We are happy to announce that Counterpoint would be joining the Mobile Disrupt Conference 2023 as the official media partner. Our Research Director Jeff Fieldhack is also speaking at Mobile Disrupt Conference 2023 at Las Vegas, NV on June 14 – 15, 2023.
Where: The Venetian, Las Vegas, NV When: June 14 – 15, 2023
Mobile Disrupt 2023 is the foremost gathering for professionals in the Wireless Mobility sector. Checking in at the event are companies focusing on Mobile Device Management, Technology and Wireless Expense Management, Enterprise Mobility, Secondary Phone Market, Wholesale Mobile Distributors, Mobile Repair & Refurbishing.
Attendees span from mobility to enterprise experts, including resellers, brokers, electronic recyclers, and mobility professionals who are actively engaged across the secondary phone market. The event provides a unique opportunity for industry professionals to collaborate on best practices, enhance procurement opportunities, and discuss the latest trends shaping the industry.
Our Senior Analyst Tina Lu will be joining Charlas De Café as a speaker for a session on ‘Smartphone Affordability in a Falling Market’. The session will be live on LinkedIn on 4th April 2023, 1500 ART.
About the session:
The smartphone market continues to decline in the world. Users are increasingly delaying the time to change their phone. In the middle, there are options to recondition mobiles, a cheaper and more environmentally friendly alternative, coinciding with a wave coming from Europe. Is the refurbished or remanufactured cell phone a new option in this falling market? Experts and protagonists of this new trend will give us their vision of what is happening in Latin America in the next Coffee Talks.
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Refurbished smartphones are cost-effective alternatives for consumers looking to save money when buying a smartphone. Apple and Samsung are the top brands in this secondary smartphone market, allowing users to purchase popular flagship smartphones at a much lower cost. Even as shipments for the global market for new smartphones grew 4.5% YoY in 2021, shipments for the global refurbished smartphone market witnessed 15% growth, according to Counterpoint Research’s Global Refurb Smartphone Tracker. Factors such as attractive trade-in programs, consumer awareness of sustainability, and certified pre-owned smartphones led to this growth.
In the latest episode of ‘The Counterpoint Podcast’, host Maurice Klaehne is joined by Research Director Jeff Fieldhackand Senior Research Analyst Glen Cardoza to discuss the refurbished smartphone market. The insightful discussion focuses on key topics highlighting the refurbished market performance in 2021, key regions contributing to the growth, and key OEMs. The three also touch upon topics like geopolitics, sustainability, right to repair movement, and much more.
Apple is reportedly working on a subscription model for iPhone and other hardware products. The news made headlines across the tech world. Apple’s influence and strength position it to effect a dramatic shift in the way smartphones are sold. A hardware subscription model comes with its own set of opportunities and challenges. While Apple is most equipped to implement such a plan and become immune to industry challenges, others may find it hard to replicate.
A hardware subscription should not be confused with hardware financing or Apple’s annual upgrade program offered in the US — the key difference here is “ownership”. Apple already offers device financing plans in many regions and some carriers also offer the option to lease the device for two years (after which the consumer is expected to return the device or pay the residual value). The value proposition for Apple lies in driving higher stickiness within its ecosystem while enabling faster upgrades. Therefore, bundled subscription plans with the option to pick and choose more than one hardware and service product will give a big boost to Apple’s “power users” which generate a much higher monthly ARPU across the brand’s products and services.
Hardware subscription model: Kill many birds with one stone
Hardware subscription can potentially make Apple immune to key challenges faced by the industry.
Firstly, replacement cycles are getting longer with hardware improvements. The average replacement cycle for iPhone users has increased to more than 30 months. The users are holding on to the devices longer because of their great quality and Apple supporting multi-year updates (at least 3-4 years). Since Apple cannot scale back on this value proposition, which is good build quality and software, it has to find newer ways to increase iPhone sales. Hardware subscription is one way to make sure users upgrade to the latest and greatest devices more frequently.
