to 35.1% as it scales back 4G AP shipments and its low-to-mid-tier 5G AP shipment momentum weakens compared to MediaTek's.

With smartphone vendors replenishing their AP inventory going into fourth-quarter 2023, MediaTek will see its shipments increase, and its market share will again exceed 50%. Qualcomm and Unisoc, on the other hand, will each face an around 5pp decline in their market share.

In terms of the manufacturing process technology, the share of 12nm smartphone APs among those shipped to China-based vendors is expected to grow to 18.1% while the share of 5/4nm chips will decline to 28.3% in third-quarter 2023 as the growth of smartphone AP shipments to China-based vendors is mainly driven by 4G smartphone sales in overseas markets, rather than flagship smartphone sales. Going into fourth-quarter 2023, shipments of 4G APs for entry-level smartphones abroad will weaken while those for mid-to-high-tier smartphones abroad and shipments of 5G APs for mid-to-low-tier smartphones in China can maintain their momentum, buoying the share of 6/7/8nm chips to 58.3%.

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