Mar
2
The data on smartphone sales for Q4 2017 are in, and it looks like two Chinese companies have reason to celebrate.
In a recent press release, research company Gartner, Inc. reports that …
Huawei and Xiaomi were the only smartphone vendors to achieve year-on-year unit growth (7.6 and 79 percent, respectively) and grew market share in the quarter.
Having thus opened on a positive note, I shall now proceed on less positive one.
While Huawei and Xiaomi did well, 2017 marked a drop in Chinese smartphone shipments overall. That’s according to global technology market analyst firm Canalys. In a recent press release, Canalys reports:
The growth story of the world’s largest smartphone market, China, came to an end as it suffered its first-ever annual decline, with shipments down by 4% from 2016 to 459 million units in 2017. This drop was partly due to China having one of its worst year-on-year performances in Q4 2017, with shipments plummeting by over 14% to just under 113 million units.
Yeah, you might say, but that’s just in China. Worldwide, sales climbed from 1.496 billion units in 2016 to 1.537 billion units in 2017. That is true, and that’s great. Unless, that is, we zero in on Q4 2017, the time of year when things are supposed to be picking up as a sign of hope for the year to come. Reports Gartner:
Global sales of smartphones to end users totaled nearly 408 million units in the fourth quarter of 2017, a 5.6 percent decline over the fourth quarter of 2016 … This is the first year-on-year decline since Gartner started tracking the global smartphone market in 2004.
Ouch.
There is no shortage of proffered explanations for the slowdown.
Gartner’s research director, Anshul Gupta, offers this one:
First, upgrades from feature phones to smartphones have slowed down due to a lack of quality “ultra-low-cost” smartphones and users preferring to buy quality feature phones. Second, replacement smartphone users are choosing quality models and keeping them longer, lengthening the replacement cycle of smartphones. Moreover, while demand for high quality, 4G connectivity and better camera features remained strong, high expectations and few incremental benefits during replacement weakened smartphone sales.
International Data Corporation (IDC) mobile phone research manager Anthony Scarsella suggests:
The latest flock of posh flagships may have had consumers hitting the pause button in the holiday quarter. With ultra-high-end flagships all the rage in 2017, many of these new bezel-less wonders proved to be more of a luxury than a necessity among upgraders. Even though we have seen new full-screen displays, advanced biometrics, and improved artificial intelligence, the new and higher price points could be outweighing the benefits of having the latest and greatest device in hand.
If wading through the last two excerpts tested your patience as a reader—you’re not a marketing professional unless your sentences are complex, right?—you’ll appreciate ZDNet’s senior reporter Danny Palmer’s refreshingly plain English:
… it’s because consumers increasingly don’t see good enough reason to spend money on upgrading to a new handset.
Short and clear. No wonder Palmer is a senior reporter.
If the decline has taken people by surprise, it shouldn’t have.
Notwithstanding the recency of the other above-cited comments, Palmer penned his warning back in June. And two months before that, under the headline “The smartphone market declined for the first time EVER,” Arjun Kharpal, reporting for CNBC, wrote:
Global smartphone shipments fell 3 percent year-on-year in the first quarter of 2016 to hit 335 million units, according to a Strategy Analytics report on Wednesday.
I have my own thoughts about the decline. A new product can take the world by storm only until it reaches a saturation point, which the smartphone may be approaching. And, to echo Scarsella, non-essential, incremental improvements may not be worth the price of an upgrade.
But here’s a possible reason I haven’t seen addressed.
Superfluous technological changes in smartphones aren’t new. If that failed to slow sales before, why would it slow them now? Maybe it’s because phones have ceased looking like new models.
Portable phone marketers took a page from the auto industry’s playbook in making phones not just tools but fashion items. In much the same way you can tell with a glance if your neighbor drives a later model car than yours, it used to be easy to tell a current from a prior year’s phone. Features aside, there was motivation to upgrade just to avoid pulling out a phone that was “so last year.”
But in the last few years, not so much. Recent variations in size and dimensions have been insignificant—there is, after all, only so much you can do with a rectangle—and just about every color option is out there. It takes a keen eye to pick out the vintage of a smartphone purchased within the last four years, to the point that these days most people have to ask what model you’re using. The result is that, for the first time in years, you can hold your head high while hanging on to your older phone.
Still, it’s important not to confuse sales of smartphone units, which is slowing, with smartphone usage, which is accelerating. Only a few weeks ago, Pew Research Center reported:
The vast majority of Americans – 95% – now own a cellphone of some kind. The share of Americans that own smartphones is now 77%, up from just 35% in Pew Research Center’s first survey of smartphone ownership conducted in 2011.
Or, as a very smart guy wrote—well, okay, actually, it was me—not long ago for The Financial Brand:
The day is nearer than anyone thought when children wonder aloud what on earth their forebears did with those folded, leather things — “What’s a checkbook? What did you use wallets for?”
Saturation may be bad new for phone marketers. For those of us in the digital banking arena, it’s good news. There’s nothing we’d like better than a market saturated with smartphones.