Friday, July 26, 2013

(Business) Smartphones: Smartphone Market Tapped Out

All markets reach a nadir due to an increase competition or lack of demand and the smartphone market look like it’s just reached its own peak. While Apple managed record iPhones sales of $31m which may signal that there is still significant demand for smartphones in a crowded market, the actions of the market leaders may indicate something else in entirely[1].

Samsung’s second quarter sales effectively doubled that of Apple’s yet the South Korean electronics company is looking invest it capital into other sections of it business particularly memory chips “used in personal computers and mobile devices”[2]. This decision is clearly moulded by Samsung realizing that the smartphone market is starting to slow due to a growing number of competitors and weaker demand especially in  developed countries as “penetration for smartphones is between 75-85 percent in developed markets, meaning a saturation point could be reached as early as 2014”[3].

What this means for the future is that we may see a substantial drop in the price of smartphones or at least see the release of model that at last cater to the lower end of the marketplace. Looking at Apple’s example, it quite clear that the magic pill of innovation as far as the smartphone market is concerned is obsolete as for the last three years, Apple have been effectively re-releasing flagship models and Samsung merely making minor aesthetic changes to theirs.

What we will also see alongside a drop in price will be clear focus in penetrating emerging where smartphone is much lower. This may suit both companies as cheaper models will cheap to make despite being obvious need to sell more in order to ensure growth. Marketing costs will be cheaper which is good news for smartphone makers as apart from actually making smartphones, marketing them is among one of their biggest costs. However for Samsung the slowdown of the smartphone market has more implications for them than most as “two thirds” of its business is dependent in how it does in smartphone marketplace[4]. Any decline severe decline in sales or profit is taken by investor as a cue to get bearish.  

In sum, all markets reach a point of saturation some quicker than most but for Samsung and Apple, they can only hope that the Smartphone market can deft the laws of the marketplace for sometime yet.

Shamless Plug:

[1] Sky News, 2013, Record Apple iPhone Sales But Profit Slumps,
[3] M.Clinch, 2013, These ‘smartphone saturation stats could prove Apple wrong,
[4] P. Olson, 2013, Samsung Earns $7.9 Billion In Q2, Cites ‘Slower Pace Of Smartphone Market,

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