In June of last year, I wrote a post wondering whether smartphones were collectively beginning to “peak” in terms of sales and growth. Now we’re starting to see real evidence of it emerging as Apple’s new iPhoneX failed to meet sales expectations:
Apple Inc is preparing to release three new smartphones later this year, including the largest iPhone ever, a device that may have a bigger display than arch-rival Samsung’s flagship phone, Bloomberg reported on Monday, citing people familiar with the products.
The trio also includes an upgraded handset the same size as the current iPhone X and a less expensive model with some of the X’s key features.
The Cupertino-based company earlier this month forecast disappointing revenue of $60 billion to $62 billion for its fiscal second quarter ending in March, with a number of media reports pointing to slack demand for iPhone X after unit sales failed to meet expectations in the run-up to Christmas.
With global smartphone sales roughly flat, vendors are focusing on features designed to encourage consumers to ditch their old phones earlier than they would have previously.
“The whole nature of smartphone purchase decisions have changed,” O‘Donnell said. “It’s not about what is the newest, greatest model. It’s about when is my phone so old I need to upgrade, and what’s available when I need a new one.”
As I mentioned last year, it’s becoming harder to deliver substantive upgrades to smartphones now that the technology has matured, and development is increasingly centered around gimmick features like the iPhone X’s facial recognition. Most of the key features people like and want on smartphones – email, internet access, Facebook – have already been implemented about as well as they’re going to be.
Apple’s behavior in the last year and a half seems to confirm this. First they received significant backlash for their decision to remove the headphone jack, a move with few benefits to the user which was designed to force people to buy more expensive Apple products to replace the cheaper headphones.
Everyone also probably remembers Apple admitting publicly that they slow down older iPhones, and while they claimed it was related to battery issues, there are many who think it is designed to force Apple users to buy new iPhones to regain acceptable performance.
These moves didn’t just appear in a vacuum. Apple is not run by total idiots, and they realize that sales growth of new smartphone units is increasingly at risk of stalling out, forcing the company to cast about for revenue growth in other ways such as urging more frequent upgrades, as noted by the analyst in the quoted piece above, or selling ridiculously overpriced accessories.
While I am ragging on Apple, this is happening across the whole smartphone industry. What we are seeing is a repeat of the fall of Microsoft and the crumbling of the desktop PC market. Much like what is happening now with smartphones, the fall began when the desktop PC market reached saturation point and the pace of significant upgrades began slowing down.
This does not mean smartphones are “doomed” or “dead,” but smartphone manufacturers face new challenges in navigating a mature market, and can no longer rely on the explosive growth of the past.