Have you ever taken the time to glance around while waiting for the bus? Probably not, because like everyone else you’re most likely engrossed in whatever is going on with your smartphone.
Work, play, fitness and social—it’s all there on your phone, rolled up in one very convenient little package.
So convenient, in fact, that the Global Smartphone Market is almost fully saturated. In previous years, the growth of the market has been astronomical, and while revenue in the market is expected to grow to more than US$ 638 billion by 2019, the actual growth rate is expected to slow considerably. All told, the cumulative average growth rate from 2014-2019 for the Global Smartphone Market will sit at only 8.1 percent.
There are a few major market challenges that are working against big vendors, and slowing growth in the Global Smartphone Market.
Increased Competition Among Vendors
The potential for huge revenues in the Global Smartphone Market has attracted a lot of new vendors that are working to establish a strong brand image against the large global brands. This means that existing, established vendors are facing intense competition from new vendors in terms of pricing and technology.
A lot of these new vendors have also adopted low-cost manufacturing techniques that tend to reduce manufacturing costs and provide them with a huge profit margin. As a result, global vendors are entering into price wars with new vendors, which is reducing profit margins and forcing down the average selling price (ASP) of smartphones.
This intense competition among vendors is a major challenge that is expected to have an effect on the growth of the market during the forecast period.
High Production Cost
To get a leg up on the competition, vendors are investing huge amounts into R&D to develop better smartphones, and into marketing activities to attract more customers to their products. This is increasing the cost of production of smartphones year on year, which will ultimately affect market growth.
The chart below presents various components that contribute to the cost of manufacturing a smartphone:
Declining ASP and Availability of Low-Cost Phones in Emerging Markets Will Buoy Market Growth
While price wars among vendors might decrease profit margins for market big-wigs, the related drop in price of smartphones themselves is encouraging more consumers to buy the devices.
The average selling price of smartphones worldwide is expected to decline from US$355 in 2014 to US$321 in 2019. This price drop is even more pronounced in the APAC region, where the price of smartphones is expected to drop from US$248 in 2014 to US$201 in 2019.
It’s actually these emerging markets in countries like China, India and even Brazil that will be crucial towards sustaining growth in the Global Smartphone Market. These markets are not nearly as saturated as North American or European markets, and the declining ASP of smartphones will make these devices much more accessible to consumers in these regions over the projected period.
