A brief analysis of the "matching points" and growth points of the Bluetooth audio SoC chip industry

A "metaverse" trend has swept the technology industry, igniting the industry's enthusiasm for wearable devices. However, it seems too early to talk about the dividends that the AR/VR market will bring to the industrial chain. TWS headphones that have truly achieved large-scale production are the market in wearable devices that can benefit most industry chain manufacturers at this stage.

When it comes to the TWS headset industry chain, we have to mention Bluetooth audio SoC chips. Benefiting from the explosive growth of the TWS headset market in the past few years, the performance of many Bluetooth audio SoC chip manufacturers at home and abroad has also hit new highs.

After several years of rapid growth, the growth of the TWS headset market has gradually slowed down since this year. So in the next few years, what new growth points will stimulate the demand for the Bluetooth audio SoC chip market? What changes will the competitive environment between companies usher in?

1. Android brand TWS headset market becomes the next "matching point"

Bluetooth speakers and Bluetooth headsets are the two types of audio transmission devices with the strongest growth in recent years, and are also the two main growth points for domestic and foreign Bluetooth audio SoC chip design manufacturers. However, while the market size continues to grow, industry competition is also becoming increasingly fierce.

First, let's look at the field of Bluetooth speakers. Currently, the representative companies in the SoC chip design industry include Qualcomm, MediaTek, Broadcom Integrated, Jerry Technology, Actions Technology, and Bluexun. According to the report data of market research organization TSR (Techno Systems Research), the top three companies in the market share of mid-to-high-end Bluetooth speaker chips in 2020 are Qualcomm, Zhuhai Actions, and MediaTek. 

JW insights believes that compared with TWS headphones, the Bluetooth speaker market is more mature, which also means that the market size growth rate is relatively weak and the market share is more concentrated. Like all consumer electronics markets, the Bluetooth speaker market has formed a relatively stable competition pattern after entering the mature stage, regardless of terminal brands or industrial chains. If there is no breakthrough in products and technology, the market share will be further concentrated and the competition pattern will be more stable as the market rules operate normally.

Looking more specifically at the field of TWS headsets, the current representative manufacturers in the SoC chip market include Apple, Qualcomm, MediaTek, Realtek, Hengxuan Technology, Jier Technology, Actions Technology, and Bluexun. The "Top 100 Chinese Semiconductor Companies" ranking list recently released by the analyst team of JW insights includes five representative companies in the Bluetooth audio SoC chip design industry in mainland China: Jier Technology, Hengxuan Technology, Bluexun, Broadcom Integrated, and Actions Technology.

Note: The "Top 100 Chinese Semiconductor Companies" ranking list is compiled by estimating the annual revenue scale of more than 2,000 companies in the database, and ultimately selecting the top 100 companies in the domestic semiconductor industry based on revenue scale.

As can be seen from the above figure, the five mainland companies have actually achieved good revenue in the early competition, and they have maintained a steady growth in the past 2021. However, it cannot be ignored that the Matthew effect in the TWS headset industry is still intensifying, and market share will be concentrated to a greater extent on mobile phone brands.

In particular, Android brands have become the main source of growth in the TWS headset market in the past two years. Therefore, we believe that the biggest competition point in the short term will also appear in the Android market. At present, there are more than a hundred brands of all sizes in the Android camp.

In the next two years, as the market size grows rapidly, the industry reshuffle will inevitably accelerate, and the competition landscape of chip manufacturers will also change accordingly. In order to maintain or achieve greater growth, the above-mentioned companies can only improve and optimize their existing customer systems through more competitive products.

JW insights pointed out that in addition to the existing competition among peers, chip manufacturers may also face pressure from some brand manufacturers in the future. Apple's self-developed W1 and H1 chips were used in the first and second generation Airpods respectively, and then the Kirin A1 chip developed by Huawei HiSilicon was used in Huawei FreeBuds3. This shows that in the TWS headset industry, the trend of brand manufacturers developing their own chips has begun to emerge.

