Trends in Embedded Mobile Phone Flash Storage Technology in China Key Findings Growth in mobile phone shipments in China may have slowed down, but the annual sales revenue has maintained a high growth momentum. Domestic mobile phone brands are moving from a low- and mid-range positioning to a high-end one, with a number of mid- to high-priced flagship s launched. Consumer requirements for phone cameras, storage, speed and applications continue to grow along with their ability to spend more on their devices. Embedded flash storage for mobile phones is developing rapidly, with an increasing number of consumers attaching more and more importance to flash storage capacities as an important indicator of smartphone performance. As an important smartphone feature, phone cameras have improved significantly in terms of both performance and functionality in recent years. It is replacing the traditional digital camera as the most popular photography method among consumers. Smartphone vendors continue to improve photography performance and
functionality, introducing professional photographic capabilities such as 4K, high-speed continuous shooting and high quality photos (e.g. RAW image files) in their high-end flagship s as standard features. This has also necessitated higher requirements for embedded flash chip storage capacity and performance. Domestic software companies continue to develop applications that address the demand for software that focus on chatting, maps and games. However, as applications in ios, Android and other operating systems are optimized, the flash storage they require rises steeply as well.
As domestic mobile phones become more high-end, consumer demand for performance rises as well. In 2014, mobile phone shipments in China reached nearly 390 million, up 15.4% year-on-year while sales reached RMB 515.41 billion. While the growth in shipment has certainly slowed, sales continue to grow rapidly due to the higher price points for the new high-end flagship s and the hunger of domestic consumers for these devices. Despite the high smartphone penetration rates already achieved in China, sales growth has continued to boom at more than 20% per year for the last three years, thanks to the increasing sophistication in devices and soaring prices. In looking at the state of domestic mobile phone sales in 2015, national policies such as Internet+ and a series of forward steps in mobile terminal development strategy has led all domestic carriers to establish a comprehensive layout for countrywide 4G networks. Furthermore, smartphones continue to become more and more popular in China s smaller and medium-sized cities, suggesting that China s mobile phone market continues to maintain a high growth rate. Figure X: The scale and growth of the mobile phone market in China (2012-14) 5154.1 27488.3 33702.8 38880.6 3440.8 4171.1 21.2% 10.0% 22.6% 15.4% 24.4% 23.6% Y2012 Y2013 Y2014 Shipment Scale Shipment Growth Y2012 Y2013 Y2014 Sales Scale 100 million / Y Sales Gro As the price trend shows, after securing their position in the low- to mid-market segments, domestic brands are focusing their sales strategies on the mid- to high-end market. For example, the standard s in the Huawei Mate, Xiaomi Note, ZTE AXON, Meizu Pro and OPPO R Plus series have been priced at over RMB 2,500 in recent years. Meanwhile, the series high-end s, equipped with increased flash storage capacities, were priced between RMB 3,000-4,000, raising the average price of domestic smartphones. Figure X: Domestic flagship release prices (2015)
