The smartphone market has stopped defying gravity. After almost a decade of turbocharged sales, the $423 billion industry can no longer count on consumers to robotically upgrade their handsets, putting at risk the fat margins and steady revenue growth long envied by the rest of the hard ware sector.
Signs of a sputtering market have been brewing for months, but it spilled into the open last week when Apple Inc. reported its first quarterly sales decline in 13 years. CEO Tim Cook acknowledged on April 26 that -nine years after the iPhone’s game changing debut -the market had “stopped growing”. The next day, research firm Strategy Analytics reported a 3% drop in first-quarter smartphone shipments, the first decline ever.
“You couldn’t help but wonder how long the party could go,” said David Hsu, a management professor at the University of Pennsylvania’s Wharton School who tracks the market.
With consumers upgrading smartphones less often and first-time buyers harder to find, handset makers seem doomed to endure the same years-long sales decline as PC manufacturers. The industry has yet to identify and market the next big idea to take the place of smartphones, the way the iPhone and its ilk did when PCs fell from favour. The industry is hard at work developing everything from robots, cars and virtual reality headsets to the grab bag of connected gadgets and software known as the `Internet of Things’. Yet it may be years before many of these technologies enter the mainstream. Before that happens, the industry could be in for some lean years.