Or perhaps I should say if we've reached peak expensive smartphone then this is bad news for the two giants at the front of the pack and possibly good news for the others in the market. There's been a couple of mentions of this possibility in recent days. The NYT for example:
Samsung Electronics may be having the same problemApple has: nearly everyone in the world who can afford an expensive smartphone has one already.
And over at The Register:
"The whole high-end smartphone industry is slowing, which is not just an
HTC problem,"Barclays analyst Dale Gai told the WSJ. "It's a saturated market."
No one is saying that the smartphone market itself is shrinking: very obviously it isn't. However, what is being mooted is that the several hundred million people who might be interested in having a smartphone costing $500 to $700 or so already have one. The market therefore is switching over from being one where companies are persuading people to adopt this amazing new gadget to one where people are replacing them either as they wear out or become technologically left behind. Sales might even continue to climb, slowly, but the massive and rapid growth of the past few years is over. That's the contention at least.
And it's an entirely fair contention too: this happens in all technology markets. The only trick is being able to call when it's going to happen, not whether. Think of the PC market back in the late 80s through to the late 90s. We had an expansion in the gross number of people who had computers, a very rapid one too. And technological advance was such that you pretty much did keep upgrading as the new chips came out. Or perhaps better put, as the new versions of Windows came out, versions that ran like treacle on the last chipset requiring that upgrade. Since then it's all rather flatlined. Sure, they're still selling 100 million a quarter or more (actually, this past year, a little less) but few of us, other than hardcore gamers, are really worried about all of the details of what's under the hood. Sure, it's a box, it does these things and it's now just a standard tool of life. The problem for the manufacturers being that once that happens then it's a very price competitive market and thus profits start to disappear.
This was an interesting comment at The Register:
I'm the reason these companies are about to lose money hand over fist. My current Android model is plenty good enough. I'm not swapping again until something really GOOD comes along. I'm talking Haswell chip, 1-week battery life, double the WiFi signal reception ability, etc. All the crap these companies have been selling for the last couple of years - huge fat phones with panoramic cameras and facial recognition, stupid money-sucking games, and non-stop
To get the next round of upgrades going there needs to be some unique that people seriously desire to have. Something it's difficult to see really. Further upgrades to cameras, batteries, wraps for the OS, sure, they're all nice, but not really compelling reasons to go out and spend that $500 to $700.
There's still potential for huge growth in the lower end of the smartphone market though. Some billions are still using feature phones and getting the price point down (around the $100 to $200 mark) could well pull many of those up into smartphones. But this in itself causes a problem for the high end manufacturers. If they offer a cheaper version of their high end machine to get to that price point then there will be some, at least some, cannibalisation of their high end sales. Why have a $500 Samsung or iPhone if there's a $200 version that does 95% of the same things with the same brand and reliability? This isn't a problem for those who are not making the $500 phones: which is why this change in the market could be good for them.
We don't actually know whether we are at peak expensive smartphone: but there's that undercurrent of stories suggesting we might be. No one thinks it's going to shrink but the days of explosive growth might be over. The only way they could be reignited is if there's some new must have function on the horizon and it's extremely difficult to see what that could be.
