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The Current State of the Smartphone Market

The Decline of the Juggernauts

The smartphone market has been through many ups and downs in the last two years. Starting with the release of the 2017 iPhone X from Apple Inc., which brought many reactions, ranging from outrage regarding the price tag, to fans adoring the new design and features. Nevertheless, according to Bloomberg, “Analysts have lowered iPhone X shipment projections for the first quarter of next year,” while “citing signs of lackluster demand at the end of the holiday shopping season” (link). This meant that iPhone X demands weren’t as high as expected, lowering, but not entirely ruining the sales figures. There are many available explanations for this decrease in sales, a common reasoning among analysts, according to Bloomberg, is the release of the iPhone 8 and 8+, which were also released at the same time, but with a lower price tag.

This trend, however, did not end with Apple’s new iPhone X. The year after the iPhone X’s release, 2018, Samsung Electronics Co. released their new iteration of their Galaxy lineup of phones, the S9 and S9+. Their advertising campaign was an ambitious one, with slogans such as “The Camera, Reinvented,” among others. Nevertheless, months after its release, “sales flopped.” According to the BBC, Samsung’s representatives have stated during a conference call that “As smartphones become more high-spec and product differentiation is becoming less clear, the global handset replacement cycles are getting longer,” lowering the estimated revenue from the phone up to 20% (link). In addition, “the higher price points of premium products appear to be driving market resistance,” overall reducing the figure of individual sales. Critics have praised the S9 and S9+’s new camera tricks as well as AR Emojis, but these changes have “not made the phone a hit.” One must pay great attention to the detail mentioned above, more expensive, high-end, and quality phones are selling in slower, longer cycles.

The Rise of the Budget to Mid-Range Phones

China is the largest smartphone market in the world, and this comes at a price. According to an analysis done by Canalys, ever since Q1 2012, the shipment and sales of Chinese phone companies have grown at a steady pace, as seen in Q1 2012, approximately 30 million phones were shipped, while in Q3 2016, there was a peak of 130 million phones shipped (link). Many of these Chinese companies have offered cheap, but viable alternatives to foreign brands such as Apple and Samsung. This advantage in price point has allowed these smaller manufacturers to cater to markets preferring quantity over quality. Due to the rise of Chinese companies, the “Juggernauts” have lost ground in China, as stated by CNN writer Sherisse Pham, “this slowdown has already hit Samsung sales in China,” and “Apple also lost ground in China, slipping from fourth to fifth place in the market” (link). Which could explain the former “flops” in sale for Samsung and Apple’s new flagship phones.

The Normalization of the Market

The increased value of Chinese companies is a positive change. Nevertheless, this sudden growth of value and market also has its downsides. A current phenomenon described by Canalys in their article is the negative growth of market (link). Q1 of 2018 has suffered a big hit, with a -21% growth rate in Chinese markets, and a giant dip in the shipment figures. Compared to late 2017, which had 110 million units sold, Q1 2018 sold 80 million units. This can be connected mainly to the increased cost and quality of these Chinese manufacturers. OnePlus Co., for example, has improved the quality and features of their phone, but the price has been raised at a similar rate. According to AndroidAuthority, a media company, the original OnePlus One launched at a price of U$299, with its second iteration selling at U$329, with a follow-up from the third generation, which sold for U$399 (link). At a similar rate, the price kept increasing until the current OnePlus device, the OnePlus 6, which currently costs U$529. This has “sparked debate around OnePlus’ tagline ‘affordable’ flagships,” meaning that these “cheaper and affordable” phones have assimilated into high-end markets. The overall improvement in production lines and material quality throughout the market have made it impossible for these cheaper phone companies to compete by building their traditional affordable phones, experiencing a similar phenomena to Samsung and Apple in their worldwide sales. Thankfully, though, the market balance has shifted due to these events, and one can hope that this balance creates a competition which pushes companies to produce better, competitive phones.

 

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