Buyer behaviour and macroeconomic challenges dampen phone demand
We recently published our latest forecast of the global mobile phone market, and the picture isn’t rosy. Sales in 2019 will be limited to 1.8 billion units, a drop of 3% from 2018. Of these, smartphones will be 1.4 billion units, down 2% from 2018. Handsets are succumbing to numerous challenges, including lengthening replacement cycles for mobile phones, a weakened Chinese economy, along with macroeconomic and political uncertainty in other major markets.
Yearly sales of 2 billion mobile phones seemed so close just a few years ago, but might become a distant dream for the industry. Our new five-year outlook is for 1.9 billion units on an annual basis until 2023.
Changing consumer behaviour is the main reason for the stagnant mobile phone market in many countries in 2019. This is a trend we’ve previously observed in Western Europe, where sales have suffered a 23% fall between 2013 and 2018. In our recent consumer survey of some key Western European markets, 35% of respondents said they plan to keep their current phone for longer than their previous one, and only 13% told us they will change their phone faster than in the past. This trend has slammed the brakes on Western European countries, and we believe similar dynamics are having a dramatic impact in the US, where we forecast mobile phone sales will drop 9% in 2019.
China isn’t immune to this trend either. In fact, in the world’s largest mobile phone market the effect is magnified by the macroeconomic slowdown: mobile phone shipments slumped 13% in 2018 and are on track for another fall, by 9%, in 2019.
We’re also concerned that the increasingly steep prices of high-end smartphones are biting sales. 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 made some consumers re-evaluate whether they really need to replace their phone as quickly as they’ve done in the past.
We have downgraded our expectations for 2019 even in India, where over 320 million mobile phones will be sold in 2019. This translates to a rise of just 5% from 2018, significantly below the 10% recorded last year but taking into account disruption 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 and to reach almost 400 million units by 2023 — roughly as many as in China. It’s little surprise that all big mobile phone-makers are strongly pursuing success in India. However, it is Chinese brands like Xiaomi that are achieving the most success, which is of great concern to high-profile brands like Apple and Samsung.
However, the gloomy market outlook for new phones isn’t bad news for everyone. Companies focussing on sales of second-hand devices are enjoying a surge in demand, especially as software upgrades and much lower prices than those of new flagship smartphones make refurbished handsets attractive to more and more people.
In the face of these difficult market conditions, smartphone makers are pinning their hopes on 5G devices. We now expect shipments of 5G phones to get off to a slower start than previously anticipated, but the growth trajectory from 2020 and beyond will be encouraging: 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. History has shown that the introduction of a new “G” always helps to energize demand for new phones, and 5G will be no exception.