Sales Recovery Seems Distant Hope for Saturated Smartphone Market

By Todd R. Weiss  |  Posted 2016-07-28 Print this article Print
Mobile Sales Slump

What all of this means, said Dawson, are some tough times for smartphone vendors over the next few years—which already has been the case over the last year or so.

Apple's latest iPhone 6 models went on sale last September but are awaiting a refresh this September, causing many consumers to wait for the new devices and hurting sales of today's models.

"It remains to be seen how things will be for Apple after its bad second quarter," said Dawson. "A lot of the major smartphone vendors are already quite challenged about making money."

Some newer Chinese companies, including Huawei, Oppo and Vivo, are in ascendance, while old established players such as LG and BlackBerry have been in a prolonged decline, he said. Nokia has all but disappeared from the market since the Finnish company sold its mobile device business to Microsoft in 2014. Microsoft had little success selling Nokia-branded mobile phones since closing the acquisition.

"Of the majors in the Android world, Samsung is the only one to have some staying power. You're seeing a change of the guard, really, where the old guard is heading out. It's going to be ultra-competitive on the Android side, especially," he said.

Samsung's strengths are its good reputation with consumers, who see Samsung's Galaxy phones as on par with Android; its massive sales and distribution scale; and its powerful nameplate in the marketplace. "People tend to go to stores saying they want to buy a Galaxy phone," said Dawson. "It's a testament to their advertising muscle and their relationships with the carriers."

Smartphone Sales Echo PC Market Trends

Tuong Nguyen, an analyst with Gartner, agrees that increased sales levels won't come to the U.S. smartphone market for at least several years.

"It takes much more than what we've seen in the last two or three years in terms of feature and functionality improvements for the U.S. market to kick back into that growth cycle that we saw before," Nguyen told eWEEK. "My personal expectation is it's not going to happen next year or the year after that or even the next year after that."

The smartphone market, he said, is emulating the same pattern that occurred in the PC market a few years ago: The devices themselves are capable of far more than users require and have reached a point where users don't see a need to replace them as often as they did previously.

"Consumers say 'These phones do so much more than I need or even understand,' while smartphone vendors then offer some new feature on top of that. It's already too much," said Nguyen. "That's why we've seen sales fall. So the industry has become a victim of its own success—it's almost like we're all driving Ferraris now, even at the low end."

What could again bring growth to the U.S. smartphone market, he said, are additional synergies between new and existing vendor platforms and desirable handsets, such as Apple integrating more features from its HealthKit, HomeKit and CarKit offerings into its smartphones.

"There are many steps being taken in that direction. Those tie-ins will help push future phones. They are pulling together these ecosystems, which Apple tends to do well. Whoever does that best and brings consumers the most value will kick-start the movement," Nguyen said.

In the world of gaming, "it's always been the games that drive the hardware," said Nguyen. "I think it's the same here; the applications are going to drive the need for the [phone] hardware. It will take consumers saying, 'Where can I get a phone that will let me do that?'"

Another analyst, Daniel Matte of Canalys, said that when Apple's Q2 iPhone sales figures flattened earlier this year, he knew that the high-end market in the United States was definitely saturated. "It's well and truly a replacement market only, right now in the U.S.," he said.

But it's not just due to longer replacement cycles and customer satisfaction with their devices.


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