At the start of the month there was a flurry of articles about smartphone saturation. This is because sales of premium smartphones are beginning to slow down, theoretically because everyone who wants to spend big on a smartphone has already done so. Fears are driven by the fact that shares of the big two – Apple and Samsung – have been dropping. In fact they’ve gone down around 20 percent this year. HTC’s fall is more like 30 percent.
The price of stock jumps around and it’s not always entirely clear why. The fact is that all three companies showed a rise in profits last quarter, compared to the same quarter last year. Apple and Samsung continue to generate obscene amounts of money. The lack of confidence is down to a growing perception that, with the premium market tapped out in places like South Korea, the U.S. and Europe, the major manufacturers will have to start competing for emerging markets and that will mean selling cheaper devices with lower margins.
Samsung missed its forecasts. It only generated £5.5 billion profit last quarter. Can you believe that? Might as well pack up and go home Samsung. These valuations and stock prices are driven by the frankly insane belief that you can continually increase profits (which Samsung has done by the way). It’s not enough to turn a solid profit every year, you have to make more next year. In fact, it’s not even enough to make more next year, you have to make a lot more, or you’re stagnating and you’re a failure.
Analysts were disappointed when the iPhone 5 failed to meet expectations by “only” selling 5 million units in the first three days on sale. The Galaxy S4 took a whole month to sell 10 million units, making it the fastest selling smartphone Samsung has ever released. It would seem that the rumblings about “iPhone and Galaxy fatigue” are proving slow to filter through to the general public.
Back in the real world Samsung and Apple are doing well by any objective standards you’d care to apply.
How saturated is it?
The market saturation argument is definitely valid, though. Google’s Our Mobile Planet report reckons that smartphone penetration in the UK passed 50 percent last year. Other countries to pass the “half of the population” milestone included South Korea, the U.S., Norway, Sweden, and Australia. Smartphones are the fastest growing consumer technology of all time. This Flurry data shows that smartphones have been adopted ten times faster than PCs, twice as fast as the Internet, and three times as fast as social media.
What will they do?
No matter how good the latest smartphones are, the manufacturers are going to struggle to get us to upgrade any faster than the standard two-year contract subsidized agreements generally encourage, although, it is worth pointing out that some service providers are looking at ways of doing just that. The new O2 Refresh plan lets you upgrade every six months and there’s a similar scheme called “Jump!” that’s being launched by T-Mobile Stateside.
From a consumer point of view this competition should be a good thing. If it becomes tougher for manufacturers to sell smartphones then they’ll have to start making them more tempting and that should drive prices down. Market saturation in smartphones should spark more of a drive towards services on our existing devices. If manufacturers can’t tempt you in based on hardware then they have to make the eco-system an irresistible proposition. The competition to get you to switch platforms should intensify. In theory at least, this should lead to a better, and cheaper, experience for all of us.
We’ll also see some serious competition for emerging markets. The margins may be lower, but that won’t stop the manufacturers fighting for a share.
The next big thing
Tablets are already the next big thing and they could outstrip smartphones for that fastest adopted tech title in the near future if they continue to sell at the rate they currently are. The race towards saturation for tablets is already well underway. What about the next “next big thing”? It looks like wearable tech is next in the queue. Could there be a smart watch fad? Are we all going to grab a pair of augmented reality glasses?
Don’t write smartphones off just yet. Some big developments could dramatically improve the experience and they are in the works right now. If a new device offers enough of a step up over what we’ve got then we’ll see another frenzied round of adoption.
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Photo by Blake Patterson (http://www.flickr.com/photos/blakespot/4773693893/)