The smartphone application processor (AP) market that declined 26 per cent in the second quarter this year is set to be on a growth trajectory from 2021 onwards as 5G adoption reaches emerging markets, according to a new report.

A mobile application processor is a system on a chip (SoC) designed to support applications running in a mobile operating system environment.

Qualcomm led the global AP market with 29 per cent market share in Q2 with a drop of 3 percentage points compared to last year owing to Huawei's HiSilicon SOCs.

HiSilicon's shipments in China increased, leading to decline in Qualcomm market share, the report said on Tuesday.

"While the overall smartphone market declined due to the ongoing pandemic, the decline in market share for Qualcomm was partly also due to Huawei, which increased the use of HiSilicon APs after US restrictions, and its growing share in China, the world's largest smartphone market," explained Neil Shah, VP of Research at Counterpoint.

Qualcomm's share in Huawei (including HONOR) smartphones declined from 12 per cent in Q2 2019 to 3 per cent in Q2 2020.

It is, however, not all bleak for the smartphone segment.

"For example, 5G smartphone sales more than doubled (+126 per cent) in Q2 2020 from just a quarter ago. This trend will try to offset the overall decline in the first half and fuel the growth back in 2021," Shah said in a statement.

The restrictions on Huawei will drive the growth for Qualcomm, MediaTek and Unisoc.

OPPO, vivo and Xiaomi will be the key drivers for Qualcomm and MediaTek as they look to fill the big gap which Huawei might leave behind in near- to mid-term.

"This could be more beneficial for Qualcomm in the premium segment ($400+ wholesale), especially in China where Huawei dominates with over 40 per cent market share, and in the mid- to high-tier segments in markets like Europe," said Research Analyst Shobhit Srivastava.

The advent of 5G will drive cloud gaming as one of the killer use-cases, bringing newer experiences in the premium segment.

"Additionally, we are also seeing increasing demand for casual and advanced gaming at the mass-market level. Thus, the affordable smartphone segment with gaming capabilities is estimated to grow a massive 1011 per cent in 2020," Srivastava said.