As Smart Phones Approach the Saturation Point, Prices Head Downward

As Smart Phones Approach the Saturation Point, Prices Head Downward

• By David Nagel

 

The era of double-digit growth in smart phone adoption is coming to a close as devices approach the saturation point, which in turn will lead to drops in prices, according to new research. In North America alone, some 200 million smart phones are already in active use — one for about every 2.75 people residing on the continent and about one-seventh of the world's total active devices.
According to International Data Corp., in mature markets like the United States and Europe, smart phone growth will drop to the single digits in 2014, while, worldwide, growth will drop in half to about 19.3 percent for the year. (That follows growth of 39.2 percent in 2013 on 1 billion unit shipments. Shipments in 2014 are currently forecast at about 1.2 billion units.)
By 2017, total worldwide growth will slow to 8.3 percent, and by 2018 6.2 percent.
In turn, the average selling price of a smart phone will decline by 5 percent, or $75, by 2018, according to IDC.
"2014 will be an enormous transition year for the smartphone market," according to Ryan Reith, program director with IDC's Worldwide Quarterly Mobile Phone Tracker. "Not only will growth decline more than ever before, but the driving forces behind smartphone adoption are changing. New markets for growth bring different rules to play by and 'premium' will not be a major factor in the regions driving overall market growth."
"Last year we saw a total of 322.5 million smartphone units ship for under $150, and that number will continue to grow going forward," said Ramon Llamas, research manager with IDC's Mobile Phone team, in a prepared statement. "We've already seen numerous smartphone announcements targeting this priceband this year, with some as low as $25. Just as the dynamics have changed for overall smartphone growth, so have the dynamics for smartphone pricing in the markets where continued growth is expected. Not all vendors will want to get into this space, but those that do must make deliberate choices about their strategies in order to succeed."

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IDC also predicted that Android would maintain its dominance of the overall smart phone market through the forecast period. Shipments of Android smart phones are expected to reach 950 million this year, representing 78.9 percent of the total market. That will grow to 1.32 billion by 2018, representing 76 percent of the total forecast market size for that year.
Apple's iOS will reach 179.9 million units this year, or 14.9 percent of the market. Those devices will reach 249.6 million units in 2018, or about 14.4 percent of the total market.
Windows smart phones will grow from 47 million in 2014 (3.9 percent of the market) to 121.8 million in 2018, about 7 percent of the market.
As for BlackBerry's future, IDC all but forecast that platform out of existence. BlackBerry will have 1 percent of the market in 2014 on 11.9 million unit shipments, according to IDC, and will drop to 0.3 percent in 2018, shedding more than half its 2014 unit sales and coming in at a forecast 5.3 million units.