Smartphone Sales Continue To Tumble In 2016

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The smartphone market has been declining recently, and it looks like the trend is poised to continue. Gartner reports sales will slow down to single-digit growth in 2016.

Global smartphone sales are predicted to grow 7% this year to reach 1.5 billion devices. This marks a 7.4% drop from 2015, when market growth reached 14.4%. Gartner is anticipating 1.9 billion smartphone sales in 2020.

Smartphone sales hit their highest levels in 2010, when the market reached 73% growth. Experts don't think future growth will achieve the levels it has reached over the last seven years.

[Mary Meeker also predicts smartphone sales will slow down this year.]

Why the slowdown? Most people in mature markets already have smartphones, causing a lag in future growth. The smartphone market has hit 90% penetration in North America, Western Europe, Japan, and mature areas of the Asia/Pacific region.

What's more, current smartphone users in these areas are not replacing or upgrading their devices as often as they have over the last few years. This trend is not expected to change.

"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," Roberta Cozza, research director at Gartner, wrote in a June 6 statement.

Communication service providers (CSPs) and smartphone vendors have begun to vary their upgrade cycles, turning away from the old model of providing a "free" upgrade every two years. Some CSPs have begun to offer device financing programs, and vendors like Apple let users upgrade to new devices every year.

While these programs could theoretically drive smartphone upgrades, Cozza noted they are not for everyone. In fact, most people are happy keeping their phones for longer periods of time, especially as the tech updates in new devices have become increasingly minor.

IDC also anticipates a slowdown in smartphone growth this year. Shipments are expected to grow 3% this year, a major drop from 10.5% in 2015 and 27.8% in 2014, the company reported. Shipments are expected to hit 1.48 billion in 2016 and 1.84 billion in 2020.

IDC also acknowledges how a shift in customer behavior is affecting sales.

"Consumers everywhere are getting savvy about how and where they buy their smartphones, and this is opening up new doors for OEMs and causing some traditional channels to lose some control of the hardware flow," said Ryan Reith, program vice president with IDC's Worldwide Quarterly Mobile Phone Tracker.

While single-digit growth is expected for the smartphone market overall, phablets (devices with 5.5-inch and larger screens) are anticipated to have double-digit growth through 2019. More vendors are pushing phablets as flagship devices, integrating powerful multimedia features.

According to Gartner, smartphone makers have an attractive opportunity in emerging markets like Sub-Saharan Africa, where smartphone sales exceeded feature phone sales for the first time in 2015. Premium phones have a lifespan between 2.2 and 2.5 years in emerging markets; basic phones last an average of three years or more.

Given the penetration of mature markets, many vendors are turning to China, and also to India, the country they consider having the greatest growth potential. Feature phone sales hit 167 million units in 2015 and made up 61% of phone sales in India.

The fact presents an opportunity for vendors to appeal to customers looking for their first smartphone. While smartphone are pricey for many Indian customers, prices for low-end models are falling. Gartner expects 139 million smartphones will be sold in India this year.

In China, smartphone sales hit 16% growth in 2014 and fell flat last year. The Chinese market is saturated and highly competitive, and Gartner expects little growth in the market for the next five years. In 2015, smartphone sales in China accounted for 95% of total phone sales.