Following nearly one decade of supercharged sales, the smartphone market looks like it has reached a dead end. Apple has recently posted the first quarterly sale decline since 2003 while analysts reported the first Q1 decline for smartphone shipments ever.
Tech companies are now rushing to shore up their margins by either squeezing component producers into lowering prices or developing new technologies such as the Internet of Things, automated cars, and VR headsets.
Apple’s CEO Tim Cook said late last month that iPhone sales had “stopped growing” after nine years since the iPhone’s debut.
“You couldn’t help but wonder how long the party could go,”
noted David Hsu, an management expert at the University of Pennsylvania’s Wharton School.
Analysts explained that the cause of the slowdown is mainly related to consumers’ change of attitude. Apparently, people are no longer willing to blindly upgrade their handsets as soon as something newer hits the market. Plus, first-time buyers are not easy to find since emerging markets still prefer cheaper and locally produced phones.
As a result, the $423 billion industry needs to find fast other opportunities to grow to avoid sharing the fate of personal computers. R&D departments are now seeking the next big idea after the smartphone, which may be either a driverless car, robot, or the Internet of Things.
But analysts believe that it may take years before these exotic concepts are accepted by the market. So, before that tech companies should get used to years of weak sales,with component makers being the worst hit.
Sony Corp. reported last week that sales of image sensors have declined in the last quarter. And so did other component manufacturers including South Korea-based chip-maker SK Hynix Inc and Europe’s semiconductor producer Dialog Semiconductor Plc.
Experts expect Apple Inc and Samsung to put additional pressure on component makers as their margins continue to shrink.
But the industry is optimistic that the smartphone market could be revived. Industry analysts pinpointed that most smartphone users use old technology to connect to the Internet, with only 16 percent of handsets in use being able to access fourth-generation connections also known as 4G LTE.
Additionally, as users continue to heavily use their phones, the handsets will eventually wear out and have to be replaced with newer ones on a regular basis.
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