FYI.

This story is over 5 years old.

The global smartphone boom is over — sorry Apple

The meteoric rise of the smartphone as a must-have device in the modern world has finally leveled off.
September 27, 2016, 2:35pm
Devant un Apple Store à New York, le 16 septembre 2016 (REUTERS/Eduardo Munoz)

It couldn't go on forever. A little less than a decade after the release of the first iPhone in 2007, the meteoric rise of the smartphone as a must-have device in the modern world has finally leveled off.

Smartphones aren't going anywhere; it's just that the global mobile phone market has plateaued, according to a new report out this week from CCS Insight saying that growth in the market is finished for the foreseeable future — even in once-high-growth markets like China and India, as everyone who can afford a smartphone now has one.

Advertisement

And that means tough times ahead for global electronics firms — Apple included — who've depended on the proliferation of smartphones for growth. CCS Insight predicts that as competition intensifies and component prices increase, only the really big players are safe.

"As growth is depleting, competition is intensifying, and it comes as little surprise that margins are being squeezed harder than ever," Marina Koytcheva, director of forecasting at CCS Insight, said. "Companies without the scale advantages of manufacturers such as Samsung, Apple or Huawei will find it much harder to make money."

The CCS Insight report says mobile phone sales have peaked at around 2 billion devices per year and will stay at this level until 2020. The smartphone component of that total will increase from 75 percent in 2016 to 90 percent in 2020, but the explosive growth we have seen in the past 10 years is over, with smartphone sales expected to grow just 4.1 percent this year.

Saturation in developed markets is the main reason for the massive slowdown. According to a report this week from Deloitte, "The smartphone user base is approaching an unprecedented peak. No other personal device has had the same commercial and societal impact as the smartphone, and no other current device seems likely to."

The last two years have seen the smartphone power base switch from the U.S. (Apple and Motorola) and South Korea (Samsung and LG) to China. While Apple and Samsung struggle to retain their market share, China's Huawei, now the world's third-largest phone-maker, is reporting huge growth and aiming to overtake its main competitors. Elsewhere in China, low-cost brands like Oppo, Xiaomi, OnePlus and Vivo have made major gains at the cost of more established brands like Sony, LG, HTC and Motorola.

Besides the sales slowdown, phone-makers are being hit by an increase in the price of components, with a recent report from TrendForce saying the displays used in budget smartphones could rise in price by as much as 50 percent by year's end. That's trouble in a market with tightening margins. In recent years, prices have plummeted and it is now possible to buy a decent Android-based smartphone for under $100; at this level, consumers will balk at any increase in price, forcing margins even tighter.

"This is the first time [in years that] we have seen component price rise," Koytcheva said. "Phone-makers with low volumes will find it almost impossible to turn a profit in these conditions without raising the prices of their products. It's a great opportunity for the big players like Huawei and Samsung to exploit their scale, apply pricing pressure and strengthen their leading positions."