As we plunge into 2016, the smartphone industry stands at a tipping point. While the numbers maintain that 2015 had been one of the best years for smartphone shipments so far, one of the worrying signs has been the sluggish YoY growth exhibited by the global market.
As a matter of fact, latest reports claim that 2015 would be the first of a few years of single digit YoY growth for the overall market. According to IDC, the economic meltdown of China, the world’s largest smartphone market at the moment, has been the primary cause behind the sharp decrease in the growth spur.
A report by Gartner analysing the same scenario has observed nearly similar results. In fact, the new report pegs worldwide phone shipments to be around 2.03 billion by 2018, with smartphones comprising more than 80% of the market. IDC reports have claimed that we will reach the 1.86 billion smartphones mark by 2019. Similarly, a fresh report from Gartner seems to lend support to that figure as smartphone shipments have been driving growth in mobile devices and will continue to do so in the near future. While there seems to be nothing amiss in the smartphone numbers, something that did manage to surprise us was the predicted resurgence in the dying PC market in 2017. Given that Microsoft has recently been very upbeat about their Windows 10 devices both on desktop and mobile; today we look at the impact that Windows 10 might have on the computing world as a whole in the coming quarters.
An Overview of the Hardware Scenario From 2015-2018
In the face of new and evolving software solutions, technical hardware including devices of daily use like Desktops, Laptops and Smartphones has often taken a back seat. We, ourselves, have been guilty of that on more than one occasion, but one of the reasons for the apparent neglect towards hardware has been due to the fact that they have not evolved much at all during the last few years.
While we have seen new app paradigms come to the forefront and observed radical changes in revenue models for software companies, hardware has gone through slow iterative betterments. A quick look at the Worldwide Devices Shipment Forecast for the next couple of years will reveal that all the major trends of the desktop and smartphone will continue to manifest themselves.
Tablets, Hybrids and UltraBooks
The new category of the premium Ultramobiles is a potential avenue of interest so we will continue to keep a close eye on newer devices in that category. With that said the hybrid tablet category is just starting out, and based on the economic landscape and the relatively higher price point of these devices the prediction that they will double in shipment numbers from 45 million to 92 million in the timespan between 2015 to 2018 is certainly an exciting proposition and may be the jab in the arm that the tablet industry needs.
The Basic and Utility Ultramobiles range reflects the iPad Mini and iPads and other traditional Android tablets as well and based on recent reports; iPad sales have gone down significantly, and their Android counterparts are not fairing too well either. The rise in phablet devices has also contributed to the demise of the traditional budget-midrange tablet offering and the stagnant numbers reveal that they face an uphill challenge to gain consumers in the coming months.
Desktops and Laptops
Based on recent reports, the PC industry as a whole has been going through a slump especially the desktop and laptop shipment numbers look dismal for the past few years with negative YoY growth in each year. Things, however, might take a turn for the positive with the arrival of Windows 10 on the enterprise scene. Although 2016 will still record a negative growth of 1%, 2017 seems to have the potential to turn things around with a 4% YoY growth on the cards.
Gartner’s conducted a global survey of 3,000 business respondents based out of six countries (Brazil, China, India, France, U.K. and U.S.) during Q4 2015 and found that nearly 80% of businesses are expected to have completed the testing and evaluation of Windows 10 within a year from release and over 60% within nine months. Given that Windows 10 is the last Windows upgrade and combined with the fact that it is free to upgrade, the onus is high among businesses to migrate to the new platform.
By the end of 2017, many businesses are looking to move as much as 40% of their installed base into newer hybrid touch-enabled devices running Windows 10. The ease of use of such touch-enabled hybrid devices has caught the fancy of enterprise users much like the smartphones has garnered the attention of the basic users; a topic we will address in the very next paragraph.
Smartphones will see another year of sluggish growth as the global economy of potential markets faces turmoil in the coming years. While constant end-user spending is expected to grow in 2016, the measly increase of 1.2% will not be able to spur overall end-user device expenditure to grow in 2016. This can be attributed to the likes of companies like Xiaomi and Lenovo and their proliferation of emerging markets with lower cost LTE capable devices.
We are witnessing a shift to basic phones in the smartphone market. Users are also opting to replace within the basic smartphone category without necessarily moving to high-end smartphones, especially in China and some other emerging markets. – said Roberta Cozza, research director at Gartner.
In fact, smartphones are all set to wipe out the basic phone market with 4 out of 5 every phone in the world is expected to be a smartphone by the end of 2016, a drastic increase of 12 percent points from the 70% of 2015.
For the first time in history, end user spending in constant U.S. dollars is expected to decline 0.5%. This is despite the fact that the worldwide shipment of devices will continue to increase at 1.9% and mobile phone shipments are expected to clock in growth at 2.6%. This disparity in the volume of devices vs. overall expenditure bears testimony to the fact that the market is no longer controlled by the innovation of hardware and software features. Instead, we have reached a level of maturity in smartphones and PCs as well where for the average consumer, lower cost devices are good enough to get the job done without any significant hiccups.
“Driven by economic variations the market is splitting into four categories: economically challenged mature markets, economically stable mature markets and the same for emerging markets,” says Ranjit Atwal, research director at Gartner when speaking of the various markets that the smartphone OEMs have to target.
While Russia and Brazil will fall into economically challenged emerging markets, India, on the other hand, will be a stable emerging market, and Japan will belong to the economically challenged mature market, leaving markets like the US as the stable, mature market. Given that, each of these markets will have a different audience and expectation from their technologies, OEMs will have their work cut out for them as they try to expand their global reach. With sub 100$ devices being constructed of sub par materials, the product cycle for new age cheap phones will be lesser than the standard 2-year model. This will give consumers an easy option to jump ship to a competitor’s product and make customer retention that much harder for the budget range manufacturers. The budget market in developing countries like India is set to surpass the US in terms of volumes of smartphones shipped, and the focus has shifted from providing great hardware to enabling a complete user experience that locks users into a brand ecosystem.
With all the OEM manufacturers desperately trying to provide an unique experience on their handsets, the time is right for Microsoft to launch an assault on Google by releasing Windows 10 on Android hardware. Can Microsoft use their new found momentum in the mobile space to stake its claim in the smartphone world? We don’t know for certain, but the way things are shaping up, 2016 should be an exciting year in the mobile industry!