For much of the market’s history, smartphones have seen high levels of growth. However, in the latter half of the 2010s, the market began to stagnate; leading to lengthened purchase cycles and a decline in smartphone shipments. For many users, the impetus to upgrade to a new device dwindled, due to the consistency of features across devices and price ranges, with current devices deemed adequate and unlikely to be greatly improved by upgrading.
Smartphone markets have slowed since the mid-2010s because, in many ways, smartphone OEMs have satisfied consumer demands; creating phones with stylish displays, high-quality cameras, all-day battery life, and fast connectivity. Previously, successive upgrades were made to smartphones that motivated consumers to purchase: 4G, increase in display size and battery efficiency, the addition of cameras with zoom functions, biometric ID systems, and wireless charging. As the 2010s ended, phone innovation hit a plateau and the impetus for users to upgrade to a new device dropped, due to the consistency of features across devices and price points.
As purchasing cycles have slowed, and recent innovations have failed to spark the market back into the growth seen in the mid-2010s, it is likely that the smartphone market will not see meaningful growth until another significant upgrade becomes available to the majority of consumers, not just those at the higher price points. Smartphone OEMs will be hoping the relatively recent introduction of 5G handsets at both high- and mid-range price points, and the benefits of developing 5G networks will help achieve this.
However, there are two main growth drivers in the smartphone market that are worth mentioning: foldable smartphones and 5G. Many industry analysts have flagged foldable phones as the future of the smartphone and a potential driver of renewed market growth. Over the last few years, several smartphone OEMs, such as Huawei, Xiaomi, Microsoft, Samsung, and Motorola, have introduced foldable phones. Aside from consumer interest in the form, the key issue with foldable smartphones is price. The current range of foldable smartphones remains highly priced. The Huawei Mate XS 5G and the Galaxy Z Fold 2 both currently retail at £1,599 and, therefore, largely appeal to early adopters. While these phones can be expected to maintain their high price points, with an increasing number of OEMs developing foldable smartphones, prices will drop through competition; making these devices more attractive to the wider consumer market.
5G connectivity is expected to drive smartphone upgrades in both developed and emerging markets. Advances in Internet penetration, 5G technology and network provision will enable 5G smartphone users to download a film in less than one minute and browse the Internet 10 times faster; acting as a spur to increase upgrades to 5G smartphones. Smartphone OEMs are hoping that the development of 5G will help trigger a trend of increasing sales of 5G-enabled smartphones; helping the industry return to sales numbers seen towards the end of the 2000s.
However, in regions other than Chinese, South Korean and Japanese markets, 5G network limitations could hinder 5G smartphone growth. Most emerging economies do not have established 5G networks, and whilst many nations have trialled 5G networks, implementation of complete 5G networks in those nations is likely to take many years. The full impact of 5G may not be seen immediately, as most connections will still be running on a 4G or slower networks, and more than half of the global population will not be covered by 5G.
Even in the developed markets of West Europe, full 5G networks are not currently in place and the cost of 5G phone contracts is higher than 4G equivalents, which may reduce consumer demand for 5G devices. In addition, Apple and Samsung dominate the smartphone market in this and other developed markets, such as Australia and the US, which may result in slower penetration of cheaper 5G devices; impacting upon 5G consumer uptake.
Our latest whitepaper, Smartphone Market Innovation: A Two-horse Race?, assesses the current smartphone market landscape, highlighting new trends and identifying potential growth challenges.
Download the Whitepaper: Smartphone Market Innovation: A Two-horse Race?
Related Research: Smartphone Market