Secondly, the average selling prices (ASPs) have stabilized. Note that iPhone is not the most expensive smartphone in the market anymore, as it was 4-5 years back. A hardware subscription will allow Apple to minimize the cost of entry for a new user, enabling the brand to target higher ASPs.
Thirdly, Apple’s service revenues have seen significant growth but still accounted for 15.7% of its revenue for Q4 2021. Apple realizes that a “power” iPhone user can generate a much larger “customer lifetime value (CLV)” over a period of time if locked into a subscription bundled with services. According to Counterpoint Research Ecosystem Analysis, Apple can potentially generate a monthly ARPU of ~US$400 or an annual revenue of ~$4800 from a “power user” subscribing to its latest hardware, software and services. Apple’s bundling of services with hardware subscription will guarantee long-term subscription to Apple services with a stable revenue stream and outlook. Note that equity markets hate elements of uncertainty and a stable outlook is highly desired.
Monthly ARPU (Hardware + Services) for Apple Power User ~400
Source: Counterpoint Research Ecosystem Analysis, 2021
Fourth, the smartphone market structure is different across countries. There are three typical models – open-channel market, carrier-driven market with device subsidized and carrier-driven market with device financed. While carriers play a significant role in keeping the smartphone cost down in carrier-driven markets, consumers pay full price upfront in open channel markets. Although third-party financing options are emerging in open channel markets, the uptake for such services is still limited. We believe that the hardware subscription model will have less impact in markets where devices are already subsidized through carriers. But a subscription model will also bring all three types of markets on a level playing field, minimizing the cost of entry and giving another boost to the iOS installed base.
Last but not least, the hidden element and the most promising gameplay here could be a stronger hold of the secondary market, i.e. smartphone’s second life. At present, the refurbished smartphone market is dominated by Apple devices but the whole value chain is heavily segmented. Apple devices manage to grab an attractive value for used phones as well. With power users upgrading more frequently through Apple, hardware subscriptions will complete a full circle, creating an opportunity for Apple to extract full value from the end-to-end device lifecycle. It will enable Apple to control the whole refurbished value chain (right from device collection, grading, repair/refurbishment to resale) and potentially put Grade A devices back into the hardware subscription cycle as refurbished devices. This will also be in line with global sustainability initiatives and boost Apple’s original spare parts program.
Apple’s hardware subscription plan can have a multifold impact across different market elements. Overall, some mobile network operators won’t entirely welcome the news, but this was inevitable. Equity markets will be very happy to see a strong and stable revenue outlook.
Further, end-to-end control of buying and selling experience of hardware, software and services also opens the door for many other opportunities. eSIM and availing financing in-house means it now owns a critical (and previously painful) part of the customer journey. The initiative dubbed as “breakout” mentioned Apple targeting payment processing, credit checks and many other fintech services. A hardware subscription will lock premium iOS users, allowing Apple to monetize daily financial transactions through a range of its possible fintech products.
A subscription model will establish a stronger relationship with premium iOS users with more frequent transactions compared to the existing one-time purchase transaction. This will have a multifold impact across Apple’s existing and future products, driving a much higher dollar value relationship with its user base.
India is a booming market for pre-owned smartphones. The market showed its potential in 2019 when it grew the most globally. Even in 2020, the second half of the year more than made up for the volumes lost in the first half, according to Counterpoint’s Global Refurb Smartphone Tracker. This year too, the market is expected to report stellar numbers.
Important factors shaping the Indian market
Importing pre-owned smartphones into India for usage is curtailed by the government. But that does not slow down the players dealing with volumes in the refurb market. Although India is relatively self-sufficient with supply compared to other countries, one of the main challenges is a complex and unstructured chain in the value system.
The brands and models which sold 2-3 years ago are the ones that make up the bulk of the supply in the secondary markets. Therefore, the players do not have control over what brands or models come their way. Similarly, the level of repair or refurbishment differs across volumes. Refurb players then have to take a call on which ones can be taken in and which need to be disposed of to others in the chain.
