Home / Blog / We hold onto our smartphone for much longer…

We hold onto our smartphone for much longer…

We are replacing our smartphones less frequently than in the past, a sign that the new ones are not perceived as much better any longer. This is both a problem and a generator of innovation. Image and data credit: Ting Mobile

I remember, over ten years ago, in Seoul talking to Samsung marketing and learning that one of the reason to generate so many new smartphones models in short period of time was the willingness of the South Korean market to get “the newest” (Samsung has delivered over 1200 types of phones since they started to produce cellphones, and half of those were smartphones, meaning some 5 new smartphones every months, on average, in the last 10 years). South Koreans could change their smartphone every 4 to 6 months and the average was around 1 year.

A captivating map of the world depicting the penetration of smartphones – divided by OS. The areas with a white circle indicates that the number of people exceed the number of smartphones, the thickness the gap between people number and smartphone numbers. As you see in most countries the number of smartphones exceeds the number of people. Source: Blooberg BusinessWeek 2019

In other parts of the world the craziness was somewhat “lower” but still the average was less than 2 years (Mexico 1.5 years, India 20 months, world average 21 months).

More than that. Over the last two decades we have seen the adoption of cellphones increase and in the last ten years the number of smartphones has increased to the point that today there are, in several countries as shown in the graphics on the side, more smartphones than people.

It has been a time of growth and fast innovation for the industry. The need for huge investment in manufacturing and the need to keep smartphones affordable has led to thin margins (with the notable exception of Apple) leading to an industry consolidation: few huge companies have the grip on the world market.

The number of smart phones sold peaked in 2017 with close to 1.6 billion units. In 2019 the number is slightly over 1.4 billion, a 150 million units loss. Image credit: The Economist

The situation is rapidly changing. The replacement time for smartphone has increased (see first graphic) with the majority of people holding on their current model for more than 3 years. At the same time the penetration is approaching, and sometime exceeding 100%. This is leading to a decrease in the number of smartphones sold, a decrease of 150 million units in 2019 vs 2017.

The forecast for this decade is somewhat gloom. The number is unlikely to rebound, although the availability of 5G might stimulate some customers to change their phones. China is expected to see a growth as there is still a significant replacement opportunity for old cellphones by smartphones.

All in all, the industry seems to have reached a peak in terms of functionality innovation (the connectivity itself is not showing as a sales point, we will see if 5G might change this, I personally doubt, and the camera improvement has already reached a very good level making any further improvement not stimulating enough to motivate the replacement of the current phone).

Clearly in this space marketing reigns, much more than technology, AR might become in the next years a factor but it is likely that it could be delivered on current phones as well.

Personally, I think that the demise of the phone is not on the horizon, i.e. it won’t be replaced by a wearable anytime soon. Hence, my bet is that the industry will endeavour to inject innovation in the smartphones to stimulate replacement. AI, supported by dedicated chips in the smartphone (we have already started to see the first signs of this trend) might become a hit. The recently announced acquisition of Xnor.ai by Apple is a sign in this direction.

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the Industry Advisory Board within the Future Directions Committee and co-chairs the Digital Reality Initiative. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.