Huge challenges ahead for smartphones market

Users of smartphones wonder where the technology take them amid markets reaching point of saturation and army of customers looking for cheaper smartphones or reluctant to buy new ones. And with the annual Mobile World Congress (MWC) kicking off in Barcelona, the world’s biggest manufacturers are set to feature their latest products that may address tastes of more tech-savvy customers.
MWC is by far the major mobile event of the year during which companies showcase their flagship devices and high-end handsets. The event will address some challenges, as sales of high-end smartphones are slowing, and the profits the manufacturers used to reap are trending towards zero.
Worldwide smartphone shipments are expected to rise to 1.9 billion units in 2019, from 1.4 billion last year, according to the research company IDC. The average selling price of handsets, however, will decline by 4.6 per cent each year to US$236.38 from $293.61.
Much of the drop will result from volume increases in developing countries, where smartphones are cheap by developed-world standards. More people coming online through inexpensive phones will push average prices down.
Another factor leading to decrease in demand is saturation in developed markets. This new trend is even affecting Apple. The company’s iPhone sales grew by only 0.4 per cent in its most recent quarter, its smallest increase since the device launched in 2007. Apple enjoyed a sales spike a year ago when it introduced iPhones with bigger screens, but the lustre is off.
The company’s high-end products bought earlier by the customers are still effective and they do not feel like buying new ones. This attitude put the companies in a dilemma.
Apple is not alone anyway. The news is worse for Samsung, Apple’s chief competitor. The South Korean company last month reported a 40 per cent decline in quarterly profit, led by its mobile division. The Galaxy S6 and S6 Edge, unveiled in Barcelona last year, failed to catch on, with some analysts proclaiming them flops. As it stands, Apple makes about 94 per cent of the industry’s profit and everyone else is fighting over the scraps.
To beat the reluctance of the customers, the companies in some markets sell the smartphones through subsidies where the customer pays a relatively smaller upfront fee in exchange for signing a contract for a year or longer. In the UAE, for example, a full-priced, unsubsidised iPhone 6S costs AED2,599. On a 12-month contract with du, however, the upfront fee is AED1,199 — after which the customer pays AED350 a month. The device can also be had for no upfront payment with a two-year contract. The subsidy plan is popular with consumers because it makes it look like they’re getting a deal.
“Worldwide mobile application store revenue is set to reach $101 billion in five years as smartphones become cheaper and data plans more accessible, drawing in people in developing countries,” according to data provider App Annie.
The user base of smartphones and tablets will more than double to 6.2 billion by 2020, up from 2.6 billion, the San Francisco-based company said in a forecast.
Some of the strongest growth will come from countries such as India, Indonesia, China, Mexico, Brazil and Turkey. Revenue generated per device will grow to $16.2 in 2020 from $15.4, boosted by spending in the Americas, Europe and the Middle East, even as average revenue will decline slightly in the fast-growing Asia-Pacific region.
The smartphones have been dominating all walks of life, with banks lining up to digitise, with a view to expand their date base and expedite delivery of services to increasing digitised customers.
Technology each day is changing all aspects of our daily lives to the extent that companies keep updating their products to keep abreast with these rapid changes.