While brands like Apple have the most demand, they also command a premium price in the Indian secondary market. Unlike others, Indian consumers have also shown an affinity towards Chinese brands like OnePlus, Xiaomi, OPPO and vivo.
The online channel for buybacks and resale activities has been present in the refurbished smartphone market for a while now. Most large players already have online platforms which are promoted well to ensure convenience. This holds true for metro and Tier I cities. However, the strategy to tap rural areas needs to be different. These areas hold a high potential and that is why players are keen to gain volumes at the earliest.
As online sales of new smartphones increase, more consumers choose to trade in their devices, which provides an added supply to the secondary markets.
Increasing volumes are flowing in from Tier II, III and IV towns. These geographies also represent the highest potential for refurbished smartphone demand.
Consumers who previously chose to sell to friends/acquaintances or small neighborhood stores are looking at selling to structured businesses with an online presence and doorstep options. This spells value for the consumer in the form of money and convenience.
There is a need to structure the vast unorganized secondary smartphone market in India but currently, players are looking at gaining volumes in a market where the potential is very high.
The Intergovernmental Panel on Climate Change (IPCC) recently released its most comprehensive and concerning report to date. Climate scientists have been reticent to ascribe too much weight to single weather events, but the IPCC report marks a shift. It brings the recent heatwaves in North-Western North America, flooding in Europe and China, and ongoing droughts and wildfires in many parts of the world into sharper focus while sharpening the language ascribing these events to human activity. It says many of these events would be almost impossible without humanity’s effect on the climate.
The report is timely – coming shortly before the COP26 summit in Glasgow, UK, which is due to take place in November. COP26 is the point at which government representatives will come together to thrash out the wording of agreements that have been in discussion for many months.
The last 18 months, during which the world has battled COVID-19, have highlighted that much of what we previously took for granted, such as office working and long commutes, face-to-face meetings, frequent international travel and large trade shows, can be largely dispensed with thanks to the power of technology. While some of us may miss travelling across eight time zones to visit clients, colleagues and partners, COVID-19 has shown us that these things are not strictly necessary. And while some of the changes in working style may revert to pre-pandemic ways in the months to come, it is likely that more people than ever will work from home at least some of the time; hybrid working will become the norm for many (assuming their roles allow them to).
But the positive impacts on sustainability through COVID-enforced changes in working practices are a by-product of the pandemic. So, what more can the tech sector deliver if it specifically targets fighting climate change?
The answer is a lot. But it needs a long-term, concerted effort by companies of all types, to take responsibility in ways, both large and small, to tackling humanity’s greatest existential threat. Let us consider a few of the ways:
Smart agriculture: One of the downsides of modern farming techniques that focus on large-scale, single-crop fields that require massive inputs of artificial fertilizer, herbicides and pesticides, is that soil health suffers. Healthy soil is a rich ecosystem that is able to store carbon as well as support a massive abundance of microorganisms. However, most soil on modern farms is almost devoid of life and can do little to store carbon. The advent of small farm robots that have developed significantly in the last few years, can help in multiple ways. They can work almost on a single plant scale, like targeting only those weeds injurious to the crops’ health. This is likely to be a slow fix though. Despite the steady improvements in the technology, it is only just at farm-scale trials. And ‘Big Agri’ business has a massive vested interest in farmers continuing to buy tons of fossil fuel-based fertilizers and other costly inputs. Undoing the damage done by industrial farming will take decades, even if there is consensus that it is the right thing to do.
