Smartphone Growth Increasing Even As Consumer Spending Declines - InformationWeek

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1/20/2016
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Smartphone Growth Increasing Even As Consumer Spending Declines

While the smartphone market continues to grow, mobile device sales won't make up for an overall decline in consumer spending this year, according to a new report from Gartner.

Windows 10 Laptops, Hybrids Grab The Spotlight At CES 2016
Windows 10 Laptops, Hybrids Grab The Spotlight At CES 2016
(Click image for larger view and slideshow.)

Good news: Global device shipments are expected to rise in 2016. Bad news: The PC market will see another year of decline, and consumer spending is poised to decline for the first time ever, Gartner reported.

On Jan. 20, the research firm has released its 2016 device forecast, which predicts 1.9% growth for worldwide shipments of PCs, tablets, mobile phones and "ultramobiles," a category which refers to PC/tablet hybrids.

It should be noted Gartner separates the ultramobile segment into "basic" and "premium" categories. Premium ultramobiles include lightweight devices that work as desktops, like the Surface Pro. Basic ultramobiles include standard tablets -- the iPad, Galaxy Tab S, and Nexus 7.

[IT spending will top $3.5 trillion in 2016: Gartner]

Device shipments will reach a combined total of 2.4 billion units in 2016. However, consumer spending is expected to fall 0.5% for the first time ever.

Broken down, the device data gets more complicated.

The report's PC market data for 2016 includes both traditional PCs and premium ultramobiles. This segment is predicted to reach 287 million shipments in 2016, a decline of 1% year-over-year.

For the most part, this year's PC decline is related to desktops and laptops, said Gartner analyst Tuong Nguyen. The decrease in consumer spending is primarily related to a slower market for traditional PCs.

Nguyen explains the PC market will continue to shrink, but declines will not be as steep as they have been. The most recent holiday season was especially harsh for PC shipments, which tumbled 8.3% during the fourth quarter of 2015.

Premium ultramobiles will drive the market forward, especially as more businesses adopt new devices to support Windows 10.

Microsoft's new operating system will undergo more rapid adoption than earlier versions of Windows, Gartner reported. A survey of 3,000 business respondents in the fourth quarter of last year found over 60% will test and evaluate Windows 10 within nine months; 80% within one year.

The finalized end-of-support for Windows 7 is largely driving the upgrade trend among businesses, said Gartner analyst Mikako Kitagawa. Because Windows 7 is big in the enterprise sector, many are starting earlier with testing and deploying Windows 10.

With a shorter testing period, business users could begin Windows 10 migrations by the end of 2016, Ranjit Atwal, research director at Gartner, wrote in a statement. The new system may also bring device upgrades to the enterprise -- Windows 7 and 8.1 will not be supported on PCs with new CPUs.

(Image: TPopova/iStockPhoto)

(Image: TPopova/iStockPhoto)

Atwal reported businesses could move as much as 40% of their installed base onto new Windows 10 devices by the end of 2017, motivated by the appeal of a hybrid touchscreen. "This will be the catalyst for growth in the PC market in 2017," he wrote.

Gartner's data indicates continued growth for smartphones, which are expected to increase 2.6% in 2016 and make up 82% of the mobile phone market by year's end. However, consumers' phone purchases will not be enough to compensate for the PC decline.

The phone market is "slower than it has been," Gartner's Nguyen told InformationWeek. While most of the decline in consumer spending can be attributed to PCs, the demand for premium smartphones is also down.

People have been upgrading from feature phones to smartphones for the last five to seven years, but now the adoption rate has slowed in mature markets. "Most people who want a smartphone have one already," he explained.

Further, the advancements in modern smartphones are not compelling enough to drive upgrades. Most smartphones have more than most people need, said Nguyen. Average consumers simply don't want to spend money on a slightly better resolution or camera in a new phone, especially in China and other emerging markets.

This is especially relevant as a growing number of devices are competing for consumers' wallets. When it comes to allocating funds, consumers may opt to purchase a smartwatch or fitness band instead of an upgraded smartphone.

Kelly Sheridan is the Staff Editor at Dark Reading, where she focuses on cybersecurity news and analysis. She is a business technology journalist who previously reported for InformationWeek, where she covered Microsoft, and Insurance & Technology, where she covered financial ... View Full Bio

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Broadway0474
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Broadway0474,
User Rank: Ninja
1/28/2016 | 6:07:46 PM
Re: The Smartphone
Ashu, American mobile consumers have one moment of empowerment --- when they're two year commitment is up. Then they can flex a little muscle with the incumbent. Otherwise mobile shopping is worse than dealing with the cable company.
Ashu001
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Ashu001,
User Rank: Ninja
1/28/2016 | 9:47:55 AM
Re: The Smartphone
SaneIT,

No need to apologize!

LOL!

I was just explaining the differences prevalent between various Geographic Entities today(vis a vis the same products).

Don't be so sure about the lack of Price action(to the downside) here in America as well.

My personal feeling is that as the Deflationary wave spreads very fast from China-India to the US,the eventual fall in Demand here in America will end up pushing prices down here too.

Just be patient!

