GLOBAL SMARTPHONE SALES – ANNUALISED VOLUME
Q4 2023 – Q4 2024
The global smartphone market continues to decline, as the chart shows. Optimists keep claiming it is about to rebound. But in reality, 2024 sales were down 19% from their 2017 peak:
- During Covid, analysts were sure that sales would see a massive rebound when the pandemic ended
- But sales were already falling before then, and the post-Covid ‘bounce’ was relatively weak
- One simple reason is that people are holding on to their phones for longer – often for 36 months or more
- ‘Foldables’ were supposed to create a new growth paradigm. But as analyst IDC now reports:
“We have seen a decreased demand for foldables in the market, despite intensified promotions and marketing. Vendors have started shifting R&D away from foldables as consumer interest remains flat.”
More recently, Apple claimed its Apple Intelligence feature was “the new new thing” to drive growth. But it had to be withdrawn, after the BBC and other news organisations complained it was inventing false headlines.
USED SMARTPHONES ARE THE ONLY AREA OF GROWTH
GLOBAL NEW & USED SMARTPHONE SALES
% OF TOTAL MARKET, 2014 – 2024
Instead, the used smartphone market is now the main area of growth, as the chart shows:
- Used phones have grown from just 4% of the market in 2014 to 22% last year
- In volume terms, they have grown by 5x, from 45 million to 348 million
Partly, of course, this is because smartphones are better built and last longer. Partly, this is because many users don’t think today’s model is any better than their current model. And, of course, poorer people, especially in India and China can’t afford a new phone, as IDC notes.
MARKETS ARE BECOMING MORE LOCAL-FOR-LOCAL AS PROTECTIONISM RISES
Huawei Surges Back Into Top Five
A third key paradigm is seen with Huawei’s remarkable recovery in the Chinese market, after it lost access to US chips. It didn’t disappear. Instead, it refocused on the domestic Chinese market as analyst Canalys reports:
- Huawei has developed its own replacement chips, as well as its new operating system, Harmony OS Next
- Its 2024 sales grew 37%, taking it to the No. 2 position – pushing Apple down from 1st to third position
- Apple’s sales dived 18% in Q4, while sales of all foreign-made smartphones fell an astonishing 57% in Q4
And since then, the government has introduced tighter customs checks on exports in response to President Trump’s proposed trade war. Apple is very vulnerable, as it relies on Chinese suppliers as a key part of its global supply chain.
INVESTORS DON’T SEEM TO HAVE NOTICED THE PROBLEMS PILING UP
Apple Inc. (AAPL)
Total Revenue % Chg. (Quarterly) (%)
Apple’s revenue has been broadly flat for 3 years, as the FinChat chart shows. But so far, investors don’t seem to have noticed.
They are still valuing the shares at a Price to Sales ratio of 9.2x, slightly down from Apple’s all-time peak near 10x. This is double the ratio at which the shares used to trade before the stimulus bubble began.
Anyone who remembers the dot-com bubble, which burst so spectacularly in 2000-2, will guess how this story ends. As Scott McNeely, CEO of then-market darling Sun Microsystems noted, when sanity returned in 2002:
“At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard.
“And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. …Do you realize how ridiculous those basic assumptions are? …What were you thinking?”
The smartphone market highlights how consumers are refocusing on ‘value for money’.
New product sales are slowing in response to the cost-of-living crisis. More people are now happy buying a used model.
And global brands no longer have the same attraction if the local brand works as well, and is cheaper.