What’s affecting phone sales – and what can turn things around?

Image credit: Apple

This year got off to a rocky start for the tech world when Apple – long seen as a key bellwether for the market as a whole – revealed it was downgrading its sales forecast for the year ahead. When longtime rival Samsung followed suit a few days later with news that it had missed targets in 2018, the world took notice, and suggestions that the smartphone market has peaked are abound.

Apple in particular suggests that weakness in China has been one of the big issues behind its lower-than-expected predictions, which have led it to cut production of iPhones by ten per cent for the first quarter of the year. 

But while it's true that there is greater uncertainty in this part of the world, with homegrown Asian manufacturers offering more competition and the threat of tariffs and the trade war with the US a particular issue for California-based Apple, is this the whole story?

Are consumers less excited by new releases?

One other possible reason for the slowdown in sales is that consumers around the world – not just in China – are seeing fewer reasons to swap their current phone for the latest model. Indeed, in the past, a typical Apple customer might be expected to upgrade their device on a roughly two-year schedule, in line with many 24-month contracts.

However, it has been suggested that these days, a refresh cycle of closer to three years is becoming more common. So why is this? While it may be that people aren't as excited by the prospect of new, innovative features as they once were, a more mundane reason is that older devices are still often just as useful to many users as the latest models.

Indeed, a recent New York Times article noted that as the cost of replacing a phone continues to rise – Apple's latest models now routinely break the $1,000 mark – more people will decide to stick with what they have.

Chris Caso, a tech analyst with Raymond James, told the newspaper: "We're going to move to longer replacement cycles, principally because the cost is higher. It used to be that for $650, you got all new features, a better screen, everything. Now, to put more features in the phone, it costs money."

It's an issue that could especially effect Apple. For years, one of its great strengths has been its brand loyalty, which meant a steady flow of customers who would automatically rush to get the latest model, and wouldn't even considering looking at Android alternative. But if they don't feel the newest model offers a significant upgrade, they're likely to keep their wallets in their pocket.

New technologies to reinvigorate interest?

However, it's not all doom and gloom for the smartphones market. Indeed, while we may have reached something of a plateau in terms of features such as higher-resolution screens and multi-megapixel cameras, there are a few new innovations in the pipeline that analysts believe will help kick-start the market again.

"For too long, major vendors have been lambasted for upgraded devices looking far too similar to their predecessors, with iteration rather than design innovation becoming the norm," said David McQueen, research director at ABI Research. 

"It has become increasingly difficult for vendors to differentiate on features, with price being one of the very few competitive factors left, but new technology innovation and features are just around the corner to help arrest this decline."

One of the most important may be 5G. With commercial deployments expected to finally arrive in the second half of the year, and really take off in 2020, this could be a key differentiator that persuades some people to upgrade.

Indeed, ABI Research suggested that that capability could be the "silver bullet" the industry needs to regain their footing. However, it will be vital for phonemakers to better communicate what this can offer in order to convince customers.

A separate study by GSMA, highlighted by TechRadar, supports this. It found only half of people understand 5G means faster speeds and only a quarter expect 5G networks to deliver new types of services. Just a fifth are aware 5G will enable new types of devices.

It is not 5G alone that could give the stagnant smartphone market a boost. ABI Research also highlighted the advent of flexible displays as a selling point for the next generation of handsets. Together, these innovations will introduce users to new ways to interact with their devices. 

"Taking full advantage of these new functionalities, users will see improvements in the user experience, including upgrades to voice assistance, AI, and smart biometrics," the company continued. 

With these features set to hit the market in the coming months and years, could it therefore be the case that the smartphone sector is due a renaissance? Only time will tell.