Why are smartphone sales falling?

Why are smartphone sales falling?

To no great surprise, smartphone sales fell again in the second quarter of this year, with only Samsung and Huawei reporting stronger sales.

However, a recent trade ban by the United States has prevented Huawei from loading Google apps onto its new Android flagship, the Mate 30.

That presumably explains the lack of a European launch date for the Mate 30, and in the long run, the US-China trade war is likely to hit Huawei’s profits hard.

Indeed, it seems Samsung may be the only smartphone manufacturer with reason to smile in 2019.

Apple was hit particularly hard in the latest sales figures, with its smartphone sales continuing to fall (albeit at a slightly slower rate than earlier this year).

It currently holds a mere 11 per cent of market share, behind Huawei and Samsung, which may explain why Apple seems to be focusing more on services than hardware now.

East meets west

While parts of the world still show strong demand for smartphones, these tend to be developing nations where people are less likely to accept the £1,000 price tags of flagship models.

In fact, that attitude is becoming commonplace even developed nations, where Samsung’s recent growth has stemmed mainly from mid-range models rather than high-ticket items.

It’s not hard to see why.

Western smartphone markets are saturated, and most people interested in owning a handset already own one with a wealth of innovations and technologies.

Prices have increased massively in recent years, but innovation hasn’t kept pace, with few game-changing features reaching the market lately.

As a result, consumers who’ve invested hundreds of pounds in a handset don’t see any reason to change it when a newer and slightly better version arrives.

Even the arrival of 5G hasn’t had much impact so far.

Meanwhile, manufacturers continue to ‘persuade’ customers to buy new handsets by ending software supports and upgrades within a couple of years.

Unfortunately, the latest sales figures suggest that’s doing little more than damaging their public image.

It certainly doesn’t seem to be driving sales.

All thing to all people, already

There’s no obvious reason to expect smartphone sales to recover in the short to medium term.

The recent lack of innovation suggests phones are already doing everything they could be expected to.

It’s highly likely that the smartphone golden age is over, and it’s just a matter of waiting for the next big thing in technology to take its place.

Yet opinions on what that may be vary widely.

Some say augmented reality, others point to VR, and people with more than six letters after their name often highlight robotics, machine learning and quantum computing.

But none of these are anywhere close to undertaking a smartphone’s key functions – for now, at least.

Growth, maturity, decline

It seems reasonable to assume that sales will continue to decline slowly over the next few years, in the West at least.

Sales in developing nations will grow, but mainly for entry-level or mid-range phones rather than those profit-bolstering flagship handsets.

If a bold new innovation turns up, things could change. But right now, there’s nothing on the horizon.

Of course, we won’t stop wanting and needing smartphones. We could hardly live without them.

However, they’ll probably become mundane pieces of kit, rather than exciting new objects of desire.

The smartphone seems likely to follow the lifetime trajectory of the TV. Ground-breaking when launched, yet soon relegated to the role of essential but unremarkable household object.

Smartphone manufacturers are already considering their positions in light of this change.

Apple seems to view service and content sales as key to its future, having announced both a TV streaming service and an online gaming service within the last month.

Huawei is focusing on the Chinese and Russian markets, presumably because these countries are more amenable to the use of an alternative OS to Android.

Huawei also recently announced it’ll be easier to sideload the Google apps that the trade ban stopped it installing onto handsets – including the aforementioned Mate 30.

Analysts have suggested the Mate 30’s impressive specifications reflect Huawei’s intention to create phones which are hard to resist.

In turn, that suggests that at least one of the big smartphone companies thinks there’s plenty of life left in this market.

It remains to be seen whether Huawei’s approach is simply misguided optimism, or well-informed confidence.

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