Mobile phones sales will be limited to 1.9 billion units
Sales of new mobile phones are falling, according to a recent report by global technology research firm CCS Insight. The company believes 2019 sales will be limited to 1.8 billion units, a drop of 3% from 2018. This reflects a number of challenges including lengthening replacement cycles for mobile phones, a weakened Chinese economy, along with macroeconomic and political uncertainty in other major markets.
The company had previously expected sales to reach 2 billion units by 2022, but its new five-year outlook is for 1.9 billion on an annual basis until 2023. Marina Koytcheva, CCS Insight’s vice president of forecasting, notes, “Yearly sales of 2 billion mobile phones seemed so close just a few years ago, but might become a distant dream for the industry”.
CCS Insight has downgraded its expectations in almost every market, even in India, where it projects over 320 million mobile phones will be sold in 2019. This translates to a rise of just 5% from 2018, taking into account a disturbance in online retail in February and a generally cautious mood that holds back people from spending money before the imminent general election. But unlike elsewhere, demand in India is expected to bounce back quickly. The importance of this market is underlined by the company’s forecast of almost 400 million units by 2023 — roughly as many as in China.
Koytcheva comments, “It is little surprise that all big mobile phone-makers are strongly pursuing the Indian market. India is one of the few oases where a significant growth opportunity still remains. However, it is Chinese brands like Xiaomi that are achieving the most success, which is of great concern to high-profile brands such as Apple and Samsung”.
Changing consumer behaviour is the main driver of the stagnant mobile phone market in most other countries. This is a trend CCS Insight has previously observed in Western Europe, where sales have suffered a 23% fall between 2013 and 2018. Koytcheva adds, “We recently surveyed consumers in some key Western European markets*, and 35% of them said they plan to keep their current phone for longer than their previous one. Only 13% told us they will change their phone faster than in the past. This trend has slammed the brakes on Western European markets, and we believe similar dynamics are now having a dramatic impact in the US, where we forecast sales will drop 9% in 2019”.
China is not immune to this trend either. In fact, in the world’s largest mobile phone market the effect is magnified by the macroeconomic slowdown: sales slumped 13% in 2018 and will see another fall, by 9%, in 2019.
CCS Insight is also concerned that the increasingly steep prices of high-end smartphones are proving detrimental to sales. Koytcheva notes, “For a long time it seemed like the big mobile phone-makers could charge as much as they wanted for their latest flagship devices, but it appears they got carried away in 2018. The psychological threshold of $1,000 seems to have prompted some consumers to re-evaluate whether they really need to replace their phone as quickly as they have done in the past”.
However, this is not bad news for everyone. Companies focussing on sales of second-hand phones are enjoying a surge in demand, especially as software upgrades and much lower prices than those of new flagship smartphones make refurbished devices attractive to more and more people.
In the face of these difficult market conditions, smartphone makers are pinning their hopes on 5G devices. Although CCS Insight now expects shipments of 5G phones to get off to a slower start than previously anticipated, the company sees an encouraging growth trajectory from 2020 and beyond. Koytcheva comments, “History has shown that the introduction of a new ‘G’ always helps to energize demand for new phones, and 5G will be no exception”.
CCS Insight expects 220 million 5G phones will be sold in 2020, rising to 930 million in 2023 to account for almost half of all mobile phone sales.
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