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Have Smartphones Peaked?

Have Smartphones Peaked?

All products have a natural life cycle: They get introduced to the market and gain acceptance, then have a steep growth period. After that, the product sales flatten and plateau prior to entering a downward trend. The timespan for this natural curve differs for each product, but it appears to me that smartphones are beginning to reach the plateauing phase.

While 1.3 billion smartphones were sold worldwide in 2015—and the forecast for 2016 is 1.4 billion—growth is slowing from double digit year-over-year percentage increases, dropping to the 1 % range and even negative range (at least in North America). Growth is still strong in Asia and other parts of the world.

Fig. 1
Image courtesy of Thinkstock

As for ownership penetration, it is about 84% in North America, meaning almost everyone already has a smartphone. Penetration is about 60% in the Asia Pacific regions and about 45% in Europe. There is still some growth left, but price decreases indicate lower smartphone revenue.

And that brings us to the smartphone itself. Manufacturers are doing all they can to keep sales growing in what is becoming a replacement market. Now we are reaching a point where new features and benefits are hard to come by. The changes that have taken place since the days of the early Blackberrys and Palm Pilots through to the first Apple iPhone in 2007 and beyond have been dramatic. Larger, high resolution touchscreens and continuously more powerful processors dominate the changes.

Better, longer-life batteries have also been developed. Then there are the high-resolution cameras on both front and back. Messaging, email and Internet access are also a given as are millions of apps.

But that’s not all. Think of the features enabled by adding Bluetooth and Wi-Fi. GPS and maps are also now standard features. What more can we possibly do or add to make the smartphone more useful and attractive?

Larger screens have driven sales in the past few years thanks to more video viewing. But that now seems to be topping out. It appears that a 6-in. screen is about as large as people want. Many phones now have Near-Field Communication (NFC) transceivers to implement electronic pay systems.

Another recent feature is wireless charging, but that hasn’t achieved popularity because of its challenges. Voice recognition is also available in most new top-line phones, but is that more of a gimmick than a useful feature? And where do we go from here?

Samsung’s new Galaxy S7 is a good example of what is happening. It has the big 5-in. high-res screen and 12-MP camera, but those are now what everyone is offering. What’s really new is…ta- da…waterproofing. And also, the more useful removable memory modules. How big a need is there for waterproofing? (More storage is always welcome, of course.0 Are these new features enough to get you to upgrade?

Apple is taking another approach, having just introduced its new iPhone SE. That’s right, no number—just SE. It is intended as a replacement for the 5S, which still sells by the millions. While the 6S and 6 Plus are huge hits, not everyone wants the larger, more expensive model. The smaller and cheaper 5S with its 4-in. screen is good enough.

I agree, as I am still quite happy with my 5S. The new SE upgrades this design with the latest A9 processor, a 12 MP camera, NFC for Apple Pay, longer battery life, and—oh yeah—a lower price. Not a bad deal at all for many folks.

It’s hard to tell what we will see next. I would love to see an FM radio as a feature, but the antenna is a problem. LTE carrier aggregation will be along shortly to give more bandwidth and higher download speeds. But do we really need more speed at this point? Realistically, there aren’t very many new things left that make sense to add.

What I worry about is how smartphone manufacturers plan on cramming in all of that sophisticated millimeter-wave, beam-forming MIMO 5G hardware into a phone when it comes along a few more years down the line. We may get 1 Gb/s download speeds, sure, but you may need to recharge your phone three times a day. Which would you rather have: higher speeds or longer battery life?

And what would you like to see added to mitigate the plateauing problem?

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