Global Smartphone Sales Slow, India and China Still Promising

Research firm Gartner states that global smartphone sales will dip into single digits following a continued slowdown. The company expects sales to grow 7 percent this year, reaching 1.5 billion units, down from 14.4 percent growth in 2015. In the mature markets of North America, Western Europe, Japan and parts of Asia/Pacific, smartphone penetration is now at 90 percent. That, along with consumers in these regions not replacing or upgrading phones as quickly as before, are the root causes of the slowdown.

According to Gartner research director Roberta Cozza, “The smartphone market will no longer grow at the levels it has reached over the last seven years.”

In response to the news that consumers, in mature regions, aren’t upgrading or replacing phones, she also notes that, “premium phone users are extending life cycles to 2.5 years, which is not going to change drastically over the next five years,” in part because communication service providers (CSPs) are no longer subsidizing “free” smartphones every two years.

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CSPs have, however, rolled out financing programs, and Apple among other vendors offers programs that will upgrade phones after one year. “These programs are not for everyone, as most users are happy to hold onto their phone for two years or longer than before,” said Cozza. “They do so especially as the technology updates have become incremental rather than exponential.”

With mature markets saturated, many vendors are focusing on China and India, says Gartner research director Annette Zimmerman, with India having the highest growth potential. There, 167 million feature phones sold in 2015, 61 percent of total mobile phone sales. Although smartphones are expensive for Indian consumers, the price of low-end models are declining, and Gartner predicts 139 million smartphones will be sold there this year, growing 29.5 percent year over year.

In China, where smartphones grew 16 percent in 2014, sales were flat this year and little growth is expected for the next five years, says Zimmerman, who reports that sales of smartphones there represented 95 percent of total mobile phone sales in 2015. Smartphones are becoming more affordable for users, similar to India, and Zimmerman notes that Gartner doesn’t expect 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,” she said, reporting that Gartner predicts “that by 2018, at least one nontraditional phone maker will be among the top five smartphone brands in China.”

The statistics are different in other emerging markets, where “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.” Cozza reports that, for the first time, in 2015, smartphones overtook sales of feature phones in sub-Saharan Africa. “This region represents an attractive market for vendors that can persuade users to migrate to their first smartphone,” she said.