Smartphone Growth Halves From 2014 to 2015

Almost 1.3 billion smartphones will be shipped worldwide this year, says IDC, representing a 26.3% YoY gain. Growth will slow significantly next year to 12.2%, when 1.4 billion units are forecast to be sold. The trend for slower growth will continue throughout the forecast to approach 1.9 billion units in 2018, leading to a 9.8% CAGR for 2014 – 2018. Revenues, hit by prices that are continually being driven down, will experience a 4.2% CAGR.

While premium phones will remain in the market, “The impact of upstart Chinese players in the global market will be reflected in a race to the bottom when it comes to price”, said senior research manager Melissa Chau. Specifications in affordable smartphones are getting better and consumers no longer need to buy a flagship device for a decent experience. “The biggest question now is how much lower can prices go?”, she said.

Average selling prices this year are expected to fall to $297, and $241 by 2018. Prices will be much lower in emerging markets such as India; ASPs in these regions are just $135 today and will fall to $102 by 2018. However, mature market ASPs are expected to remain stable. A minor increase in shipment volume will not drive overall revenue up, as each smartphone generation is less differentiated from its predecessors.

In operating systems, Android will continue to drive volumes while iOS drives revenues. Android will represent 80% of global smartphone shipments by 2018, and 61% of revenues. iOS will have 13% of volumes and 34% of revenues. With the dominance of Android, new systems like Tizen and Firefox cannot compete only on price; they must be significantly different from the established players.

“As shipment volume slows, we expect greater attention to shift toward value trends”, said research manager Ramon Llamas. “Apple’s approach with premium pricing ensures a growing portion of overall revenues despite its declining market share. Meanwhile, Android’s multi-faceted approach – with forked versions and low-cost Android One strategy – will produce mixed results, yet it allows deeper penetration into emerging markets. That can lead to additional pressure on its vendor partners, who will need to seek greater differentiation in terms of devices and experiences in the hyper-competitive smartphone market”.