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IDC: Smartphone Growth To Decline Sharply in 2014

IDC: Smartphone Growth To Decline Sharply in 2014
February 26, 2014 12:32PM

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The smartphone market will decline this year and beyond, according to IDC. But IDC's forecast isn't shared by all observers. "Around a third of U.S. consumers still have feature phones, and new apps and features make moving to smartphones more attractive every year. We see no evidence that demand is slowing," said Yankee Group analyst Carl Howe.

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Slower growth? That’s the smartphone story coming out of market research firm IDC. Despite the high growth expected in many emerging markets, 2014 will mark the year smartphone growth drops more significantly than ever before, with only a 19.3 percent year-over-year growth, according to the firm’s Worldwide Quarterly Mobile Phone Tracker.

Annual smartphone volume in 2013 surpassed 1 billion units for the first time, accounting for 39.2 percent growth over 2012. In the year ahead, IDC expects mature markets like North America and Europe to drop to single digits, while Japan might contract slightly. Global smartphone shipments will slow to 8.3 percent annual growth in 2017 and 6.2 percent in 2018.

"In North America we see more than 200 million smartphones in active use, not to mention the number of feature phones still being used," said Ryan Reith, Program Director with IDC's Worldwide Quarterly Mobile Phone Tracker. "2014 will be an enormous transition year for the smartphone market. Not only will growth decline more than ever before, but the driving forces behind smartphone adoption are changing. New markets for growth bring different rules to play by and 'premium' will not be a major factor in the regions driving overall market growth."

Declining Price Points

As mature markets become saturated and worldwide growth slows, IDC said service providers and device manufacturers are seeking opportunities to move hardware wherever they can. The result: rapidly declining price points that the firm said is creating challenging environments in which to turn a profit. The worldwide smartphone average selling price (ASP) was $335 in 2013, and is expected to drop to $260 by 2018.

Ramon Llamas, Research Manager with IDC's Mobile Phone team, said in order to reach the untapped demand within emerging markets, carriers and OEMs will need to work together to bring prices down.

“Last year we saw a total of 322.5 million smartphone units ship for under $150 and that number will continue to grow going forward,” Llamas said. “We've already seen numerous smartphone announcements targeting this priceband this year, with some as low as $25. Just as the dynamics have changed for overall smartphone growth, so have the dynamics for smartphone pricing in the markets where continued growth is expected. Not all vendors will want to get into this space, but those that do must make deliberate choices about their strategies in order to succeed."

No, Demand Isn’t Slowing

We caught up with Carl Howe, vice president of Research and Data Sciences at Yankee Group, to get his thoughts on smartphone growth. He told us that although he can’t comment on other the figures from other research firms, he doesn’t have any data at present that supports that theory of slowing growth. (continued...)

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