The great smartphone boom is about to bust
Growth is expected to drop to single digits
The smartphone boom is about to go bust, with sales growth expected to fall to single digits in 2016. That’s a far cry from the 73% growth the industry saw just six years ago.
According to market research group Gartner Inc., worldwide smartphone sales will increase by just 7% in 2016. IDC Research, meanwhile, predicts growth will slow to just 3.1%.
Why such a precipitous drop? Simply put, because consumers already have too many smartphones in their hands. Smartphone markets in North America, Europe, Japan and more mature Asia and Pacific markets have already reached 90% penetration, according to Gartner. That’s a lot of smartphones.
China was supposed to be the next big smartphone hotbed to keep sales on their upward trajectory, but Gartner reports that overall sales were flat in the region in 2015 with little growth expected over the next five years. Gartner research director Annette Zimmermann says companies should instead look to India, which she says has the highest growth potential.
Market saturation isn’t the only thing keeping growth relatively stagnant; consumers are now savvier about when and where they purchase their handsets.
What’s more, the decision by US carriers to move away from traditionally subsidized two-year smartphone contracts has discouraged consumers from upgrading their smartphones.
Smartphone makers aren’t exactly helping themselves, either, since many of their annual upgrades aren’t fundamentally different from their previous iterations. As a result, Garner’s Roberta Cozza points out, consumers keep their handsets longer than they otherwise would. After all, if your iPhone 5s still works perfectly fine and you’re cool with its screen size, why bother upgrading to the newest iPhone?
Then there’s the simple fact that smartphones, especially premium handsets, have largely reached parity with each other.
If you buy a new handset today from the likes of Apple, HTC, LG, or Samsung, you’re getting a great phone no matter what. Sure, there are differences between the handsets — some have brighter screens or capture sharper photos — but you’re unlikely to see a phone from any of these companies that is worlds better than its competitors. IDC even predicts that Apple will see it's first decrease in year-over-year growth in 2016, though the firm says the iPhone maker will rebound in 2017.
To try to counteract this trend, some US carriers and handset makers are taking steps to get consumers interested in purchasing phones at a faster clip. Gartner, for example, points to Apple’s buyback program that lets you get a new handset after having your phone for a year. AT&T, Sprint, T-Mobile, and Verizon offer similar upgrade programs.
But without a fundamental shift in smartphone design or function, the market will likely continue to see minimal growth going forward.
via: Gartner, IDC Research
Email Daniel at dhowley@yahoo-inc.com; follow him on Twitter at @DanielHowley.
