Smartphone Sales to Hit 1.5B Units in 2016 as Growth Slows: Gartner

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Double-digit annual growth rates appear to be a thing of the past for the smartphone market.

Device makers will sell a total of 1.5 billion smartphones this year, a 7-percent increase, said Gartner in a new forecast released today. In 2015, vendors sold 14.4 percent more smartphones than the prior year, noted the analyst firm.

“The smartphone market will no longer grow at the levels it has reached over the last seven years,” said Gartner research director Roberta Cozza, in a statement. “Smartphone sales recorded their highest growth in 2010, reaching 73 percent.”

In April, Apple reported its first decline in quarterly revenue since 2003, due in part to slowing iPhone sales. The company sold 51.2 million iPhones during Q2 fiscal 2016, an 18-percent drop from the 61.2 million iPhones sold in the same year-ago quarter and a whopping 32-percent fall from the 74.8 million iPhones sold in previous quarter.

One reason why smartphone sales are slowing is that the major markets are saturated. Smartphones enjoy a 90-percent penetration rate in mature North American, Western European, Japan and Asia-Pacific markets, Gartner said.

And smartphone owners in these regions are hanging onto their devices longer.

“In the mature markets, premium phone users are extending life cycles to 2.5 years, which is not going to change drastically over the next five years,” stated Cozza. That said, smartphone sales are predicted to hit 1.9 billion units in 2020.

The telecommunications industry has changed the way they sell smartphones. Subsidized plans that offer customers a “free” phone every two years have fallen out of favor with carriers. Instead, phone financing and upgrade plans are taking over.

“These programs are not for everyone, as most users are happy to hold onto their phone for two years or longer than before. They do so especially as the technology updates have become incremental rather than exponential,” added Ms. Cozza.

In China, smartphone sales were essentially flat last year, observed Annette Zimmermann, a research director at Gartner. “In this saturated yet highly competitive smartphone market, there is little growth expected in China in the next five years,” she stated.

Gartner’s data suggests that vendors may have better luck in India. While smartphones are considered expensive in that populous country, dropping prices on low-end hardware is making them more affordable.

This year, research group expects sales of 139 million smartphones in India, a 29.5-percent gain. “India has the highest growth potential,” said Zimmermann.

Pedro Hernandez is a contributing editor at Datamation. Follow him on Twitter @ecoINSITE.