Smartphone Sales Will Stagnate Until We See AR, 5G

6 min read 

In 2013, it was common to see people upgrade to a new iPhone or Samsung every year. In 2018, the cost of a new premium smartphone has doubled to around US $1,000. I find myself holding on to my phone a lot longer nowadays.

With phones having full screen displays reaching 6 inches, do you still need to consider buying a tablet? And with premium phones having as many as three cameras, what will happen to the camera industry? But maybe we should ask this question from another perspective: do you really need a phone with three cameras to begin with? Is it still called a phone when you rarely even phone people? These new innovations may be gimmicks rather than ground breaking technology, and I would argue they are simply building on existing success.

Some may justify the size of the large screen for mobile gaming. Although gaming is definitely an important revenue for smartphones and apps, not everyone who buys a smartphone has the time for gaming. Moreover, full screen displays as the norm mean decreasing differentiation between products. Does it even matter which phone you are watching Netflix on?

The growing weight and size of smartphones has already led some clothing manufacturers to sew bigger pocket sizes into their trousers, and taobao vendors sell neck straps for toting large handsets.

larger phones brings larger pockets in trousers (source: digitaltrends)
larger phones brings larger pockets in trousers (source: digitaltrends)

The breakthrough technology of smartphones may now be past the point of diminishing returns. Are new premium smartphones priced US $1,000 really twice as good as smartphones priced US $500?

Not really.

Future of Apple and Samsung

Apple and Samsung’s premium pricing has led Chinese smartphones makers like Huawei and Xiaomi to enter overseas markets with lower prices and comparable quality. That competition may mean the dominance of Apple and Samsung is nearing its end. In China, you’ll hardly ever see a person using a Samsung phone. If Apple and Samsung want to keep their dominance, they may have to slash their prices for premium smartphones. If premium prices continue to rise, those phones may become luxury goods affordable to only the few – for example, the upcoming Oppo Find X Lamborghini Edition.

Oppo Find X Lamborghini Edition
Oppo Find X Lamborghini Edition

Furthermore, sales figures released by both Apple and Samsung show they are suffering from stagnant and decreasing sales figures. Sales figures from Apple show that since the price of a flagship iPhone rose to US $1,000 the number of phones bought and sold has decreased. The chart below shows that the growth in iPhone unit sales has more or less stagnated since 2015. In order to sustain profits, Apple may be to release more mid-range and entry level phones, such as the long-rumoured iPhone SE 2, or increase the longevity of older models.

Apple's holiday quarterly performance
Apple’s holiday quarterly performance

Samsung’s death in China came from the combined challenges of rising Chinese brands, such as Huawei, Xiaomi and Oppo, and political tensions. Today, Chinese brands account for nearly 70 percent of the domestic market. But sale figures for smartphones in China are declining, shifting the battle to mid-range phones in other Asian markets. Chinese smartphone makers have shown they can create good quality products at low prices.

Chinese brands now account for nearly a third of the market in Southeast Asia. Samsung’s mid-range phone sales have declined due to the rising quality of the Chinese brands and Samsung’s decision to concentrate on premium phone series.

source: Asean Post
source: Asean Post

But there may be another explanation for the shift.

In top phone-purchasing markets, such as Indonesia and the Philippines, expensive premium phones are not a large part of the market share and consumers do not switch their phones on a yearly basis.

Xiaomi recently released its Redmi Note 5 in Korea. Even in Samsung’s home country, there are indications that Chinese smartphone makers are set to increase their market share in the near future – especially in the mid-range and budget product tiers.

Xiaomi
Xiaomi

The only place Chinese phone makers are underrepresented are European and US markets. That may be more due to legal and political disputes than concerns about quality. In 2018, both Huawei and Xiaomi made significant increases in the EU market. If this trend continues and if legal and political disputes can be solved, then I can imagine Chinese brands increasing their market share in western markets as well.

The coming years

The future of smartphone innovation may not be in hardware, but in software. Virtual assistants – starting with Siri from Apple, and now Bixby, Google Assistant and Jovi – are speeding up basic phone tasks such as Web searching and navigation. In the case of China, apps such as WeChat are being used for everything from renting apartments to buying movie tickets and paying bills. If these features become popular and mainstream, then phones will become more useful whether they are an iPhone X or iPhone SE.

Although I was joking about the OPPO Lamborghini edition smartphone earlier on, it does have Super VOOC technology, which can charge a 3400mAh battery in only 35 minutes. Future battery charging technologies such as this are likely to become the norm. However, the present ability to charge a premium phone to 80 percent in one hour seems to be enough.

Augmented reality (AR) could be another important area for growth in the near future. However, firms need to stop pursuing gimmicky AR and expand into practical areas other than gaming and photography. Mapping developers could create useful databases in real time; marketers could create innovative advertisements in AR to grab our attention. AR could be the useful innovation that is missing in the smartphone market.

augmented reality in smartphones (source: mobileeurope)
augmented reality in smartphones (source: mobileeurope)

Furthermore, 5G mobile services may be widely available in the near future. That would allow 4K videos to be streamed easily across mobile platforms, and future technology may create the first 5G smartphone allowing faster speeds. The question is whether 1080p HD video is already enough to satisfy our needs, and whether watching Netflix at 4K would take up too much data and storage.

It all goes back to the law of diminishing returns. As with Super VOOC technology, once all of our phones can charge within 35 minutes, do we really need more development in that area?

Conclusion

In the near future, consumers are likely to stick to their phones a lot longer. The majority of tasks can be accomplished whether you are using an iPhone SE or an iPhone X. We can also expect to see more Chinese smartphones in western markets, especially if handset makers can resolve their disputes in the USA and release more limited editions.

What will truly motivate consumers to buy a new smartphone will be new functionality. That won’t happen unless hardware developments enhance lives or offer a required upgrade, as in the case of 5G connectivity and AR.

Sources:
Asean Post (2018) https://theaseanpost.com/article/chinese-smartphones-reign-supreme-southeast-asia Chinese smartphones reign supreme in Southeast Asia (Access on 6/8/2018)
Business Insider (2018) https://www.businessinsider.com/smartphone-sales-are-decreasing-2018-2 Smartphone sales are decreasing (Access on 6/8/2018)
Venture Beat (2018) https://venturebeat.com/2018/05/09/huawei-smartphone-sales-surge-in-europe-as-apple-and-samsung-stumble/ Huawei smartphones sales surge in Europe as apple and Samsung stumble (Access on 6/8/2018)

Featured Image Source: 9to5mac.

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