Tuesday, 11 February 2020 12:21

Smartphone sales decline as consumers baulk at cost of premium handsets Featured

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Smartphone sales in Australia dropped by 5% to 4.3 million units in the second half of 2019 compared to the same period in 2018, as the cost of premium handsets continued to weigh on buyers, according to a new research report.

The report from technology analyst firm Telsyte also found that found both Apple (-3%) and Android (-6%) sales fell during the measured 6 months, resulting in Apple’s share increasing marginally (by 0.7%) to 42.4% (vs. 57.6% Android).

Telsyte found the iPhone 11 and iPhone 8 were the two most popular models amongst Apple buyers due to affordability, making up around 40% of iPhone sales.

In addition to affordability concerns, Telsyte says it believes longer-term operating system support, and lack of 5G, has given consumers reason to hold onto their iPhones longer.

According to the research average replacement cycles for smartphones has reached 3.0 years, up from 2.8 a year ago - with the figure even higher (3.3. years, up from 2.9 years) among mid-range ($300-$599) smartphone owners.

The top three Android vendors in the second half of 2019 remained Samsung, OPPO and Huawei with sales driven by continued demand of devices priced between $300 and $1,000, and heavy discounts during Black Friday and holiday sales on premium models such as the Samsung Note 10.

Telsyte estimates sales of Huawei smartphones in 2H19 declined by more than 20% when compared to 2H18, and expects a continued downturn for Huawei in Australia as new models such as the Huawei Mate 30 Pro are not expected to support Google Mobile Services.

Telsyte says the market ripe for a new budget iPhone, with its research showing more Australians are resorting to purchasing second hand and refurbished smartphones given the high cost of new handsets.

The percentage of those buying second hand and refurbished smartphones has more than doubled to around 10% in 2019, from less than 5% in 2016, and Telsyte says this is especially the case for Apple with more than 15% of iPhones purchased in 2019 second hand or refurbished.

According to Telsyte, the rising demand of used or second-hand iPhones highlights a gap in the market, after the “budget” iPhone SE stopped being sold at Apple stores in September 2018.

Telsyte Managing Director, Foad Fadaghi, says there is a gap in the Apple line up which it needs to address to continue to grow iCloud, Apple Music, Apple TV+, and other services sales.

“Apple needs to revisit its lower end smartphone strategy, given the importance to its services-based income,” Fadaghi says.

Fadaghi points to the fact that Telsyte has previously reported the Australian Subscription Video on Demand (SVOD) services market reached 12.3 million subscriptions at the end of June 2019, a growth of 235 per cent vs June 2016. Similarly, Australians have taken up more than 12 million streaming music subscriptions at the end of June 2019, up over 40 per cent vs June 2016.

Telsyte estimates annual sales of smartphones could potentially reach peak 2017 levels where the market achieved 9 million smartphones sold, if more sub-$1,000 5G devices become available and Apple releases at least one 5G iPhone model.

“Apple is primed to have a strong year similar to when it first released its plus-sized handset, if it delivers a 5G model” Telsyte Senior analyst Alvin Lee says, noting that additionally, around 20% of smartphones currently in use are at least five years old, indicating the market is ripe for upgrades.

“Despite a modest start, consumers are indicating 5G is important when choosing a smartphone.

“Telsyte’s latest consumer survey found two thirds (66%) of Australians (aged over 16) that plan to purchase a smartphone in 2020 intend to purchase a 5G handset.

“While 5G applications and networks are still emerging, Telsyte believes consumer 5G motivations are primarily based on “future-proofing” and being ready to utilise new apps such as cloud gaming.

“The same survey also found that of those likely to purchase a 5G smartphone as their next handset, an overwhelming 71 per cent are not willing to spend more than $1,000. Currently less than a handful of 5G smartphones on the market are priced below $1,000 according to Telsyte’s ongoing market monitoring.”

Telsyte also says that smartwatches already used by 1 in 5 Australian smartphone users, with smart wearable and wrist technologies are becoming more sought after - and consumers are increasingly comfortable with wearables given the benefit of convenience alongside their health and fitness features.

More than half (54%) Australians claim they “like to stay fit and healthy” according to the same research which is creating what Telsye says is a groundswell of interest in devices that accurately measure fitness.

According to the study, a total of 1.2 million smart wrist wearables (smartwatches and smart wristbands combined) were sold in the second half of 2019, up 15 per cent from just over a million a year ago, with the increase was mainly driven by the adoption of smartwatches with more than one-in-five smartphone owners now pairing one to their phone.

Other key points on smartwatches noted by Telsyte are:

  • There was an influx of new smartwatch releases before the 2019 holiday season, which drove sales to new levels.
  • More than 900,000 units were sold during the measured six months, an increase of 29 per cent compared to the second half of 2018.
  • Apple remained the leader in the smartwatch market with around half share of total smartwatches sold during the 6 months period.
  • Telsyte research shows Apple Watch series 3 (including all variations of series 3) was the most popular choice, mainly due to the attractive price point for many first-time users.
  • Samsung was the second clear winner in smartwatches market with sales increasing by more than 150 per cent from the same period last year. The surging adoption was mainly due to popular promotional giveaways of Galaxy Buds when the Watch Active2 was released in October 2019.
  • Similar to Apple’s Watch series 3, the previous Samsung Galaxy Watch Active also became an attractive alternative due to price.
  • Smartwatches are still a clear opportunity for service providers looking to expand their mobile IoT portfolio – nearly one in three (30%) indicated mobile connectivity (e.g. 4G) is important for their next smartwatch, especially amongst existing smartwatch users (53%).

As part of Telsyte’s wearables market measurement, the new market category of “smart hearables” has been growing strongly since the Apple AirPods were first released in 2017, and Telsyte says:

  • Smart hearables are wireless earbuds and headphones that include smart features such as supporting digital assistants, voice activation, and deeper integration with smartphone and smartwatch apps.
  • The study found 3.2 million (16%) smartphone users were using smart hearable devices at the end of December 2019.

Telsyte says that smart glasses could regain “consumer vogue” with better designs, while AR (augmented reality) headsets have not been readily available to consumers, with the study finding the continued improvement in both software and hardware, helped by the various business use cases of Microsoft HoloLens, is proving the technology is edging closer to widespread acceptance, and also notes that:

  • AR gaming and education related apps have seen early success on smartphones and tablets, and Telsyte expects with improved hardware design, consumers will give smart eye wear a chance.
  • Only around one in five Australians are interested in using smart glasses or AR headsets, however, Telsyte found this increases to greater than 30 per cent among loyal Apple users (those with already more than five Apple devices or services).
  • Telsyte estimates if Apple releases consumer smart glasses in Australia, it could sell 100,000 or more units in its first year – if they are priced within the range of existing consumer VR (Virtual reality) headsets.

Telsyte says it has identified an emerging market in location tracking tags that can help consumers find their property via smartphone apps - with research showing at least 30% of Australians have lost, or had difficulties finding, their personal belongings such as keys, wallets, and remote controls.

At the end of 2019, Telsyte estimated almost a million Australians were already using location tracking tags such as Tile Mate and Telstra Locator tags, and says it believes tracking technology will also strongly appeal to businesses, as organisations of all sizes address their asset security and management challenges - with research finding that businesses are losing more than $4.3 billion each year in assets that could be easily tracked, from small items such as key cards to large construction assets.

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Peter Dinham

Peter Dinham is a co-founder of iTWire and a 35-year veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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