 
Ashu001
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Ashu001,
User Rank: Ninja
1/28/2016 | 9:07:23 AM
Re: The Smartphone
ImpactNow,

We are at that stage(where Pain for Consumers is beyond intense) is here today.

Is'nt that why AT&T has started offering unlocked iPhones today?

 
SaneIT
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SaneIT,
User Rank: Ninja
1/28/2016 | 8:25:51 AM
Re: The Smartphone
I would like to apologize to the rest of the world on behalf of the US for subsidized phones.  I think we see the high prices of unlocked phones simply because we've been numb to the true cost of these devices for so long.  If you put an $800 laptop or $800 phone in front of most people and said they could pay the $800 and have one or the other, I think in the US we would trend toward the phone where countries that are a little behind the curve would choose the laptop.  We've stopped looking that the utility and started looking at the convenience when it comes to smartphones.   I'd like to see the emerging markets lower prices across the board but I get the feeling those cuts won't move across continental lines.
impactnow
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impactnow,
User Rank: Author
1/27/2016 | 1:01:35 PM
Re: The Smartphone
Broadway , much good luck to you in your search . The process to buy a smartphone today is beyond complex . I consider myself a savvy shopper and someone understands true cost of ownership . Once you pull back the layers of the onion the fees add-ons , and mysterious pricing of the phone itself is enough to make anyone run from their local phone store screaming . Not only are the phones priced out of most people's budgets but the monthly fees with data additions are incredible . Trying to get a phone with a monthly fee less then hundred dollars is a challenge . Eventually we are going to reach a saturation point on the smartphone market , the enhancements to the next new model are minimal . Phone manufactures are going to need to find a way to drive purchases of their phones that have little to no extra value added features . I suspect the tide will turn but not before the pain is intense for consumers .
Ashu001
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Ashu001,
User Rank: Ninja
1/27/2016 | 11:16:25 AM
Re: The Smartphone
TerryB,

Don't worry.I have used Cellphones with $150 Prices on all American Networks.They all work very-very well!

Its all upto Ordinary Consumers to make that decision today.

The day,will be the beggining of the end of Apple's Brand Premium strategy forcing them to compete on Innovation and Quality.
Ashu001
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Ashu001,
User Rank: Ninja
1/27/2016 | 11:12:04 AM
Re: The Smartphone
Broadway,

Why can't you just buy a smartphone outright (on AT&Ts store) or overseas and then use it on any Network you want?

Its American consumers who hold the keys to the change today.

They have to stand up and be counted.

 

 
Ashu001
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Ashu001,
User Rank: Ninja
1/27/2016 | 11:09:48 AM
Re: The Smartphone
SaneIT,

Latest Data in from Apple;says they sold about 74 million iphones in the last Quarter.Of those 17 million(not an insignificant number by any means) where sold in China.India accounted for another 6 odd million.

By no means are these numbers small or insignificant today.America remains(by far) the Biggest market for the iPhone but even here as Carriers move aggressively to drop Carrier Subsidies(AT&Ts website lists an iPhone 6 for over $800 today without any Plans);Consumers even in America are starting to realize enormous savings by not buying a phone with a so-called Carrier Subsidy.

The Writing is very much on the Wall for Apple.Which is why they came out with the cut-price(By Apple's overvalued pricey standards) iphone 5se.But its a risk and a market fraught which sharply declining margins & Hyper-Competition.I for one won't be surprised if Apple flops and flops bigtime pursuing this strategy,

You will be surprised by how much Smartphone manufacturers discount the latest specs when they are desperately hunting for market-share(Apple cut prices of their iphone6 series by 30%-40% in India,Samsung has been doing the same for last 2 years or so).

That's when the real price of smartphones comes into the picture.

Trust me,folks in Emerging Markets save when they want anything (for a few months/a year or so);In addition the same Easy Payment Plans so common in the US (with 0% Down)are also entering these markets today,
Ashu001
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Ashu001,
User Rank: Ninja
1/27/2016 | 10:58:18 AM
Re: The Smartphone
Vanessa,

Ultimately one has to pull the Trigger somewhere and call their (the Corporations) Bluff.

Otherwise,we will be stuck overpaying for basic services ;again and again and again.

I see a lot of Middle-Class Consumers in America(who are basically struggling to make ends meet) ;find Massive Savings by ending these wasteful plans one by one.

Its about each and every one of us making(Individually) what is the best decision for us today.

 
SaneIT
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SaneIT,
User Rank: Ninja
1/27/2016 | 8:35:19 AM
Re: The Smartphone
"If they are fighting so hard for a market where the Per Capita Incomes are less than $5000/Year we have well and truly reached the bottom of the barrel when it comes to smartphone Demand Globally."

 

That is a frightening thought for a company that size, I can't say that I'm up to date on the emerging cellular markets, so I'm probably thinking at least one generation old for most of this model.  The income alone would mean that a $600 piece of hardware isn't going to fly but what some of these markets are doing with technology I can't imagine a cheaply made low powered version of our flagship devices doing well at all.  I know there are a handful of Chinese manufacturers that are bringing current spec devices at less than half the price of the biggest players but even that is a lot to ask when annual income is that low. 

 
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