Smartphone saturation, phablets notwithstanding

That may be the story of the demand for smartphones. Apparently, the declining demand has not been slowed down by the recent introduction of phablets, which are jumbo phones that lie between a traditional smartphone and the larger tablet, and were basically introduced by Samsung via the Galaxy Note family of products. (The Galaxy Note […]

That may be the story of the demand for smartphones. Apparently, the declining demand has not been slowed down by the recent introduction of phablets, which are jumbo phones that lie between a traditional smartphone and the larger tablet, and were basically introduced by Samsung via the Galaxy Note family of products. (The Galaxy Note 3 device has a 5.7-inch screen.) Samsung is reportedly seeing significantly-reduced sales from smartphones.
Despite the downward sales trend, other companies, such as HTC, LG, Nokia, and even the troubled BlackBerry, are still introducing their own phablets. Smartphone makers also continue to roll out new devices, as if their game has no end. Moreover, they are adding enhancements to the devices, giving them larger screens, and adding tablet capabilities. There are even new entrants into the business, such as Asus, the personal computer manufacturer, who is launching a new line of smartphones that includes the Padfone, which is a 4.3-inch smartphone that docks with a 10.1-inch tablet, and three Zedfone models with respective screen sizes of four, five, and six inches.
So, why do the demands for smartphones (phablets) appear to wane? The event is simple to understand: most of the people who wanted (and could afford) a smartphone already have one. Thus, the slow-down is simply a manifestation of demand saturation. To be sure, folks like their devices and will continue to buy them. But for those who already have a phone, subsequent demands are going to be driven mostly by the need to replace the old devices. Incremental feature additions may not get the buyers to the shop – there has to be radically different features in new devices in order to maintain the peak demand for smartphones that was witnessed a year or so ago.
A word or two on screen sizes. Many vendors (Samsung, LG, etc.) have tried to find gold in phablets, the assumption being that people prefer larger-screen devices. Conspicuously, Apple hasn’t joined in on this game, as the company that gives us the best smartphone (iPhone) has yet to launch a phablet. (iPhone 5S has a 4-inch screen.) Apple has resolutely resisted peer pressure in this regard, as many analysts have speculated that the company would be losing business because it does not have a large-screen smartphone in the market. Sales data show that Apple might not be missing much. According to data from Kantar Worldpanel ComTech, the smartphone sales in the U.S. in October/November last year – about the time that Samsung introduced its 5.7-in Galaxy Note 3 device – as a function of screen size, are as follows: 4.49-inch (64.2% of sales), less than 3-inch (19.1%), and 5-inch or greater (15.2%). This data pertains to the U.S. market and I acknowledge that the situation may be different in other parts of the world. However, the disparity may not be too different. Moreover, the devices in question are the expensive, high-end ones, which perform best in the U.S. because of the high expendable incomes.  The idea in this paragraph is that larger screen sizes, per se, may not significantly move sales!
The slowing smartphone business can be gleaned from the reduced (relevant) energy at this year’s Consumer Electronics Show (CES) in Las Vegas (USA). The show, which was introduced in 1967, has been an event for tech companies to showoff new technologies. The original shows focused on TVs and stereos, but more recently, high tech, Internet, and Information and Communication Technology (ICT) companies have used the show to launch and/or show off their innovations. The show typically attracts approximately 150000 attendees and 3000 exhibitors. This year’s show started last week Monday and ended on Friday. It was reportedly tepid, if not low-key, as far as smartphone innovations are concerned, although Asus and Huawei showcased their new devices. The big regulars, like Microsoft and Apple, didn’t show up to exhibit. This year’s event featured the exhibition of autos (Audi, BMW, Ford Motors, and General Motors). There were self-driving cars, 3-D printers, the virtual money bitcoin displays, and displays on wearable computers, which I wrote about on 8 July 2013 in this column in Daily Trust.  Humongous-scale TVs were also featured in this year’s show, including the 105-inch (110-inch) TV by LG Electronics (Samsung). At this year’s CES, Intel Corp. CEO Brian Krzanich hinted on Intel’s efforts to get into devices beyond personal computers.”
Obviously, Intel will be a late-comer into the smartphone/phablet business when it eventually shows up. Just ask Samsung, the company who sells more smartphone than any other company in the world. Besides smartphone saturation, analysts are of the opinion that Samsung might be losing share in the competitive market for the top-of-the-line smartphones as Chinese smartphone makers appear to be giving Samsung a run for its money. In the past couple of years, Samsung has tried to spur its smartphone business, not just by putting out better devices, but also in the software arena. The company has also invested heavily in innovations, including wearable computers. Samsung’s smartphone success has depended strongly on Google’s Android operating system (OS), which power Samsung’s devices. Now, Samsung is planning to deploy a smartphone OS of its own called Tizen, which will be available as an alternative to Android. None of these initiatives from Samsung has caught on yet, suggesting that Samsung should stay close to its consumer electronics and chip manufacturing heritage.
The bottom line in this article is that the smartphone business is showing a sign of saturation and smartphone companies will need to find other avenues for fast growth.