Smartphones head for price war as China sales fall 4% in Q4

Consumer demand

SHARE THIS STORY

Smartphone Feb16We all now carry around a mini-computer in our pockets – one with more power than those which controlled Apollo 11 when Neil Amstrong first walked on the moon in 1969.  In certain parts of the world, there are now more smartphones than toilets, according to Time magazine.

This is raising the spectre of market saturation in the world’s largest market:

  • In China, for example, there were 1.3bn users last year – virtually everyone now owns a smartphone
  • The length of the upgrade cycle there is rising from the previous 13 months, and sales actually fell 4% in Q4
  • Apple’s share price has fallen by a quarter in just 2 weeks, since reporting “signs of economic softness there”
  • ARM, the smartphone chip supplier, has seen its share dive 15% in the past 3 days

The chart above, based on Strategy Analytics data, highlights the problems ahead.  The market had a record year in 2015, selling 1.44bn handsets.  But growth rates have collapsed from 41% at the end of 2013 to 31% in 2014 and just 6% in Q4 2015.  It seems almost inevitable that global growth will now follow China and go negative.

This will impact all the major suppliers.  Apple has claimed 90%+ of total smartphone income in recent years, and it has a devoted fan base.  But even the late Steve Jobs would probably now struggle to come up with “the next new thing” that would excite consumers to rush out and upgrade.

The problem is that the market has run out of potential demand.  As I noted in November, there are 4.1bn people in the world who can’t afford a smartphone today.  They are the people who have incomes of less than $5/day:

  • 1.4bn earn $3-$5/day; 1.6bn earn $1-$3/day and 1bn earn less than $1/day
  • Most of the other 3.1bn people in the world already own a smartphone

But the world’s 1000 smartphone suppliers won’t give up easily.  Almost inevitably, therefore, we are heading for a major price war, as it is already possible to assemble smartphones for as little as $20.

As the chart shows, the 3 major Chinese players – Huawei, Lenovo and Xiaomi – now have had a global market share of 17.5%.  And Samsung with its 20% share (down from 35% in Q3 2013), is clearly in their line of fire.  But Apple is bound to be hit as well.

The smartphone market is also probably acting as a leading indicator for many other industries.  It highlights how China’s slowdown means there is a vast amount of spare capacity in the world, which won’t ever be needed again.

This also means that deflation is inevitable as price wars intensify.

PREVIOUS POST

IEA says market "awash with oil" - debunks bullish myths

10/02/2016

Oil markets are the proverbial “canary in the coalmine”.  They are ...

Learn more
NEXT POST

Tokyo, Shanghai stock markets fall; yen rises 8% in 2 weeks

15/02/2016

Pity poor Janet Yellen, you might say.  The head of the US Federal Reserve told...

Learn more
More posts
Portugal shows the way to climate neutrality by 2050
24/11/2019

“If you don’t know where you are going, any road will do”. The Irish proverb’...

Read
The next billion phone users will be buying $10 smart feature phones, not $1000 iPhones
10/11/2019

Smartphone sales plateaued in Q3, down 9% since Q3 2017’s peak of 1.55bn, as the chart shows....

Read
Companies ignore the Perennials 55+ generation at their peril
13/10/2019

Nearly a third of the the world’s High Income population are now in the Perennials 55+ generat...

Read
Auto markets set for major disruption as Electric Vehicle sales reach tipping point
21/09/2019

Major disruption is starting to occur in the world’s largest manufacturing industry.  Hundred...

Read
Smartphone sales continue their decline, whilst $25 smart feature phones open up new markets
04/08/2019

Global smartphone sales have now been falling for 8 consecutive quarters, since Q3 2017. They are no...

Read
Smartphone market decline begins to impact global stock markets
19/05/2019

The bad news continues for the world’s smartphone manufacturers and their suppliers.  And Pre...

Read
There’s a great future for the European plastics industry in recycled plastic
05/05/2019

Europe’s plastics industry is under major threat from the growing legislative and consumer bac...

Read
$60bn opportunity opens up for plastics industry as need to eliminate single-use packaging grows
17/03/2019

150 businesses representing over 20% of the global plastic packaging market have now agreed to start...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more