From roughly 2007 until 2013, the smartphone market grew at an astonishing pace, posting double-digit growth year after year, even during a global recession. They were the good years, the type that would inspire a Scorsese montage: millions and then billions of smartphones going out; billions and then trillions of dollars in rising company valuations; every year new models of phones hitting the market, held up triumphantly at events that were part sales pitch, part tent revival. (To nail the Scorsese effect, imagine “Jumpin’ Jack Flash” playing while you think about it.)
But just like every Scorsese movie, the party ends. Smartphone growth began to slow starting in 2013 or 2014. In 2016, it was suddenly in the single digits, and in 2017 global smartphone shipments, for the first time, actually declined — fewer smartphones were sold than in 2017 than in 2016.
Every smartphone manufacturer is now facing a world where, at best, they can hope for single-digit growth in smartphone sales — and many seem to be preparing for a world where they face declines.
The Smartphone Plateau
The idea of a “smartphone plateau” has been floating around since at least 2012, with the phrase entering common usage in the middle of this decade. It has a twofold meaning. One is the slowdown in smartphone innovation, which was once progressing at that same breakneck pace as smartphone sales. If you bought a new iPhone 3G in 2008, and then a new iPhone 4 in 2010, you were buying markedly different machines, with the iPhone 4 sporting a Retina display, a much better battery, a faster processor, and a sleek, sharp-edged design. If you bought an iPhone 6 in 2014 and then an iPhone 7 in 2016, that expected improvement was much harder to mark (except, perhaps for that fact the the iPhone 7 didn’t have a 3.5mm headphone jack). The other meaning is the flattening of smartphone sales.
We’re already fairly far along this plateau — from 2015 to 2017, global smartphone shipments have held firm at about 1.4 billion per year — but talking to analysts and reading the tea leaves of what the major manufacturers are doing, it’s looking like we’re reaching the end. Not because sales are picking up again, but because we’re heading toward the downslope. “I think we’re well over the plateau,” says Ben Stanton, senior analyst at Canalys. “We’ll see little pockets of growth in the global market, but on the whole it’s a declining picture.”
In 2017, per the International Data Corporation, global shipments of smartphones declined year-over-year for the first time in history. In 2018, IDC says the same thing happened in the U.S. market. “We are at market saturation rates of 90 to 100 percent in many developed markets,” says Ryan Reith, program vice-president at IDC.
Some manufacturers and analysts may hope that flat sales in the developed world could be offset by strong sales in other markets. Fat chance. The markets where smartphone saturation hasn’t set in yet — such as India, Southeast Asia, pockets of Latin America, and Africa — are different than the markets that fueled the first decade of smartphone growth. “In those markets, there are extremely competitive devices down near the equivalent of $200,” says Stanton. “It’s becoming a real battlefield, but it’s a low-margin business and consumers down at the those price points tend to be not very brand-centric. That really plays into hands of a few really hyperaggressive brands of smartphones, most of which are coming from China.”
The Artificial Replacement Cycle
If you’ve bought flagship phone in this year, you likely won’t need to buy a replacement until the next decade. “Most people have more phone than they can handle, or need,” says Gartner senior principal analyst Tuong Nguyen. “It’s similar to what you saw in the PC market for while — people had really powerful PCs but they barely used it for anything. It’s the same with phones.”
Your smartphone camera is good to great, and you mainly share those photos on social media, where photo quality doesn’t matter much anyway. Barring a few high-end 3-D games or technologies like augmented reality, your processor can handle everything you throw at it, and will for a while. Your screen is bright and sharp, and while there may be slightly better screens out there, you’d only be able to tell by holding the two phones side-by-side. Durability has vastly improved; waterproofing is now standard on smartphones, so a brief dip in the sink or toilet doesn’t mean you need a new phone, and the weakest links in smartphone hardware — batteries which tend lose their ability to hold a charge over time and screens that crack and shatter — have improved.