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Interest in smartphones is flattening

Matt Hamblen | Jan. 29, 2016
Worries about sales hit both Apple and Samsung stock prices.

Both IDC and Strategic Analytics said this week that global smartphone shipments surpassed a record 1.4 billion units for all of 2015, up by more than 10% over the prior year. For the fourth quarter of 2015, however, smartphone growth slowed to 6% compared to a year earlier, the slowest growth rate ever, Strategy Analytics said.

In the U.S. alone, Strategy Analytics estimated smartphone growth for the fourth quarter of 2015 was just 4%, and predicted it could drop to 1% to 2% growth in the current quarter. In China, the last quarter of 2015 actually saw a 4% decline. "China is a maturing market and facing economic headwinds," said Linda Sui, an analyst at Strategy Analytics.

For all of 2016, Strategy Analytics said all regions of the world will see single-digit growth, except for Africa, where double-digit growth is expected.

Some optimism 

"There is still room for smartphone growth, but it will be mainly in emerging regions where users are moving off feature phones to smartphones," said Patrick Moorhead, an analyst at Moor Insights and Strategy. "Even in emerging regions, sales will be driven by overall economics, and consumer confidence right now is pretty low."

Of the six technology analysts interviewed for this story, all said that Wall Street's negative reaction to Apple's comments about smartphones are probably an over-reaction by investors accustomed to Apple's strength in smartphones. It is estimated that 90% of the profits made from smartphones go to Apple, even though Samsung sells more smartphones, the most of any company, Moorhead noted.

"Apple stock may be taking a beating, but that company has had almost a decade of bringing massive growth and massive change, and all these investors have made money off Apple, so now the investors are facing the first quarter in a long time of no growth," Moorhead said. "Wall Street is disconnected from reality a lot of the time because of their short-term focus."

IDC analyst Anthony Scarsella said the stock market reacted negatively this week primarily to Cook's comment about the current quarter being down and didn't take note of Apple's view that smartphone penetration is still low in China and India.

"I don't think the smartphone market is at a peak yet; there are still opportunities to grow," Scarsella said.

A big factor in future smartphone growth could come with innovations in the way upgrades are sold, the analysts said. Apple introduced the iPhone Upgrade program last fall, and most of U.S. carriers have eased the purchasing terms for smartphones.

"You can walk in a store and pay no money down and walk out with a high-end flagship phone," Scarsella noted. But the impact such offers have on smartphone growth won't be felt for a year, he said.

 

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