Has the smartphone market peaked?
That’s what Mary Meeker, a general partner at venture capital firm Kleiner Perkins Caufield & Byers, suggested on Wednesday when she presented her annual internet trends report at the Code Conference in Rancho Palos Verdes, California. According to Meeker, new global smartphone unit shipments had 0% growth — yes, 0% growth — in 2017, versus 2% in 2016.
That’s a dramatic decline from just five years ago, when smartphone shipments around the world were still growing at a healthy clip of over 40%.
Julie Ask, vice president and principal analyst with Forrester, contends Meeker’s estimates for 2017 likely have to do with several factors. For one, the rate at which people are replacing their smartphone is slowing down significantly. Not only are smartphones generally a costly investment for the average consumer, but smartphone technology has reached a point where the differences from year to year are now less apparent.
‘It’s harder and harder to communicate subtle differences’
“Smartphones are expensive, devices are amazing with fewer compelling and obvious hardware-related reasons to upgrade, and it’s harder and harder to communicate subtle differences in usability tied to artificial intelligence and machine learning,” Ask explains.
The differences between the first iPhone in 2007, for instance, and the iPhone 4, which launched three years later, were night and day. Put side-by-side, the iPhone 4 was much faster, offered brisker cellular speeds, and had a noticeably sharper screen and camera.
To many smartphone users at the time, upgrading perhaps seemed like an obvious choice. Less so now, when virtually every smartphone on the market — iPhone and Android alike — is capable, at the most fundamental level, of accomplishing what many people want their devices to do: text, check the internet and Facebook (FB), and snap decent photos. To be sure, newer devices like Apple’s (AAPL) iPhone X offer more cutting-edge features like facial recognition, newer chips and machine learning techniques. But for most people who can’t or simply don’t want to throw down $1,000 or more, their devices are probably “good enough.” So why splurge?
That’s a trend that even applies to markets such as China, where analysts were previously more bullish on smartphone market growth. According to research firm Canalys, smartphone shipments in China recently suffered their biggest decline ever, plunging over 21% year-over-year in the first quarter of 2018 with consumers buying just 91 million phones — a quarter only matched by the fourth quarter of 2013.
It’s hardly doom and gloom for smartphones, though. In the short term, market research firm IDC India predicts double-digit growth for smartphones in India this year, driven by lower-priced phones and big smartphone makers like Xiaomi moving towards manufacturing some parts in the country. And overall, the global smartphone production for this year is expected to pick up slightly, with around 1.5 billion phones manufactured — a growth rate of 2.8%.
In other words? Meeker’s 2017 estimates may be likely less of a red flag for smartphone makers and the market as a whole and more of a temporary dip.
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