This year's smartphone shipments might be worse than we previously thought

BI Intelligence

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Total smartphone shipment projections for 2016 have been lowered to 1.6% year-over-year (YoY) growth, as the market becomes increasingly reliant on upgrade cycles to drive unit sales, according to the IDC.

That’s down significantly from the almost 11% YoY growth recorded in 2015. The new forecast projects smartphone shipment volumes will reach 1.5 billion units by the end of 2016, up from 1.4 billion devices in 2015. 

A doubled-faceted maturation developing in the smartphone market is leading to greater sales decreases than previously expected, notes Jackdaw Research.

• Developed markets are reaching saturation, meaning that the pool of first-time buyers is shrinking. If the trend continues, it’s likely that growth in these markets, including in the US and Western Europe, will begin to decline.
• Smartphones are becoming more polished and reliable, and they continue to function to a sufficient degree several years after purchase. The lack of cutting-edge features being introduced to new devices is ushering in a trend of consumers being comfortable with “good enough.”   

Nevertheless, the rise in larger-screen devices (phablets), as well the addition of VR and AR tech to smartphones, will help re-invigorate upgrade growth. These features, such as Google's Daydream VR platform, will require the latest technology and processor chips to run at the optimal level. As a result, users will be required to upgrade their devices. This will also open up new avenues of operation for app developers and advertisers, including richer video-based advertisements and immersive app experiences.

The global smartphone market is expected to slow considerably over the next few years. Despite a record-setting holiday quarter, 2015 was likely the last year of double-digit growth for smartphone shipments.

Mature markets were at the heart of this year’s deceleration. Adoption has reached new highs in key markets in the United States, Europe, and China. The pool of first-time buyers in these countries is shrinking rapidly, and sales are now primarily coming from phone upgrades.

Meanwhile, emerging markets will continue to see robust shipment growth. India and Indonesia, in particular, will help fuel a large share of the shipments growth within the global smartphone market over the next few years.

BI Intelligence, Business Insider's premium research service, has compiled a detailed report on smartphones by country that forecasts the market through 2021 to reflect slower, stabilizing growth in the long term.

Here are some key points from the report:

• The global smartphone market is still growing at a steady pace due to more widespread adoption in emerging markets. We estimate the global market will hit about 2.1 billion units shipped in 2021.
• Shipments growth over the past few years has been driven by the falling price of smartphones, which has made handsets more accessible in emerging markets. The average selling price of a smartphone in India nearly halved between 2010 and 2015.
• With relatively low smartphone penetration, we forecast Indian smartphone shipments to grow rapidly over the next five years. Nevertheless, India has a long way to go before it surpasses China as the world’s leading market for smart handsets. India is estimated to account for roughly 10% of the global smartphone market in 2016, considerably less than China’s 30% share.
• The global platform wars are over, even as smartphone adoption continues to rise across various markets worldwide. Android and iOS are estimated to account for 97.3% of global platform market share in 2015, compared to 96.3% last year.
• Apple closed the year with another strong quarter on the back of its iPhone 6s and iPhone 6s Plus launches. Still, the vendor saw a slight decline in YoY growth of its share of the market in the face of stiff competition from Samsung and Chinese vendors such as Huawei.

In full, the report:

• Forecasts global smartphone shipments through 2021.
• Explores why India is the next high-growth smartphone market.
• Breaks down the global smartphone platform wars.
• Discusses smartphone vendor performance market share.

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