Smartphone Market Hits a Ceiling

"It is the first time ever since the modern smartphone market began in 1996 that global shipments have shrunk on an annualized basis", said Strategy Analytics director Linda Sui.

Mobile analyst firm Juniper Research estimates that the number of smartphone shipments reached 320 million in Q1 2016, representing a year-on-year decline of almost 6%.

The analyst calculates global smartphone shipments fell 3 per cent annually to reach 334.6 million units in Q1 this year, down from 345 million in Q1 2015. Year-over-year shipment growth was 62.5% in 2013, but by 2015 it had dropped to 2.5%. IDC placed Vivo with a market share of 4.3 percent as the fifth largest player, while Strategy Analytics estimates that Xiaomi managed to retain the fifth position it held in the previous quarter.

And on Tuesday, second place vendor Cupertino.

At the same time, the share for Apple declined from 17.7% to 15.3%.

One of the major reasons why this is now the new normal for the smartphone industry is this: everyone already has a good-enough, high-quality smartphone.

Several vendors without a strong base in China are also suffering. In the first quarter, it shipped 18.5 million smartphones, up by a whopping 153 percent from the same period a year ago.

There have been troubling signs in the smartphone market for a while now, ever since China reported a decline in its shipments around a year ago.

Samsung has increased profits, but has not produced a strong volume turnaround.

Huawei is continuing its rise, with over 27 million devices shipped. Large growth in other areas such as Africa is unlikely it said unless there is a dramatic reduction in prices of lower-end smartphones, meaning that the market decline will continue throughout the year.

So what does all of this mean for the smartphone market? That increase marks the smallest year-over-year growth on record, according to research firm IDC's latest quarterly mobile phone report.

He said the cycle is producing commoditization, price competition and the resulting margin squeeze, although he said some room for growth remains since about 40 per cent of global handset users still own a feature phone.

With this realization, smartphone makers are faced with a tougher competition.

IDC said that shipments declined 0.6% for No. 1 vendor Samsung and 16.3% for No. 2 vendor Apple.

Xiaomi's meteoric growth has slowed, to just over 14 million units shipped, a 1% decline on shipments compared to this time a year ago. IDC says Samsung's global share of smartphone sales slipped to 24.5 per cent in the quarter from 24.6 per cent a year ago, although the company remains market leader.

"Tablet replacement cycles are creeping closer and closer to PC replacement cycles and further from smartphone replacement cycles", Smith said.

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