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The Battle for Global and Local Supremacy and Survival Steps Up in a Maturing Market
Smartphone Market Analysis and Commentary
02 Sep 2016 - The latest worldwide smartphone report from Futuresource Consulting marks a pivotal moment in a maturing market. 2015 demonstrated good growth, up 16.4% and 210 million units to 1,491 million. However, the growth was largely driven by low-end smartphone adoption in emerging markets, specifically in the sub-$100 bracket. New competing vendors are expanding beyond their traditional domestic markets, seeking new growth areas by targeting the entry-level / low-end segment, taking share from the leading brands and the traditional customer base that they once dominated. This latest report highlights how contenders must re-think and innovate in the maturing smartphone market.
"The increasing market saturation is driving the fierce battles for market positioning, supremacy and survival which can be seen across the different segments, from premium, to low-end and in all regions. This has resulted in the average trade price falling 9.6%, restricting market value growth to 5.3% to $299 billion" commented Mariia Konovalova, Futuresource Consulting. "Companies are working hard to improve their portfolios, increasingly moving into the middle ground and/or into new product categories in an effort to use their volume base as a platform to increase their profit margins."
The days of double digit volume growth have gone. 2016 is the first year that this has occurred and Futuresource predicts that global smartphone revenues will peak in 2018. As a consequence smartphone brands, OEMs and retailers have to evolve in order to differentiate their products, new strategies are being tried out; smartphones are being used to generate revenues from accompanying products & accessories and new retail & pricing strategies are being used to drive replacement sales and upgrades.
Without exception, leading handsets vendors are seeking to exploit complementary, high-growth categories, within audio and wearables in particular. Apple already leads the smartwatch market in revenues and is threatening Sony as the world's 2nd largest consumer audio brand (Bose is #1), helped in no small part by the strength of Beats in headphones. Today, the 7th September, Apple is expected to announce its next generation smartwatch, which is reported to come with GPS and a barometer to target fitness enthusiasts where specialists Fitbit, Garmin, Polar and Suunto currently dominate as the most recognised brands in this category. Apple is also likely to announce the next iPhone which is rumoured to be without a 3.5mm audio jack, which in turn is expected to fuel sales of Beats wireless headphones. Meanwhile Samsung, Xiaomi, LG and Oppo all have significant footholds in their respective segments of the wearables and/or audio markets. Beyond the OEM's we also see the mobile handset retail channel branching out in to complementary categories, in order to maintain growth - the telecom channel in the US accounted for 14% of wireless speaker revenues in 2015.
It is apparent that the competing vendors are leveraging new found market penetration in handsets to strengthen position, trying to move up the food-chain, adding more premium features and specifications in new flagship products, priced more competitively, as is evident from Huawei, OPPO and Xiaomi. The knock-on being that those major tier 1 vendors are now being pushed harder to innovate in order to distinguish their products from those that are encroaching on their traditional customer bases.
Futuresource states that whilst latest results were not encouraging for all, it can be seen that OEMs are keen to differentiate and highlight their brand strengths across their growing portfolios. Their main aim being to upsell consumers with additional products and add-ons to their smartphones, introducing new services and encouraging more frequent use in a wider array of applications. Much has been made of HTC, Samsung and Sony's forays into the VR space, whilst Alcatel and OnePlus have also used this angle to attract consumers to their latest smartphone launches. 360 cameras, wearables, connected devices, from headphones and speakers to TVs to domestic appliances and 'robo-balls' and toys together with integration with cars are also evident as efforts to broaden vendors' brands in the IoT/smart home space. Alcatel, Gionee, Huawei, Lenovo (Moto), LG, Microsoft and Xiaomi are others taking this approach.
It is evident that the most successful companies over the past 12 months have focused on meeting popular needs of consumers, such as fast charging technologies and camera features. Understanding local needs and preferences, refocusing on distribution channels, retail partners and not simply relying on a one-size-fits-all strategy in every country is important for companies wanting to expand and fend off lower-priced competition.
The report goes into detail about the future developments, such as how virtual reality (VR) will continue to be popular due to immediate demand from gamers and some content providers, although augmented reality (AR) is likely to be more widely used as it can touch so many areas without being so intrusive or constrained as VR.
New form factors will start to be experimented within the next 12 months, with many waiting for existing screen technologies to deliver a folding phone, whilst new artificial intelligence (AI) and virtual assistants, sensors and new user interface (UI) technologies will evolve user behaviour and further new form factors by reducing reliance on traditional keyboard input. Pebble's Core is highlighted as the best example of this; in effect it is a phone that is not a phone, combining GPS, a virtual assistant, voice input and sensors to deliver a new connected device in a wearable form factor.
Futuresource Consulting is a specialist research and knowledge-based consulting company, providing organisations with insight into consumer electronics, digital imaging, entertainment media, broadcast, storage media, education technology and IT. With a heritage stretching back to the 1980s, the company delivers in-depth analysis and forecasts on a global scale, advising on strategic positioning, market trends, competitive forces and technological developments. www.futuresource-consulting.com
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