5000 4000 3000 2000 2688 3288 3199 3699 4399 2299 2799 3299 2799 3888 2799 3099 3299 1000 0 standard high-end 32GB 64GB 128GB standard high-end top standard supreme 32GB 64GB standard Sales Price (Yuan) According to trends in smartphone demand, consumer requirements for phone cameras, storage, speed and applications continue to grow and turn towards higher-performance phones with richer features. In the domestic smartphone market, mobile phones priced at over RMB 4,001 enjoyed the largest share of sales thanks to greater shipments numbers and higher prices. Mobile phones priced below RMB 1,000 equaled those between RMB 1,000-2,000, even though their shipments were more than 30% higher. This means that, despite high shipment figures, low-end smartphones are not the main contributor to vendor revenue. As domestic vendors move towards the mid- to high-end market, so are consumers smartphones priced between RMB 2,000-3,000 continue to rise and accounted for 18% of total sales this year. This trend will continue over the next few years. Figure X: Domestic smartphone price brackets (2014) 433.8 1180.6 1147.0 918.1 1414.9 RMB 100 M Up to RMB 1000 RMB 1001-2000 RMB 2001-3000 RMB 3001-4000 RMB 4001- RMB 2001-3000 RMB 3001-4000 8.5% RMB 4001-27.8% 18.0% RMB 1001-2000 22.5% by sales revenue RMB 100M Up to RMB 1000 23.2% According to CCID Consulting, the growth of domestic mobile phone shipments will slow down over the next two years due to market saturation and high penetration rates as well as the lack of new growth points. However, during the upcoming 13 th Five-Year Plan, or Thirteen Five, the government will continue to
introduce relevant Internet strategies. This is set to accelerate the integration of the Internet in various fields, promote the rapid development of the mobile Internet industry and propel improvements in living standards as well as advances in technology, smartphone software and hardware, thus increasing consumer demand for mid- to high-end smartphones. In addition, profit pressure is driving vendors towards the high-end segment, meaning that the share and sales growth of mid- to high-end smartphones will surge. Based on a quantitative forecast in conjunction with the various factors and trends sweeping the Chinese mobile phone market in the next three years, CCID Consulting predicts that smartphone shipment growth will decline in the next three years but remain higher than the growth of the mobile phone market as a whole. Meanwhile, sales of mid- to high-end mobile phones will remain at a relatively high growth rate. Figure X: Forecast on the scale and growth of the mobile phone market in China (2016-18) 51082.6 53738.9 47496.3 8.6% 7.6% 5.2% Y2016 Y2017 Y2018 Sales Volume(10,000 volume) Sales growth rate 6758.7 12.6% 7805.4 15.5% 8835.7 13.2% Y2016 Y2017 Y2015 Sales amount (100 billion yuan) Sales amount growth rate
Embedded flash storage technology for mobile phones is developing rapidly and consumers are attaching more importance to flash capacities. As mobile phone technology evolves, so do the devices themselves. The same can be said for storage chips. In the 1980s, when flash storage was created, it could only hold approximately 256K bit of storage. Flash forward to today, where a modern embedded flash chips use memory technology nodes smaller than 20nm and will soon use the 3D NAND flash architecture to reduce its volume and scale its capacity to 256GB or more. Many flash giants (e.g. Samsung, SanDisk and Toshiba) have launched their 256GB embedded flash chips for mobile phones and have started to develop next-generation high-capacity flash chips. Embedded flash chip capacities for mobile phones are expected to scale to 512GB in 2016, with R&D on 1TB embedded flash chips to be completed in 2017. Figure X: Embedded flash storage technology and capacity (2005-16) The rapid development of flash storage technology has led to the increasing sophistication of embedded flash chips while improving their manufacturability, thus reducing the overall cost. Beginning in June 2015, the price of various flash chips in China have dropped considerably, while 128GB flash chips have begun to appear in various high-end smartphone s.
