What Could Drive The Smartphone Market In 2016: An Overview

worldwide smartphone market 2016 - 2019

The most recognized smartphone brand, Apple Inc. (NASDAQ:AAPL), is showing signs of downward trend out—NASDAQ figures shows that Apple’s stock stood at $100.70 on Wednesday—just a fraction above the $100 threshold.  Latest figures show that the stock price has come down to $96.45; this comes amidst signs of slowing demand for the latest iPhone 6s and 6s Plus models in Q4 2015. The Asia-focused business publication Nikkei, reports that the smartphone giant could cut iPhone 6s production by a third as the current inventory of iPhone 6s and 6s Plus have“piled up at retailers” across China, Japan, Europe and even the U.S.

Well, the so-called high-end premium phones are seemingly losing its admiration; when disruptive brands like OnePlus and Xiaomi rolled out mid-range high-end devices, consumers flocked to lay their hands on the new models that offered a rich, premium-like experience.

Exhibit ‘A’ is One Plus One—the so-called ‘flagship killer’ which was announced in April 2014, sold close to 1 million devices by the end of 2014. East Asia accounted for 39% of the sales, India accounted for 7%. The company’s CEO Carl Pei said in a media statement that they originally planned to sell around 30,000-50,000 units of its ‘flagship killer’.

Exhibit ‘B’ is the Xiaomi range of devices; an IDC report points out that the key to its triumph was the launch of Redmi 2A model in China, as well as the consistent performance of Redmi 2 and Mi 4 models. Xiaomi’s Mi4 launched in July 2014, sold like hot cakes–over 10 Million devices worldwide in just one year.

How Disruptive Brands Are Stealing The Show

Two things—marketing strategies and high-end features (with a mid-range price) are leading factors that drove the success of Xiaomi and OnePlus. IDC predicts that worldwide smartphone shipments will grow 9.8% in 2015 to a total of 1.43 billion units, with China as a focal market. The growth will swell with a CAGR of 7.4% till 2019 to 1.86 billion units shipments.

“The main driver has been and will continue to be the success of low-cost smartphones in emerging markets,” says the IDC report. A combination of first-time buyers as well as replacement buyers are key drivers of the low-cost devices’ success.

“We believe that, in a number of high-growth markets, replacement cycles will be less than the typical two-year rate, mainly because the components that comprise a sub-$100 smartphone simply do not have the ability to survive two years. Offering products that appeal to both types of buyers at a suitable price point will be crucial to maintaining growth and vendor success,” adds the report.

At the same time, high-end devices from newer players like the Huawei’s new Mate S, as well as Nokia’s 950 XL are packing a punch. The 950 XL’s 20MP camera and the Windows Hello and Continuum feature could be considered as ‘trigger’ points that add to its plausibility. Original ‘Features’ like the iPhone’s 3D touch and Windows Hello, could become the next big thing in 2016.

Next Big Thing: ‘Trigger’ Features, Design & OS ‘Ecosystems’

Apart from features, inspired designs, and support for popular apps like Snapchat, Tinder (and a mix of similar services) could play a lead role for expected models in 2016.

The design is the another important element for device manufacturers to focus on; Samsung’s Galaxy S6 and S6 Edge received an underwhelming performance during 2015, the brand has been blamed for its uninspired design.

A counterpoint research states “We continue to recommend Samsung to significantly cut down on hundreds of SKUs to a few hero models which will immensely help Samsung focus on its product design, experience and generate greater scale to improve profitability which is dipping quarter after quarter from 20% level when Samsung was at peak”

Currently, the two major OS ecosystems—Android and iOS are setting benchmarks in the mobile industry; 2016 could be a “war of ecosystems”, says Stephen Elop, CEO, Nokia. An MIT research paper suggests that in order to win the “war”, organizations have to anticipate the shifts in value flow and be ready to respond in order to create maximum value and capture it. Understanding ecosystem dynamics and other roles in it could help players to create, grow and sustain thriving ecosystems available to them.

“They also have to understand the ecosystem dynamics and various roles within an ecosystem available to them, to help create, grow and sustain thriving ecosystems of component manufacturers, device manufacturers, accessory manufacturers, software application developers and service providers for their platforms,” says the research paper.

Exhibit ‘C’- CyanogenMod. This community built ROM has caught the attention of users and critics alike. Why? The ability to control almost every part of an OS—from design (themes, UI, etc) to app permissions. After the U.S Library of Congress gave the green signal to ‘jail-breaking’, CyanogenMod spread to more than 150 models. OnePlus, India-made Yu phones, and even Nexus are some of the major players that have adopted Cyanogen into their devices.

It is now very evident that a chunk of the consumer crowd is starting to move on from premium devices to mid-range, high-end models. Bigger smartphone players, like Samsung and Apple, should be considering the new trend-shift to deliver a better experience to the user. Glittery features and overpriced devices could pack the punch, but the idea of a premium-like device for just half the price of a high-end phone is here to stay.

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