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Smartphone innovation is slowing, so what's next?

Matt Hamblen | March 25, 2014
Improvements are less significant, leading makers to explore wearables and connected 'things.'

Llamas continued: "I can pick on the Galaxy S5. They said to check it out because it was waterproof and that was one of the big things Samsung touted. Ok...waterproof, huh? Right."

Llamas said some of last year's Galaxy S4's innovations were a disappointment, including inserting your image into a photo captured on the camera, scrolling through Web pages with your eyes, and pausing a video when you look away.

"That kind of thing didn't exactly ignite the market, and it didn't work for me all the time," he said. "Instead of pausing the video by looking away, why is that better than pressing pause on the screen?"

Carolina Milanesi, an analyst at Kantar WorldPanel, agreed that innovation has slowed with smartphones over the past year, but added, "it's more a case of incremental innovation than revolutionary innovation. Improvement on existing products is certainly there." She note that Android users replaced their earlier models in mature markets like the U.S. throughout 2013.

She noted that manufacturers and wireless carriers count on customers to replace their smartphones every couple of years. Consumers are replacing their phones, but not necessarily because the latest devices are revolutionary improvements over their predecessors. While even incremental improvement have their appeal, customers are also lining up for the new iPhone 5S and pre-ordering the Galaxy S5 in response to revolutionary changes in pricing for wireless services and hardware.

T-Mobile US, for instance, in 2013 took the lead over other major wireless carriers to offer customers the chance to pay in monthly installments for the full price of a smartphone without a carrier subsidy. Meanwhile, data sharing plans from all the major carriers have often been accompanied by short-term discounts on new hardware pricing and trade-in options.

As innovation with smartphones has slowed, a number of other factors are weighing on carriers, which control the market more than manufacturers would like to acknowledge.

"We've already reached a point in the U.S. where smartphones are a majority of the phones sold, and smartphones are all starting to look alike," Llamas said. Carriers are not selling smartphones exclusively nearly as much as in the past (as AT&T did with the first iPhone) and will be evaluating each new device to see which has a breakthrough in innovations or is just playing catch-up. There is only so much room on store shelves, and carriers want to choose winners.

"Carriers can now be more selective about which smartphone will receive a subsidy and which won't," Llamas said. "Manufacturers are aware of this and are trying to stay in line with carriers."

However, that doesn't necessarily mean that smartphones with the highest quality features will drop in price much below that magic $200 pricetag with a two-year agreement, the price most carriers are charging for the Galaxy S5, Milanesi said.

 

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