Flash memory price (unit: USD) Trends in Embedded Mobile Phone Flash Storage Technology in China Figure X: Price trends in the mobile phone embedded flash storage market in China (2014-16) 50 40 Flash memory capacity 39.6 41.4 30 20 10 0 22.3 15.9 10.2 7.1 4.7 2.8 2.3 3.9 2.6 4GB 8GB 16GB 32GB 64GB 128GB Jun-14 Jun-15 Declining prices have allowed mobile phone manufacturers to use high capacity and low-cost flash storage chips in low- to mid-end smartphones, increasing the product competitiveness. As seen in the upward swing in storage capacities across all price brackets in the China market, storage is being rapidly expanded on a large scale. In 2014, the average embedded mobile phone flash storage capacity increased by 45.7% for mobile phones priced at RMB 1,500-2,400, by 33% for mobile phones priced at RMB 2,400-3,500 and by 34.6% for mobile phones priced at more than RMB 3,500. Figure X: Embedded mobile phone flash storage capacity according to price bracket in China (2013-14) Storage capacity Foreign Mobile Brand 30.11 34.56 Unit: GB 2013 2014 4.7 5.22 5.52 6.53 10.15 12.96 18.72 21.66 Up to 700 Yuan 700-1500 Yuan 1500-2400 Yuan 2400-3500 Yuan 3500 Yuan+
Storage capacity Unit: GB 2013 2014 5.72 6.93 7.74 11.26 China Mobile Brand 14.93 17.32 10.25 23.04 27.33 36.72 Up to 700 Yuan 700-1500 Yuan 1500-2400 Yuan 2400-3500 Yuan 3500 Yuan+ According to statistics from Alibaba, the top five domestic mobile phone brands in terms of sales (as of November 2015) were Xiaomi, Huawei, Meizu, Apple and Qiku Dazen. According to statistical data from JD.com, mobile phone brands ranking in the top 20 in terms of sales (as of November 2015) were Apple, Huawei, Xiaomi, Meizu, Letv, OPPO, Smartisan and Samsung, while Suning.com sales figures had Xiaomi, Apple, Meizu and Huawei. This indicates that Chinese consumers still tend to stick to famous brands when buying mobile phones both at home and abroad. However, besides important considerations like brand, price and appearance, consumers also pay for greater capacity and flash storage performance, which has become a major factor in mobile phone purchasing. Spurred by the popularization of 4K HD image, Hi-Fi audio and high quality photo shooting functions, more and more consumers are spending more to increase the capacity of their mobile phones. Figure X: Analysis of smartphone purchase factors for Chinese consumers 40 Brand Endurance ability Network type 30 20 10 0 Price Appearance Screen size Storage Capacity Smartphones Choosing & Buying Influence Factors Photo capture
In the last few years, new brands like Xiaomi, Coolpad, Smartisan and Nubia have been fiercely competing in the low to mid-market segment for mobile phones priced around RMB 1,000, which has improved the performance of these phones in terms of memory capacity, CPU frequency and photo quality. Meanwhile, high-end mobile phones have contained increasingly larger storage capacities that also power HD image function and applications performance. By 2017, the average storage capacity of mobile phones priced between RMB 500-1,500 will reach 25.73GB while that of high-end s priced above RMB 3,500 will reach 43.96GB. Figure X: Trends in mobile phone embedded flash storage capacity according to price bracket in China (2015-17) 50 40 30 20 10 0 43.96 41.12 37.83 33.76 36.09 31.06 22.1424.0725.73 12.90 14.02 14.99 5.18 5.63 6.02 Up to 500 Yuan 500-1500 Yuan 1500-2500 Yuan 2500-3500 Yuan 3500 Yuan+ Y2015 Y2016 Y2017 Domestic mobile phone companies are supporting consumer photography trends and strengthening mobile phone image shooting functions by increasing the performance and capacity of embedded flash storage. A critical smartphone function, photo taking performance and capabilities have increased dramatically in recent years. CCID Consulting has found that, thanks to the portability, high image quality and fast shooting speed of smartphones, they are already beginning to overtake traditional digital cameras as the most commonly used photography equipment by consumers. An IDC report shows that, in 2015, global consumers will shoot and share about 1.6 trillion images, 70% of which will be done via mobile devices. IDC also predicts that the upward trend will continue. By 2019,
90% of all images taken will come from mobile devices. The rapid improvement of mobile phone shooting capabilities has played a huge role in making image sharing on social channels these days the incredibly popular phenomenon that it is. Thanks to the efficiency, portability and high image and shooting quality that smartphones have increasingly afforded, more and more consumers have begun to record images using these devices to share their life with others. Today, people are taking photos and videos on their mobile phones and uploading them to their blogs, WeChat moments, chat groups and QQ zones every day. This is not just a new trend, either it is a complete change in consumer habits. It is also not only a new phenomenon among adolescents or middle-aged consumers but seen across the board, with similar rates of popularity in different age groups. However, the younger generation, more so than others, value quality