Once red-hot smartphone market sees slower sales

A man using a smartphone at a mobile fair in Barcelona, on Feb 26, 2018.
A man using a smartphone at a mobile fair in Barcelona, on Feb 26, 2018.PHOTO: AFP

SAN FRANCISCO • The smartphone market is down but not out, with high prices and other factors combining to chill what had previously been a red-hot sector.

Fresh surveys show global sales had their worst contraction ever last year, and the outlook for this year is not much better.

Still, analysts do not see the sun setting any time soon on the smartphone era, seen as a must-have device for many people around the world.

"They don't have a viable replacement yet," independent Silicon Valley analyst Rob Enderle said of the smartphone. "There is always the possibility to go to wearables or head-mounted displays, but none of those have emerged as a real threat."

Worldwide handset volumes declined 4.1 per cent last year to a total of 1.4 billion units shipped for the full year, according to research firm IDC, which sees a potential for further declines this year.

Another market tracker, Gartner, said its research suggested some stabilisation in the smartphone market at the end of last year, said analyst Werner Goertz.

"Mobile phones are here to stay," Mr Goertz said, while suggesting that consumers may be waiting for some devices with new features.

Analysts pointed out that other tech products such as personal computers have seen similar ebbs and flows.

"Markets will always have slow moments when companies have to spend more on marketing money to get people to go out and buy stuff," Mr Enderle said.

He added that some consumers are holding off on replacing their devices amid price hikes for premium devices like Apple's iPhone.

"People don't want to spend another thousand bucks to replace something that isn't broken," Mr Enderle said. "In emerging markets, you can't get people to pay a quarter of their monthly income for a phone; they are not giving up food for texting."

Nonetheless, the latest data suggests the days of red-hot smartphone growth are over and that sluggish growth or contraction is likely in many saturated markets.

Apple recently reported a rare drop in revenue in the fourth quarter. South Korea's Samsung, the world's largest smartphone maker, reported a slump in fourth-quarter net profits, blaming a drop in demand for its key products.

"Globally the smartphone market is a mess right now," said IDC analyst Ryan Reith. "Outside of a handful of high-growth markets like India, Indonesia, (South) Korea and Vietnam, we did not see a lot of positive activity in 2018."

Mr Reith noted that along with consumers waiting longer to replace their phones and frustration around the high cost of premium devices, there was political and economic uncertainty.

The Chinese market, which accounts for roughly 30 per cent of smartphone sales, was especially hard hit with a 10 per cent drop, according to IDC's survey.

However, Chinese smartphone makers such as Huawei, Oppo, and Xiaomi defied the trend and ended the year with gains, according to Counterpoint Research.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on February 04, 2019, with the headline 'Once red-hot smartphone market sees slower sales'. Print Edition | Subscribe