Supporting reuse and recycling of smartphones and other devices: Counterpoint has been tracking the refurbished smartphone market for years. During this time, we have seen the refurb sector grow and develop substantially. But still only a small fraction of devices enjoy a second life. The energy and resource costs to build a smartphone are considerable. Phones collectively require substantial volumes of minerals and energy-intensive manufacturing processes. One way to measure impact is embodied energy. Estimates vary, but to manufacture all the smartphones that are likely to be consumed in 2021 will require approximately 375 Giga Joules of primary energy. Assuming a product life of 2.2 years, that represents more than 160 GJ per year. For comparison, cars require massively more primary energy to make, around 100GJ per car. But since cars have a much longer life, their annualized primary energy cost is only 4.6x that of a smartphone, despite weighing something like 7500x more than a typical smartphone. Cars, of course, consume massively more energy in use during their lifetime than smartphones, but for this comparison we are only concerned with the energy cost of initial manufacturing. In the same way that buying a second hand internal combustion engine car has less environmental cost than buying a brand new electric car, buying a second hand or refurbished smartphone has less environmental cost than buying a new one. For those smartphone makers that have embraced recovery, refurbishment and recycling of second hand devices, not only are they making a positive contribution to building their user base, they are also helping the environment by substantially reducing the embedded energy cost per year, per smartphone.
And humanity is likely to need every marginal gain available to achieve even the minimum targets to avert the worst impacts of the climate crisis.
We will always be happy to talk to our clients and other companies about ways they can mitigate their impact on the earth’s resources.
Boston, Toronto, London, New Delhi, Beijing, Taipei, Seoul – July 13, 2020
The global refurbished smartphone market saw healthy growth across most regions in H2 2020. The market more than made up for the slump in H1 2020 with a modest 4% increase in 2020 compared to 2019 volumes. Counterpoint expects a higher increase in 2021.
The Surge in H2 2020
Due to the sharp deceleration in H1 2020, mainly due to COVID-19, the refurbished smartphone market saw a rise in demand and supply in H2 2020. Commenting on the dynamics of the market, Senior Research AnalystGlen Cardoza said, “While there was limited supply of smartphones in the secondary market in the first half of 2020, there was a sharp increase in both demand and supply during the second half of 2020. When the markets opened, most refurb players saw a surge in resell volumes and trade-ins. All regions saw YoY volume increases in H2 2020. While some markets like LATAM and Southeast Asia took time to recuperate in H2 2020, other regions like the US, Europe, India, and Africa bounced back and tried to increase supply and distribution-related activities.”
Highlighting that Apple had gained share in the secondary market, Research Director Jeff Fieldhack said, “There has been no slowdown in the appetite for Apple within the secondary market. In fact, over the past year, it has increased compared to its competitors. Apple’s share in the global market for new smartphones was just over 13% in H2 2020. Its share in the secondary market over the same period was over 44%. In addition, Apple’s secondary market ASPs (average selling prices) are almost three times higher than the average of all its competitors. Even with the rollout of 5G by over 150 mobile operators in over 70 countries, the demand and ASPs for Apple’s refurbished LTE portfolio remain elevated. This is helping Apple grow its installed base as many of the Apple buyers in the secondary market are first-time buyers.”
Additional trade-in offers and a focused approach on circular economy initiatives are fueling the demand in developed regions like Europe. In contrast, developing regions like India and Africa are showing a higher proportion of new businesses and improvements in domestic tech and repair capabilities. Cardoza added, “China is slowly becoming a more difficult market for the secondary market. There is still high demand, but costs have increased for key components. Also, there is more oversight at international ports. The China–US trade war has also added more risk, making many buyers more conservative in their purchases. We expect more secondary market volumes to move to other areas such as Africa, Japan, India, and Europe. There are established secondary market companies, with new companies also moving into these regions. There is also an appetite for flagships from premium brands but at mid-tier pricing.”
Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.
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San Diego, Buenos Aires, London, New Delhi, Hong Kong, Beijing, Seoul
June 10th, 2020
According to the latest research from Counterpoint’s Refurbished Smartphone Tracker, the global market for refurbished smartphones declined 1% YoY in 2019 reaching just over 137 million units. The latter half, especially the fourth quarter the market grew, as Apple upgrades remained strong. However, a 1% increase during the second half of the year was not able to offset the decline in the first half.
