Have smartphones peaked? What falling smartphone sales say about the future of the device

Google+ Pinterest LinkedIn Tumblr +

Smartphone sales are in decline. Global shipments recently hit the lowest point in over 4 years, and global smartphone shipments have fallen almost 7% YoY. The iPhone in particular has suffered from severely declining sales, globally and stateside. Between trade tensions, longer replacement rates, rising smartphone costs, the decline of the contract/upgrade model, and smaller and smaller hardware difference between new releases, the future of the smartphone market is not looking good. 

NewtonX recently conducted a global investigation of the smartphone market by issuing a survey to 2,000 former and current executives at smartphone providers and smartphone parts providers, and found that despite declining sales and increasing development costs, there are a few bright spots for the smartphone market. 

Why the Smartphone Market is Stalling — and What Market Leaders Are Doing About It

2018 was the first year ever that smartphone sales stopped growing annually. Early reports of 2019 indicate that this may have been the beginning of a multi-year decline, with sales falling over 20% at Apple, and close to that for many of its competitors.  

The most commonly cited reason for this decline in the NewtonX survey was longer replacement rates and rising smartphone costs. In other words, smartphones are good enough now that consumers are more reluctant to replace them on the standard two-year cycle — and the hardware updates for most upgrades are becoming less and less compelling. For 2018, the average time that a consumer kept his/her smartphone reached just over two and a half years — an extra six months and ten days that make a big difference.

That said, there were some smartphone retailers that appeared to be immune to the market decline. Huawei grew by almost 36% in 2018, and industry leaders expect the Chinese telecommunications giant to overtake Apple by the end of 2019 or 2020 at the latest. This is in part due to the company’s budget options (the Huawei P20 Lite is only $216.80, as compared to the iPhone’s $1k price tag), which are highly appealing in developing markets including India, Latin America, and Eastern Europe. Huawei’s competitors have likewise begun offering price-sensitive options: from the iPhone XR, to the  Samsung S10e and Pixel 3a, smartphone companies are making an effort to diversify their offerings. 

Still, the fact remains that the overall global market is in decline — and a few budget smartphone options aren’t enough to turn that around. 

Are Foldables and 5G Enough to Jumpstart the Smartphone Market? 

The smartphone industry is relying on two pending developments to jumpstart the market: foldable phones and 5G. Both technologies have faced significant setbacks, though. 

5G — which we wrote about here — is far from delivering on its promises of reduced latency, and early 5G phones are prohibitively expensive. The Samsung S10 5G that launched in April on Verizon starts at $1,300, and only gets a few hundred feet of distance from each cell site. Naturally, prices will lower once 5G phones become more mainstream, but NewtonX telecom leaders indicated that this won’t occur for at least another year. 

Similarly, foldable phones have struggled to live up to their hype. The Samsung Galaxy Fold had a tendency to break in reviewers’ hands, which pushed back its release date to the summer of 2019. These hardware issues notwithstanding, the device will cost $1,980 when (and if) it launches, while Huawei’s 5G foldable, the Mate X, starts at $2,600. Considering that foldables are already considered a somewhat niche device (at least for another year), and these high costs and potentially low functionality indicate that it may not have the rejuvenating effect the market needs. 

Regardless of new hardware and software advances, it was inevitable that at some point the smartphone market would become saturated. While there are still developing markets that different brands appeal more or less to, globally it’s unlikely that 5G or foldables will significantly move the needle for the market in 2019. 

Share.

About Author

Germain Chastel is the CEO and Founder of NewtonX.

Comments are closed.