Worldwide smartphone sales to grow just 7 percent in 2016, to reach 1.5 billion units, according to the latest report from Gartner. The latest numbers are down from 14.4 percent growth in 2015.
Global smartphone sales will continue to slow and will no longer grow in double digits. In 2020, smartphone sales are on pace to total 1.9 billion units. The report said that the smartphone market has reached 90 percent penetration in the mature markets of North America, Western Europe, Japan and Mature Asia/Pacific, slowing future growth. One of the main reasons for slow smartphone growth is that users in these regions are not replacing or upgrading their smartphone as often as in previous years.
Roberta Cozza, research director at Gartner said,
The smartphone market will no longer grow at the levels it has reached over the last seven years. Smartphone sales recorded their highest growth in 2010, reaching 73 percent. In the mature markets, premium phone users are extending life cycles to 2.5 years, which is not going to change drastically over the next five years.
Gartner further states that as mature markets are saturated, the focus for many vendors is on India and China. Sales of feature phones totaled 167 million units in 2015, 61 percent of total mobile phone sales in India which has highest growth potential. Smartphones are expensive for users in India, but with the average selling prices (ASPs) of low-end models falling, Gartner estimates that 139 million smartphones will be sold in India in 2016, growing 29.5 percent year over year. ASPs of mobile phones in India remain under $70, and smartphones under $120 will continue to contribute around 50 percent of overall smartphone sales in 2016.
Talking about China, the report said that sales of smartphones in the country were flat in 2015. Similar to India, falling ASPs for smartphones will make them more affordable for users. Gartner forecasts that by 2018, at least one nontraditional phone maker will be among the top five smartphone brands in China. In emerging markets, the average lifetime of premium phones is between 2.2 and 2.5 years, while basic phones have an average lifetime of three years and more.
Annette Zimmermann, research director at Gartner said,
The worldwide smartphone market remains complex and competitive for all mobile phone vendors, and we are not expecting the vendor landscape to get smaller. In such a fluid vendor landscape, some will exit the market while newcomers, including mobile manufacturers or internet service providers from China and India, could make their debut.
Communications service providers (CSPs) have moved away from subsidies providing a “free” smartphone every two years, which has led to more varied upgrade cycles. On the other hand, CSPs have introduced financing programs and vendors such as Apple now offer upgrade programs that provides users with new hardware after only 12 months. Coza added that such programs are not for everyone, as most users are happy to hold onto their phone for two years or longer than before. They do so especially as the technology updates have become incremental rather than exponential.