and function in the photography experience. HD photography, specific frames captured by continuous shooting, panorama, auto adjustment and beautifying are the advanced needs shared by young consumers. Certain mobile phone companies spotted this trend early on and began to, from the beginning, continuously improve and promote image shooting on mobile phones. For example, image functions like 4K HD image shooting, quick continuous shooting and high-quality photography (e.g. RAW image formats) have gradually become the standard configuration for high-end flagship mobile phones. Taking 4K image shooting as an example, various mobile phone manufacturers have already begun to regard it as an important function in recent years and made it a major selling point for their mid- to high-end mobile phones. This includes the LG G4, the Samsung Galaxy S6 and Note 5, the Sony Xperia Z4 and Z5 and the Apple iphone 6s and 6s Plus. In terms of domestic brands, the ZTE Axon, the Vivo Xshot, the Gionee ELIFE E8, the Nubia Z9, the Meizu MX5, the Letv 1 Pro and 360 Qiku Prestige have jumped on the bandwagon as well. These mobile phones not only offer 4K image shooting, but most of them also support continuous shooting and HD photo formats. Clearly, these professional shooting functions have begun to serve as the standard configuration for high-end flagship mobile phones and are gradually becoming an important development trend for future mobile phone configuration. However, allowing the camera to achieve high-performance image shooting does not solely rely on photography features. Flash storage is also critical to the photography function in the following two ways. Demands of high-performance image shooting on flash memory capacity: Many features can indicate the photography performance of a mobile phone camera, none other more directly than image resolution ratio. The standard with which to measure shooting functions, consumers are continuously chasing higher and higher pixels. From the 300,000-pixel videos shot by mobile phones in the early days of the technology to the 8,800,000+ pixels recorded thanks to 4K image shooting today,
high pixels have greatly increased image definition. Regardless whether for everyday shots or video capture, today s technology can reproduce the scene in an incredibly detailed manner while also being cut and edited in post-production with ease. Figure X: Development in mobile phone shooting technology The demands of 4K-level and RAW image formats are quite high on flash storage capacity. Each 4K image requires about 30MB in storage space per second. This means that a capacity of 10GB can only support a shooting task of about 4-5 minutes. RAW images, in order to ensure that the original image quality is not compressed and image data like acutance, contract ratio, saturation, color temperature and white balance is reserved for professional processing later on, require a storage space several times bigger than those in the JPG format. Low to mid-range mobile phones with 4GB, 8GB or 16GB in storage capacity can therefore no longer meet the daily consumer demand for high quality images. Demands of high-performance image shooting on flash memory performance: People have begun to take more pictures and videos using their mobile phones for its flexibility and convenience, as it allows them to record moments in everyday life whenever they need to. However, it is difficult to ensure that the perfect shot will be taken when taking the time to shoot one by one. In this regard, the mobile phone camera s continuous shooting function comes into play. However, as mobile phone cameras shoot photos of improving quality and
growing size, it is taking longer to store photos shot by mobile phones. As a result, the minimal intervals of continuous shooting are limited and the picture quality affected, making it impossible to guarantee both good quality and the continuous shooting function. If data transmission rates for mobile phone flash storage could be improved, however, picture storage time will be reduced, minimizing the intervals in continuous shooting. This would enable customers to capture a more spontaneous array of pictures and make the best selection. Mobile phone embedded flash storage technology has been improving significantly. In particular, the emmc standard established by the MMC Association has now become the mainstream embedded flash storage choice for mobile phones. Earlier this year, emmc5.1 was released with improved storage performance, security measures, and more. In terms of the industry s corporate players, companies such as Samsung, SanDisk and Micron have been improving data transmission rates through continuous research, development and applications, providing a strong guarantee for the improvement of the continuous shooting function in smartphones. Mobile phone system optimization and applications require increasingly higher flash storage capacity. Mobile system manufacturers and relevant software suppliers are trying to develop more comprehensive software products to provide broader applications and a more humane system design. However, as operating systems