Confluence of saturation and cost will slow smartphone growth in 2016

by Matt Klassen on April 6, 2016

refurbished-smartphones-640x0The smartphone market has reached a strange crossroads of saturation and expense, whereby our favourite devices have become ubiquitous in mature markets, yet remain cost-prohibitive in emerging markets. It is because of this precarious position that we will likely see the end of the many consecutive years of double-digit smartphone growth, according to new research released by market analysis firm Gartner.

“The double-digit growth era for the global smartphone market has come to an end,” said Ranjit Atwal, research director at Gartner. “Historically, worsening economic conditions had negligible impact on smartphone sales and spend, but this is no longer the case. China and North America smartphone sales are on pace to be flat in 2016, exhibiting a 0.7 per cent and 0.4 per cent growth respectively.”

To put it another way, those who can afford smartphones already have them (and want to keep them), those who want smartphones can’t afford them. While there is still some hope that smartphone growth can rebound once the affordability barrier is breached, for now smartphones will remain in limbo, growth hamstrung, in large part, by growing frugality.

That’s not to say that emerging smartphones markets aren’t growing, but simply that they’re growing slower than expected, as Gartner estimates that over the next few years 150 million people will delay upgrading to smartphones until the “functionality and price combination of a low-cost smartphone becomes more desirable.”

“Prices did not decline enough to drive upgrades from low-end feature phones to low-end smartphones,” said Annette Zimmermann, research director at Gartner. “Vendors were not able to reduce the price of a ‘good enough to use’ smartphone lower than $50.”

Once that affordability barrier is broken I would expect smartphone growth to resume in earnest, but given that vendors have been looking for ways to deliver ultra-budget smartphones to emerging markets for several years now, it doesn’t seem that a profitable yet affordable solution is imminent.

But not to lay the blame for flagging smartphone growth on just the emerging markets, smartphone manufacturers aren’t doing themselves any favours in mature markets either. By failing to deliver more radical, exponential advances in smartphones, manufacturers have provided the impetus for users to keep their old phones for longer, given that the technology gap across multiple generations of smartphones really isn’t all that wide.

As Gartner’s research explains, incremental development cycles have made it easier for smartphone users in mature markets to extend the lifespan of their devices, as the more cost-efficient idea of “good enough” has replaced the desire for the latest and greatest gadget.

“As carriers’ deals become more complex, users are likely to hold onto phones, especially as the technology updates become incremental rather than exponential,” said Zimmermann. “In addition, the volumes of users upgrading from basic phones to premium phones will slow, with more basic phones being replaced with the same type of phone.”

All that to say, the smartphone market will likely see its lowest growth on record due to a confluence of saturation and unaffordability, where those who have the financial means to purchase a smartphone have already done so (and they don’t want to spend their money on another), while those who are looking to finally enter the smartphone market continue to wait until it is within their financial means.

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Written by: Matt Klassen. Follow by: RSS, Twitter, Facebook, or YouTube.

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