Insight

Growth Opportunities in the Saturated Global Smartphone Market

June 26, 2019

The global smartphone market declined 2% annually in 2018 and is expected to remain flat in 2019. Replacement cycles are lengthening, and the lack of breakthrough innovations is making it difficult to attract buyers. Mature markets like China, the US, and Europe, are showing few signs of recovery. Competition is increasing even in emerging economies like India as OEMs expand aggressively. In such a scenario, localized offerings, as well as an appropriate channel and marketing mix, have become crucial to stay relevant. Even in this sluggish market, there are pockets of growth. Chinese OEMs, especially, have been quick to identify these areas. The saturation in the home market has led the Chinese players to look for newer growth arenas overseas. This has created a wave of disruption and smartphone adoption in emerging economies like India, South East Asia (SEA), and the Middle East and Africa (MEA). Extensive product innovations and effective marketing strategies have helped some OEMs to achieve exponential growth across price bands, in both overseas and the Chinese market. Clearly, the discovery of new markets and new pockets of growth is essential for smartphone brands to grow. Counterpoint has identified some such growth areas. We have split these across price bands, geographies, and product features. Let us take a closer look at these areas:-

Significant Growth Seen in Emerging Markets as Mature Markets Slow

One of the key reasons for the slowdown in the global smartphone market was the sluggishness in mature markets. Even the collective smartphone shipment growth in emerging markets was not enough to offset the decline in the mature markets. However, there are some countries which are still getting the attention of the smartphone supply chain and OEMs. India is one such example as it was the fastest growing country for smartphone sales among other emerging smartphone markets. Exhibit 1 highlights other such geographical regions where the smartphone segment continues to grow.

Exhibit 1: Smartphone YoY sell-through growth by regions - 2018

*APAC Ex China India and Japan. Source: Counterpoint Market Pulse

Mid and Premium Segment Smartphones

The growth momentum is shifting from the entry-level segments to higher price bands. Increased use-cases and mature smartphone users upgrading their devices are driving this trend. The premium segment (>US$600) and mid-segment (US$151-US$300) have both registered high positive year-on-year (YoY) growth in 2018 There is also a trend of increasing average selling price (ASPs) of smartphones across the globe. In fact, global smartphone ASP in 2018 grew at the fastest ever pace of 11% YoY. The maturity levels of the market have influenced the shift in price band preferences. Premium flagships from OEMs are raising ASPs in mature markets like North America, Japan, Korea, and Western Europe. In emerging markets, ASPs are increasing because of higher-priced devices in the affordable premium segment. Examples of such devices include OnePlus, older iPhone models, and models with higher ASPs from brands like OPPO, Vivo, Xiaomi, and Huawei. The premium and the mid segment have emerged as the new pockets of growth in terms of price bands. All the key OEMs operating in these segments grew their sales. The diffusion of high-end feature from premium to the mid-segment is making it a viable option for buyers of entry-level and mid-high segment smartphones.

Key Features Driving Growth

OEMs have been focusing on differentiating their offerings by chalking out new product categories across price bands. Features such as full-screen displays, dual-cameras, biometric security, and support for AI, are beginning to make inroads to the mid segment. Camera, AI, memory, and display are the key growth driving features. Our forecast for the smartphone market in 2019 is flat, but we believe as the Chinese economy recovers in late Q2, the overall smartphone market will stop the negative growth starting from H2 2019. We believe the growth opportunities will remain hidden like last year, and only a handful of companies will succeed in gaining growth this year again.

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Author

Varun Mishra

Varun is a Principal Analyst at Counterpoint Research based out of Gurgaon. In Counterpoint, he closely tracks mobile devices and ecosystem with a focus on Apple. He started his career as a Consultant with Infosys Limited where he was able to identify strategic avenues for business growth through deep research and analysis of markets and companies in various domains. He holds a Master of Business Administration in Marketing from Institute of Management Technology, Ghaziabad and a bachelor's degree from Coventry University, UK.