and applications software continuously upgrade, they are taking up more and more storage space. Primary operating system manufacturers are announcing a new generation of software products every so often in order to continuously improve the human-machine interaction interface and maximize system functions. As a result, mobile phones will have to download upgrade installation packages ranging from dozens to hundreds of MBs of storage. Apple s ios, for example, has released upgrade installation packages that are increasingly bigger every time it announces a new system version, from the ios 2 all the way to the most recent ios 9. Nevertheless, the system installation packages take only one-third of the space after installation. Freeing up storage space on mobile phones is therefore a constant challenge. Figure X: ios system installation package capacity evolution
The same is seen with the Android operating system. From Android 1.5 (Cupcake) to Android 2.0 (Clair) to the latest Android 4.4 (KitKat) and Android 5.0 (Lollipop), each upgrade has meant not only an optimized system and improved functions but also a rapid growth in system weight. Meanwhile, Android s open-source code means that the many Android-derived system versions out there offer differing emphases, with some attaching great importance to numerous functions and software. For these operating systems, it is no surprise that installation packages are growing and growing to well exceed the size of the original package. It can therefore be a major challenge to upgrade and operate Android mobile phones with small flash storage capacity. Figure X: Android system installation package capacity evolution
Application software is growing increasingly comprehensive as well, with stronger functionalities such as social communication, media player, news and reading, office and learning and games and entertainment software. Yet, software packages are growing rapidly in size, with many of them requiring dozens or hundreds of megabytes of storage after relying on a few for so long. This is especially true for social communication and games and entertainment software. The main reason is that more and more software developers are joining the competition, as well as the gradual development of mobile communications and the mobile games market in recent years. More and more effort is being put in software research and development in order to make such products more competitive and appealing. Software is growing to be more wide-ranging in function, more sophisticated in interface and smoother in running performance developments that are all based on expanding flash storage capacity. Figure X: Average smartphone applications downloads (2013) Source: Google s mobile planet, CCID Consulting consolidation (December 2015) According to 2013 Google data, global smartphone users installed on average 26 applications. As smartphone functions continue to develop and as user habits continue to evolve, this number continues its upward incline every year. According to CCID Consulting data, smartphone applications downloads in China in 2013 averaged 25.6, slightly lower than the global average. However, as domestic mobile phone performance has skyrocketed and as storage capacity has ballooned, the figure reached 43 in 2015, demonstrating a growth rate of approximately 26.5%. The number of average applications downloads per smartphone is estimated to reach 61 in 2017. Even though the growth rate has slightly declined due to limited flash storage capacity and customer saturation, it continues to hover above 15% and remains in a stage of healthy growth that will soon bring the average number of applications per smartphone to 61.
Figure X: Average applications downloads per smartphone in China (2014-17) 70 60 50 40 30 20 10 0 30.8% 61 26.5% 53 43 23.3% 34 15.1% Y2014 Y2015 Y2016 Y2017 The Average of APP Installation Growth rate The growing size of applications software will pose a challenge to storage capacities. On September 29 th, 2015, Google announced that the size limit for Android APK has been extended from the original 50MB to 100MB to enable developers to add better quality components to the software package. However, Android software has grown so big in size that mobile devices with small storage space are not able to afford upgrades and are thus excluded. Mobile phone manufacturers will therefore employ higher capacity flash storage chips to improve product competition, optimize performance and support the constant upgrade of system and applications software. Growing capacities will be an important factor in future mobile phone embedded flash storage development and trends. Conclusion The constant growth of the mobile phone market in China and booming customer demand for functionality and performance have given domestic companies a major incentive to transition to the mid- to high-end market. Professional camera functions such as 4K high-resolution, high-speed continuous shooting and high-quality picture formats rely significantly on embedded flash storage capacity and performance support. This makes embedded flash storage an important trend to track.