At present, domestic first-tier mobile phone brands are gradually "testing the waters" in the sub-sectors. In the future, we may see more terminal brand manufacturers start to develop the same type of chips for their audio products. If this happens, it also means that the terminal brands' demand for SoC chips will be reduced compared to the current demand.

2. New LE Audio regulations have been implemented, stimulating market growth

In the first quarter of last year, the Bluetooth Special Interest Group (SIG) released a report entitled "Latest Bluetooth Market Information in 2021"; the report data showed that global shipments of Bluetooth audio transmission devices will reach 1.3 billion units in 2021, and this figure will increase by 1.5 times from 2021 to 2025.

Data source: SIG "2021 Bluetooth Market Latest Information"

SIG believes that the completion of the LE Audio technical specification in 2021 will further strengthen the Bluetooth ecosystem and drive greater demand for Bluetooth headsets and speakers. In September 2021, the Bluetooth Technology Alliance SIG released the latest LE Audio core specification. It is reported that LE Audio (Low Energy Audio) is a new generation of Bluetooth audio transmission protocol based on low-power Bluetooth BLE wireless communication.

The new LE Audio has five features: "ultra-low power consumption, new high sound quality, low-power audio decoder LC3 (Low Complexity Communications Codec), LE synchronous channel (ISOC: Low Energy Isochronous Channels), support for multiple streaming audio, and support for broadcast audio technology."

JW insights pointed out that the implementation of the new LE Audio core specification has also provided guidance for industry trends and product planning directions for chip manufacturers. The first is ultra-low power consumption; today, users have higher requirements for the miniaturization and battery life of headphones and speakers. LC3 reflects the user's increased demand for high sound quality, low latency and other aspects of product experience; this also means that the terminal's demand for high performance and low power consumption of SOC chips is still increasing.

In addition, the new LE Audio supports the feature of multiple streaming audio; this actually means that users can use one mobile phone to share music with multiple headphones, while supporting fast switching between multiple Bluetooth devices, and also reshaping the transmission architecture of TWS headphones.

JW insights believes that the implementation of the new LE Audio regulations not only guides the product trends of Bluetooth audio devices, but also sets a threshold for competition in the industry chain, separating manufacturers that have completed certification from those that have not. After completing this certification, developers can develop more optimized products with better user experience based on several technical features of LE Audio. The chip manufacturers that complete LE Audio certification first will occupy a more advantageous position in the market competition.

As terminal products (mobile phones, laptops, tablets, etc.) are upgraded and iterated, they will also begin to support the LE Audio standard. If chip manufacturers are unable to successfully complete the certification and launch Bluetooth chip products that support the new regulations, it may lead to the loss of existing market share and orders, thus causing a decline in performance.

3. AIoT expands the growth boundary of Bluetooth audio chip market

As mentioned earlier, the rise of Bluetooth speakers and TWS headphones has been a powerful driving force for the rapid development of the Bluetooth audio SoC chip industry in recent years. However, as the market saturation gradually increases, the growth space left for the industry chain is getting smaller and smaller. However, with the support of AI and 5G technologies, the AIoT market is gradually heating up. Following wearable devices, smart home devices have also become another major application scenario that can generate revenue for Bluetooth audio SoC chip manufacturers.

 According to the IDC report, the shipment volume of China's smart home device market in the first half of 2021 was about 100 million units, a year-on-year increase of 13.7%; the annual shipment volume in 2021 is expected to be 230 million units, a year-on-year increase of 14.6%. It is expected that the shipment volume of China's smart home device market will continue to grow at a compound growth rate of 21.4% in the next five years, and the market shipment volume will be close to 540 million units in 2025.

JW insights believes that in the AIoT field, we see that most smart home devices use voice to achieve human-computer interaction. Equipment such as TVs, lighting, door locks, air conditioners, refrigerators, etc. are rapidly becoming intelligent and voice-based. At present, the market penetration rate of whole-house smart solutions in my country is gradually increasing, and consumers are gradually developing the habit of interacting with terminal devices through voice. With the popularization of equipment, there will undoubtedly be more diverse requirements for chip integration, computing power, power consumption, etc. Therefore, the smart home market is also expected to bring new growth momentum to the Bluetooth audio SoC chip industry.