TWS Earbuds Market will be the Focus of AI Era

At the end of October, Apple’s third-generation TWS (True Wireless Stereo) earbuds, AirPods Pro, was sold on the official website for 249 US dollars. This price is higher than the previous two generations, but the purchase desire of consumers is not affected. Previously, the two generations of AirPods have reversed the decline in sales of ordinary electronic products, becoming the absolute benchmark for the TWS earbuds industry.

The TWS earbuds is not just a sound transmission tool, the more important role of it is the AI assistant based on voice interaction technology. As a smart wearable device, TWS earbuds is designed to provide a better human-cellphone interaction experience. For the TWS earbuds consumer, the smooth experience of an instant automatic connection is more important than the sound quality. This can also give some reasons to "why AirPods can make a word of mouth effect and become Apple's fist product", and "why the performance of manufacturers like Sennheiser on TWS earbuds is far behind Apple".

Apple leads the TWS earbuds market

When Apple released the first AirPods in 2016, the TWS earbuds industry is still at its infancy, and the global shipment of TWS earbuds at the year was 9.18 million units. Time came to 2019, and AirPods shipped more than 27 million units in the second quarter alone. In 2019, the global shipment of TWS earbuds is expected to exceed 100 million units, and the market size will exceed 10 billion US dollars.

Compared with similar products, the positioning of AirPods is clearer. The first two generations of AirPods look like EarPods which cut off the headphone cable, and the wireless design and instant wake-up make the AirPods even more convenient than the EarPods, since the latter needs to be plugged into before the use. With a large number of iPhone users as the basis, coupled with a great experience, AirPods quickly gained a large share in the TWS earbuds market.

In the fourth quarter of 2018, 12.5 million units of AirPods were sold, accounting for 60% of global TWS earbuds shipments. Under the popularity of TWS earbuds, other communication companies, such as Samsung, Xiaomi, Huawei, etc., have actively joined the TWS earbuds market. In addition, traditional acoustic manufacturers, such as Sennheiser, Sony, etc. have also launched TWS earbuds products. In 2019, AirPods still dominated the TWS earbuds market, but its market share declined slightly.

More TWS earbuds are now in the market


However, AirPods currently has a penetration rate of only about 10% among iPhone users, and the room for improvement is considerable. According to data provided by Apple, at the end of 2018, there are more than 900 million active iPhones worldwide, which is expected to grow to 1 billion this year. AirPods shipments are also expected to grow from 35 million units in 2018 to 58 million units. 

The group of potential consumers of AirPods is huge


TWS earbuds is expected to become the mainstream in the upgrade

The first two generations of AirPods have no active noise reduction function, and the sound quality is also inferior to the earbuds manufactured by Sennheiser and Sony. AirPods has lost some of the TWS earbuds market for these insufficiencies, and the new AirPods Pro is a powerful weapon for Apple to regain the market. The function of active noise reduction and improved sound quality will make AirPods Pro more competitive in the TWS earbuds market, and the upgrade on the chip will allow Siri to provide more services to users, which will upgrade the interaction experience for consumers.

To gain access to a larger TWS earbuds market, manufacturers must increase their research capabilities to meet the growing needs of consumers. In terms of standby time, matching speed, range of application, noise reduction function, sound quality, and controllable content of headphones, improving matching speed, expanding application range, increasing earphone controllable content and noise reduction function will most significantly enhance consumers' experience.

The more convenient the connection and the more stable the connection, the wider the applicable scene of the TWS earbuds, and it may become the most preferred earphones for consumers in the future. Since its inception, the market value of TWS earbuds has soared and is expected to become the highest value headsets in 2020.

Market scale of earphones (million US dollars)



Supplier identity will be the profit basis of upstream companies

At present, the mainstream TWS earbuds on the market are from Apple, Samsung and Jabra. And other manufacturers in the TOP 10 of TWS earbuds market are Xiaomi, QCY, PhD, JBL, JLab, Beats and Huawei. Due to the different specifications of the TWS earbuds of various brands, the components used generally need to be customized, and the supplier identity will become a necessary condition for the upstream enterprises of TWS earbuds to enter the industry chain.

Suppliers of Apple are more profitable

TWS earbuds are generally divided into two parts: wireless earbuds and charging box. The components of the charging box generally include: integrated circuit (IC), printed circuit board (PCB), lithium battery pack, LED charging indicator module. And the earphones mainly include various types of chips, speakers, microphones, and button lithium batteries.

To achieve faster and more stable connection, Bluetooth solution is important. In addition to Apple who uses its own solution, most TWS earbuds manufacturers adopt the Bluetooth solutions of Qualcomm, BES and Airoha. Among these three enterprises, Qualcomm has the highest proportion.

The core function of the charging box is to extend the standby time of the wireless earbuds, so the power management IC and lithium battery are the most important components. At present, the main lithium battery manufacturers include VDL and AEC; the main power management IC manufacturers are Texas Instruments, ETA Solution and WILL. Among them, VDL supplies lithium batteries to both Samsung and Huawei, and WILL is also a supplier of Huawei.

The core functions of the wireless earbuds are audio decoding and speaker. The TWS earbuds control chip is the core component, and the button lithium battery that guarantees the standby time is also an important component. The main manufacturers of the control chip are Qualcomm, BES, REALTEK and Airoha; among the manufacturers of button lithium batteries, VARTA has the highest proportion for being the supplier of Apple. Other important manufacturers include VDL and Great Power.

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