Date
17 October 2018
As the room for further innovation and technology upgrade has become smaller, users may also become less frequent in replacing their existing handsets. Photo: Reuters
As the room for further innovation and technology upgrade has become smaller, users may also become less frequent in replacing their existing handsets. Photo: Reuters

Smartphone industry losing its luster

Ten years after the launch of the first iPhone, the smartphone industry seems to have reached a plateau as groundbreaking new features become harder to come by and offerings from different brands are becoming similar.

News about Apple slashing iPhone X production is thus not entirely surprising.

From 50 million units for the first quarter of 2018, Apple has cut down its production target by 40 percent to 30 million, Taiwan’s United Daily News reported on Dec. 25.

Since over 90 percent of Apple’s products are made by Taiwanese contract manufacturers such as Hon Hai Precision Industry, Taiwan Semiconductor Manufacturing Company, Quanta Computer, and Pegatron, Taiwan-based media are known to have kept a very close tab on the handset market.

Working with more than a hundred suppliers, it is possible that Apple is cutting orders with certain makers and diverting them to other factories. However, another source sent out a similar signal.

The tech giant launched iPhone 8, iPhone 8 Plus and iPhone X on Sept. 12. But users of the three models only accounted for 11.3 percent of the 780 million iPhone users worldwide in the two months following the launch, according to Mixpanel.

By contrast, iPhone 7 and iPhone 7 Plus, launched in September last year, hit a share of 23.5 percent within the same time frame, indicating demand for Apple’s new smartphones has been lukewarm.

The lackluster demand can be partly attributed to the overall slowdown of the industry.

Global smartphone sales growth has slowed markedly to 2.7 percent this year, from 7 percent in 2016 and 14.4 percent in 2015, according to Gartner.

Stiffer competition is another reason. Top-end models are reportedly lagging behind their mid-tier counterparts in sales.

Samsung, Huawei, Oppo and Xiaomi have all reported robust shipment growth, as customers turn to cheaper models, which, thanks to maturing technology, are almost as good, if not better.

Samsung smartphone shipment rose 9.5 percent year on year to 83.3 million units in the third quarter, while its market share expanded to 22.3 percent, according to IDC.

Three Chinese brands – Huawei, Oppo and Xiaomi – reported third-quarter shipment growth of 16.1 percent, 19 percent and 102.6 percent respectively.

Huawei now has a market share of 10.5 percent, only 2 percentage points less than that of Apple. By contrast, Apple’s shipment in the same period only expanded by 2.6 percent.

As the room for further innovation and technology upgrade has become much less, people are probably going to be less excited about new model launches. Phone users may also become less frequent in replacing their existing handsets.

Even when they do so, value for money is likely to be a key consideration.

This article appeared in the Hong Kong Economic Journal on Dec 28

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

RT/CG

Hong Kong Economic Journal columnist

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