It’s Official: Smartphone Peak Achieved

Jan 31st 2019

Smartphone sales slump to worst levels in 10 years as vendors and carriers seek new business customers

By Channelnomics Staff

The world reached and surpassed peak smartphone demand in 2018, according to market analyst firm IDC, which reported a 4.1 percent decline in sales in 2018 and a nearly 5 percent decline in the typically robust holiday season.

The Lowdown:  In any other industry segment, shipping 375 million units in a quarter would be seen as a triumph. In all of 2018, personal computer vendors shipped just 259 million units. But smartphones are largely consumer devices with a much higher total addressable market than PCs. IDC blames the decline on lengthening replacement cycles, regional markets reaching consumption saturation, political and economic uncertainty, and increasing prices driving buyers away.

The Details:  Of the top five smartphone brands, Apple is the biggest loser, posting sales declines of 11.5 percent in the fourth quarter of 2018. Apple’s revenue and profits took a hit because of the iPhone slump, which the company blamed on the trade war with China and cannibalization through its own low-cost battery replacement program.

Samsung posted a 5.5 percent decline. While Samsung remains the world’s largest smartphone brand, its total market share dipped below 20 percent.

The big gainers are Huawei, Oppo, and Xiaomi, which posted impressive growth through increasing sales in emerging markets and their own home market of China. Huawei’s sales jumped 44 percent in the fourth quarter and 34 percent for the year. Xiaomi saw sales in 2018 climb 32 percent. And Oppo recorded a modest increase of 1.3 percent for the year. While the three Chinese brands saw most of their gains in China, the Chinese smartphone market shrank nearly 10 percent.

The Impact:  IDC believes the smartphone slump will continue into 2019 as manufacturers struggle to balance new features and design elements with costs and prices that consumers and businesses can afford. The advent of folding smartphones and 5G networks could stimulate new smartphone sales. However, IDC says those new units with advanced features also will drive up prices that are already turning off consumers and commercial users.

The Buzz:  “With replacement rates continuing to slow across numerous markets, vendors will need to find a new equilibrium that balances the latest smartphone features, compelling design, and affordability. The arrival of both 5G and foldable devices later this year could bring new life to the industry depending on how vendors and carriers market the real-life benefits of these technologies,” said Anthony Scarsella, research manager with IDC’s Worldwide Quarterly Mobile Phone Tracker. “However, we expect these new devices to elevate average selling prices as new displays, chipsets, and radios will bring an increased price to the BOM (build of materials), which will translate to higher price points for consumers. To combat this, carriers and retailers will need to fully maximize trade-in offers for older devices as a type of subsidy to push upgrades throughout 2019.”

Channelnomics Point of View:  Smartphone manufacturers are trying to generate new sales to businesses through IT resellers and agents. While some vendors are seeing some success selling smartphones to field workers for accessing cloud-based resources, the overall business segment is equally lackluster due to the dual use of smartphones as personal and professional devices.