As Apple’s valuation approaches $2 trillion, and the most innovative technology companies are closing down, it might feel like we’re reaching saturation with the world’s most popular tech. But while smartphones may have spread faster than any other technology in history, the global mobile market is also shrinking at its fastest rate yet.
Last year, a record number of phones were sold. This year, those numbers are expected to drop, as consumers upgrade their devices less frequently and major vendors struggle with slowing demand. This contraction is occurring just as 5G networks prepare to launch, promising faster download speeds and augmented reality features. But will new networks and augmented reality apps be enough to save smartphone growth?
The first quarter of 2023 was a tough one for most mobile phone vendors, with shipments down almost a third from the same period last year. According to research firm Canalys, the weak results are due to a combination of factors, including slow demand and a cautious approach by distribution channels.
It’s also not helping that China, the world’s biggest smartphone market, is showing signs of slowing. In fact, the country’s smartphone shipments in the fourth quarter were down four percent year-on-year. Canalys’ Runar Bjorhovde explains that this was the industry’s “worst annual and fourth-quarter performance in a decade”, with distributors reducing inventory levels ahead of the holidays.
Moreover, high inflationary conditions have squeezed disposable incomes in many markets, and this is impacting consumer spending on phones. In addition, users are holding on to their devices for longer than they used to. A senior executive at a top mobile phone maker tells the Wall Street Journal that average phone replacement cycles have increased to 36 months from 24 months some time ago.
In the wake of these developments, some manufacturers have slashed prices on their products and are looking to clear out existing inventory. Others have cut their revenue forecasts, with Nokia and Sony Ericsson both slashing estimates for the year ahead.
It’s too early to say whether the slump is just a cyclical downturn or if demand will pick up again next year. However, the accelerated decline in smartphone sales could be a sign that the industry is entering its “late maturity phase”, similar to when personal computers, laptops and tablets entered the market and started to cannibalize desktop PC sales. At this stage, the market will have to settle on which mobile devices are most desirable and which networks will be the most useful for consumers. The mobile market looks very different now than it did three decades ago, when Motorola dominated the business. See how the landscape has changed in the infographic below.