The world population, and the percentage of people who can afford a premium smartphone, is not elastic. Analysts suggest that the market may be over-stuffed.
They also suggest that the current crop of premium smartphones have too little differentiation between them. You can buy big, thin, loudest, best camera, water resistant or sexiest but most use the same quad core, memory, operating system and do very much the same thing.
Samsung sold 20 million Galaxy S4 handsets so far. The target is 70 million sales this year but it is looking increasingly unlikely it will achieve this figure. Samsung’s Q2 earnings (and share price) have taken a hit – US8.3 billion instead of US$10 billion as expected.
HTC’s share price was also savaged based on its performance and predictions of future earnings. Its profit for Q2 was 83% down on the same period last year.
This portends a new, more mature future for smartphones. The smartphone category is saturated. Lack of new compelling features makes it a dog eat dog race now as each manufacturer fights for market share at the expense of another. Simply put the size of the pie in not increasing.
There may be six million people in the world but only a relatively small number can afford a US$500+ handset and most do not have access to low cost, 3G or 4G networks - Mexico for example, where network access costs US$100 per month for far less coverage and value.
Apple, HTC and Sony have ceded the low end of the market to other makers and are finding it increasingly difficult to gain economy of manufacturing scale that Samsung and Nokia have. Will they launch low cost phones and risk cannibalising their premium brand?
What the industry needs is the next big thing. Wearable computing will get consumers to dip into their post GFC pockets and make the manufacturers rich again.