August 15, 2020

Smartphone Application Processors – a segment at the point of ebullition

The past couple of months saw more news about the smartphone AP segment than has been seen in a long while. This includes a dramatic moment for Huawei’s Kirin processor, having its production forcefully halted just when it has achieved number 2 position in global market share. It also includes the race to acquire ARM, the dominant multi-core CPU architecture used by smartphone APs. In this short article, Digiecon takes stock of the recent developments.

In its latest forecast release, the World Semiconductor Trade Statistics (WSTS) organisation estimates the global semiconductor market to be worth around 426 billion USD in 2020, with growth of 3.3% in relation to previous year and projected growth of 6.2% for 2021. Of this, the amount related to micro is 68 billion USD (i.e., approximately 16% of the total). In WSTS classification, the micro category includes microcontrollers, microprocessors and digital signal processors (DSPs).

Discounting the market size for microcontrollers, estimated by IHS Markit (now OMDIA) to be worth approximately 20 billion USD in 2020, microprocessors and DSPs are jointly worth approximately 48 billion USD.

Analyst and consulting firm Strategy Analytics tracks the shipments of Application Processors (AP) used in mobile devices (smartphones). Their forecast of market size for smartphone APs by 2025 is approximately 36.0 billion USD and they foresee a compounded annual growth rate of 11.2% from 2020, which points to an estimate of market size of 21.2 billion USD in 2020.

Although, at first sight, the above data points all seem a bit of a mumbo jumbo, there are key takeaways which are significant and help to set the context for the sudden movements we are witnessing:

  • Applications Processors used in Smartphones, as of 2020, represent about 5% of the much broader semiconductor market.
  • Smartphone APs represent a staggering 44% of the total market for microprocessors and DSPs in 2020.
  • Market growth for this category is well above the average for all segments and with no signs of reducing pace in the next 5 years.

So, what are the recent events stirring the market?

  • In 8 years, Huawei has grown market share, through its wholly owned subsidiary HiSilicon, from virtually 0% to 20% in the Smartphone AP segment, overtaking Apple in Q1 2020
  • The embargo imposed by the American administration in relation to exports to Huawei, resulted that TSMC, Huawei’s major contract manufacturer for smartphone APs, announced that it had stopped processing new orders from Huawei from May 15th.
  • In a recent event, Huawei CEO Richard Yu has allegedly told investors that the company will have to stop making its custom Kirin ARM chips from September 2020 because of ongoing sanctions from the United States.
  • In tandem with the above events, Qualcomm and Huawei have eventually announced a patent licensing agreement with Huawei reportedly paying Qualcomm the amount of 1.8 billion USD for previously unpaid licensing fees. Now, Qualcomm is lobbying the U.S. government to revoke restrictions on sale of components to Huawei. Worth to note, as of Q2 2020 Huawei has surpassed Samsung as global leader in smartphone shipments thanks to its domestic market share in China.
  • Intel tried to penetrate the market for Smartphone Processor through the acquisition of Infineon’s Wireless Solution (WS) in 2011. By 2017 there were reports that Apple iPhone 7 and 8 LTE modems were based on Intel chips. However, after facing claims of patent infringement with Qualcomm, Apple eventually settled and bought Intel Mobile Communications division in July 2019.
  • The absolute majority of Smartphone Processors APs currently use ARM multi-core CPU (Cortex) architecture. Some, as Qualcomm’s Kryo are a custom version of ARM-based CPU
  • Having acquired ARM back in 2016, as of July 2020 Softbank has mulled exiting this investment and this has triggered a spate of rumours about potential suitors. These include a consortium between Qualcomm and TSMC, a consortium between TSMC and Foxconn, and, more recently, Nvidia.

The outcomes of all the activity that is ongoing in this segment will certainly mark a point of inflection with either Qualcomm becoming the absolute dominant player, or Nvidia penetrating a segment and becoming a force to contend also in the mobile CPU segment, or manufacturers such as TSMC and Foxconn expanding their roles in the value chain. There is also the question mark of Huawei’s sustainability as number 2 in the smartphone market. In summary, a lot of interesting developments can be expected for the next months and years.

Sources:,,,,, All accessed on 15/08/2020