Red Flag Flying Over Flagship Phones
These might be the worst of instances for high-end flagship smartphones.
Google CEO Sundar Pichai on Monday advised Alphabet shareholders that his firm’s flagship telephones, the Pixel three and Pixel three XL, launched final fall, had encountered some “year over year headwinds.”
Samsung maintained that its flagship cellphone lineup, which incorporates the Galaxy S10, has been promoting properly, but it surely acknowledged that gross sales have been being cannibalized by its lower-priced fashions.
Meanwhile, Apple noticed iPhone gross sales plummet, 12 months over 12 months — 15 p.c throughout the vacation quarter of 2018, regardless of holidays sometimes being a sizzling time for smartphone gross sales. Wall Street analysts have predicted additional drops for the primary three months of 2019.
“We’re starting to see a backlash against these expensive smartphones,” mentioned Ramon T. Llamas, senior analysis analyst for cellular gadgets expertise and developments at IDC, a market analysis firm in Framingham, Massachusetts.
“At a time when innovation has been moving slowly, consumers can’t justify the spend for incremental change and are retreating to less expensive stuff,” he advised TechNewsWorld.
“A thousand dollars for a phone is pretty ridiculous,” mentioned Phoenix, Arizona-based Jim McGregor, principal analyst at Tirias Research, a high-tech analysis and advisory agency.
“People should not be paying that,” he advised TechNewsWorld. “They’re not getting the value for their money.”
Hitting Price Wall
Many shoppers have hit the wall with regards to what they’re prepared to pay for a smartphone, noticed Charles King, principal analyst at Pund-IT, a expertise advisory agency in Hayward, California.
“It used to be that premium-priced flagship phones delivered substantial new features or design points that softened the sting of their much higher costs,” he advised TechNewsWorld. “Incremental improvements don’t offer the same sort of pain relief.”
People are holding on to their telephones longer, too, not solely as a result of they see their current cellphone as adequate, but additionally as a result of it is taking them longer to pay for it, since they paid a lot for it within the first place, famous St. Paul, Minn.-based Gerrit Schneemann, senior analyst at IHS Markit Technology.
What’s extra, “in areas where the overall market is still growing strongly, high-end devices are beyond the reach of many new and existing smartphone users, further limiting the addressable market,” he advised TechNewsWorld.
Flagship telephones have much less attraction now as a result of they’re extra about status than any vital differentiator, remarked Tuong Nguyen, senior principal analyst at Gartner, a analysis and advisory firm primarily based in Stamford, Connecticut.
For instance, cameras was a key differentiator, however “now, many mid-tier phones have excellent cameras,” he advised TechNewsWorld. “It’s at the point that it’s not worth it to the average consumer to replace an existing phone for one with an even a better camera.”
While the marketplace for premium smartphones shrinks, mid-range telephones appear to be doing properly, Pund-IT’s King mentioned.
“Reports that Google plans to introduce a new lower-cost Pixel 3 handset suggest that the company is going where customers want to be,” he famous. “I expect other handset makers to follow a similar path.”
Those stories say the brand new “Pixel 3a” might seem as early as subsequent month, when Google holds its annual I/O present for builders. “There’s going to be a shift from the top-tier guys to the middle-tier guys,” Tirias’ McGregor predicted.
“With the help of Qualcomm and others, high-end phone features are being added to the mid-range phones,” he continued. “If these top OEMs keep going after these really expensive phones, they’re going to continue to lose market share.”
Mid-range and low-end telephones match into rising markets and the financial scenario of customers there, IHS’ Schneemann famous.
“Whether in Southeast Asia, India or Latin America, mid-range and low-end devices are affordable options for more users,” he mentioned.
“Apple’s struggle in India is a reflection of the reality that most Indian users cannot afford to buy an iPhone,” Schneemann added.
Approaching Saturation Levels
Even a mid-range cellphone could also be a tricky promote sooner or later.
“I believe we’re approaching saturation of the overall smartphone market,” mentioned Frank E. Gillett, principal analyst at Forrester Research, a market analysis firm headquartered in Cambridge, Massachusetts.
“As we approach saturation, the smartphone market will become a replacement market,” he advised TechNewsWorld.
Meanwhile, high-end smartphones will strategy saturation earlier than the general market.
“We’re going to see a decline, and the high-end smartphones will stabilize at a new level,” Gillett defined.
“There’s still going to be a bunch of people who want big screen, high-end smartphones,” he continued, “but it means they’re going to keep them longer, and the market of buyers will no longer be expanding.”
5G to the Rescue?
A wild card for future gross sales of flagship telephones might be 5G expertise, which guarantees quicker information speeds. Those gross sales is not going to be fast, although.
“Even though the rollout of 5G will be quicker than 4G, it will take some time for subscribers to get access to it at scale,” Schneeman defined.
“In the U.S., Verizon’s rollouts are geographically limited,” he mentioned.
“There is also still no killer application which would not only move existing premium smartphone users to upgrade quicker, but also move those subscribers with cheaper handsets to move into the premium price range,” Schneeman added.
“I think 5G will have a significant impact,” he mentioned, “once handsets in more than one pricing tier are available.”
Media and providers that reap the benefits of 5G will roll out loads slower than anticipated, King predicted.
“It’d be a mistake to believe that 5G alone will somehow pull the smartphone market out of its current malaise,” he mentioned.
“No one is going to get rid of their phones because of 5G,” contended Forrester’s Gillett.
Moreover, the attention-grabbing 5G options are going to be restricted to dense city areas and it will value extra to make use of it, he identified.
“Because it’s more expensive, people will just wait until they get their next phone to get 5G,” Gillett mentioned. “That won’t fuel any growth.”
Advocates of 5G might have an issue promoting the expertise to shoppers.
“Joe and Jane consumer have no idea what 5G means, nor do they care — at least not right now,” IDC’s Llamas mentioned.
“Is 5G going to save smartphones?” he requested. “I don’t think so. If it is, it’s going to take a long time to happen, and a lot of consumer education.”