Commenting on the market dynamics, Jeff Fieldhack, Research Director at Counterpoint Research noted, “This is the first time in the last four years that the refurbished market has declined for the full year. The trend is mainly linked with the downturn in new smartphone sales in key regions like the US, China, and Europe. The sell-through in these regions combined declined 6% YoY during 2019. The upgrades in the premium segment also remained slow, as users continue to hold on to their devices and replacement cycles lengthen. Premium devices are key to refurbished device volumes in the mature economies. China, the largest market for refurbished devices, declined 4% YoY during the year. This was due to the combination of a sluggish economy and the fact that it is harder for players within the refurbished market ecosystem in China to make a profit. The China-US trade tensions have also affected the secondary market as many large players are being much more cautious on purchases. Many of the smaller players in the ecosystem have seen growth, but it was not the case with the larger players.”
Despite a decline in the overall market, there were several growth markets like India, Latin America, and Africa.
Commenting on these emerging regions, Varun Mishra, Research Analyst at Counterpoint Research, added, “The refurb ecosystem in these economies is at a nascent stage. In terms of smartphones, these markets remain underpenetrated. Many users are looking for affordable devices to come online. The transition from feature phones to smartphones and the aspiration of premium devices at an affordable price point continue to fuel growth in these markets. There is also the ongoing transition of the refurb segment from the unorganized sector to organized in countries like India which is opening opportunities. There still needs to be more consumer awareness, standardization in processes, and quality assurance to build consumer trust to fully tap the market potential in these regions. However, going forward, because of COVID-19, the growth of the segment will be impacted in 2020.
Other key themes in the refurbished market:
Apple and Samsung continued to dominate the secondary market in 2019. Flagship models continue to hold values strongly and hence are also preferred by the overall ecosystem players.
Apple continues to foster its trade-in and insurance programs. This also makes sense for Apple as it has been focusing on its service segment. The experience of these services is more enriched with the newer hardware, and a strong trade-in program can help users upgrade.
Samsung’s Galaxy S series is the main driver for Samsung. The company is getting more aggressive with buy-back programs and adding more repair partnerships. Certified Pre-Owned volumes are likely to increase in 2020. This area has been surprisingly low in 2019.
Huawei’s strength in new sales and brand building efforts has helped it increase its presence within the used/refurbished market. But the US sanctions are likely to hurt sales and the brand outside of China in 2020 unless an agreement is made within a China-US trade deal.
There has also been an evolution of the repair market especially in the US and Europe, which is also shaping the refurb industry. The Right to Repair bill, which has now been accepted in over 25 US states, is also driving this trend.
BONUS Podcast: Hit the play button to listen to it
Counterpoint Technology Market Research is a global research firm specializing in detailed industry analysis of the TMT sectors. It services major technology firms and financial firms with a mix of monthly reports, customized projects, and detailed analysis of the mobile and technology markets. Its key analysts are experts in the industry with an average tenure of over 15 years in high tech industries.
The Coronavirus (COVID-19) pandemic has caused the global smartphone market to decline below 300 million in Q1 2020. As a result, we have also lowered our overall smartphone shipment estimates for the year 2020. The global market for refurbished smartphones also saw a 1% decline in 2019. Given the current economic conditions and global downturn, the user buying pattern is expected to change. But it does bring new opportunities for the refurbished smartphone market.
Despite a decline, Apple and Samsung continued to dominate the secondary market in 2019. But how does the refurb ecosystem work? Which are the key refurb smartphone markets? Once the smartphone enters the refurb ecosystem, a fair amount of work goes into making it sellable. So, what are the typical repairs that are carried out?
Host Peter Richardson and research analyst Varun Mishra discuss the key trends and opportunities in the global refurbished smartphone market in the latest episode of “The Counterpoint Podcast.” The discussion also touches upon the replacement cycles and the refurb market in India.
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