IDC: Smartphone annual growth to hit single digits by 2017; Windows Phone well equipped for the future

We’ve all seen the huge adoption rate of smartphones in the last few years, but according to IDC this trend is about to end. The market research firm says annual smartphone sales growth will hit single digits by 2017.

In its latest report IDC takes a look at how the smartphone market is changing rapidly, and how this will impact most of current players. According to them, the high-end market has already become saturated. Last year more than a billion smartphones were shipped, representing 39% growth over 2012 but this trend is no longer sustainable.

Due to saturation we’re bound to see a sharp decline in annual growth starting with 2014. Estimated growth for this year will be only 19.3%, less than half compared to 2013. This downward trend will continue until at least 2018 when yearly growth will reportedly hit a low of 6.2%.

Not only that but the average retail price of smartphones will also start to drop as OEMs and carriers focus on the emerging markets.

Industry watchers have long agreed that developing markets are the only ones that will drive growth in the long run, but these markets play by somewhat different rules. First up, “premium devices” will no longer be that important and the focus will shift towards low-end but capable handsets. We’ve already seen this with the success of the Lumia 520 as well as the prevalence of cheap Android handsets.

The average smartphone selling price (ASP) will also drop in the long run as companies compete in these markets. In 2013 ASP was $335 worldwide but that price is expected to drop to $260 by 2018. This will put some strain on OEMs and will lower the profit margins, creating an important entry barrier for new competitors.

As for which platforms will fare well in this brave new world there’s little to surprise us. Android is expected to account for the vast majority of smartphones out there, much as it does today. Lowering price points and having a wide reach will spell success for the open source OS. Whether this comes via Google or via OEMs forking AOSP will remain to be seen, but Android will nonetheless be the clear winner here.

Despite recent downward trends, IDC suggests Apple will still be the clear number two player by 2018. The Cupertino company will most likely be the only one not competing in this low-end segment of the market; rather it will rely on its premium devices with high ASP and margins to offset its slowly declining marketshare.

Windows Phone is also seen as a strong contender in future emerging markets. With the recent announcements regarding lowering hardware requirements and cutting licensing costs, not to mention the addition of a new OEMs and ODMs as its partners, Microsoft’s OS will still be the fastest growing operating system. Despite all of this though, IDC predicts Windows Phone will still only account for 7% of the worldwide pie – admittedly a much larger pie than today.

Finally, Blackberry is viewed as having a negative outlook with its marketshare disappearing almost completely by 2018. The company will face increasing competition and aggressive price strategies from its competitors, even in highly specialized areas such as government communications infrastructures.

While this report is very straightforward it also doesn’t take into account the chance that a new revolutionary product might hits markets and restart the race once more. Of course this chance is slim but people thought the same thing back in ’07, before the launch of the iPhone.

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Windows Phone will do fine, they have carved out their low end inexpensive niche very nicely.
Now lets look at profits from these cheap low end phones and ongoing revenue from the ecosystem, hmmm. Thats not looking good.

We have been seeing a huge increase in Windows Phones at our high school. Many of our Teachers and students and been accompanying them with their Windows 8 Tablets.

In less then 18 months, our school district will be leaving Laptops and moving to Tablets as the Primary device for our Teachers, running Windows 8.1 or 9. Many other schools throughout Florida are doing the same thing.

I have a feeling that if this holds true, Windows Phone will be over 12% maybe 15%.

XerXis said,
so they expect that by 2018 the market shares haven't really changed...I find that hard to believe

It's gotta settle out at some point.

It won't be too long until the "smartphone market" is simply the "phone market"

But by that time... the platforms will have equalized.

The platforms will have equalised, but WP will still have half the market share of iOS?

I agree roughly about the sales totals, but not the breakdown. I'm bullish that WP8.1 and then 9 (both Windows and WP) will bring people back to Microsoft's OS and they will get a much larger share (at the expense of Android). I looks a little crazy to expect sales to double YoY, but I think with the better perception of WP, the improved feature set that's coming, Nokia being in-house and there being far more OEMs supporting WP and finally more integration between Windows Tablets and Windows Phones it is achievable. With the new OEMs, WP8.1, I'd say 60 million is achievable this year, not 47. (10m Q1, 12m Q2, 18m Q3, 20m Q4). Then 100m 2015, 170m 2016, 250 2017 and 350m by 2018.

So more like by 2018

Android: 1,000
iOS: 250
WP: 350

After all WP has already overtaken iOS in some markets, with more phones and lower prices that is only going to happen more and more this year. By 2018 I cannot imagine any market (not even the US) where WP isn't selling more phones.

Also with the Nokia X line; in some ways it's not even so much about the OS the phone is running, but the services people use on top of it. Android needs broken down into the stores people use; Google Play, Amazon Marketplace, AOSP, Nokia (when it happens) and all the rest.

Interesting times ahead for sure.

Edited by TheShark, Feb 27 2014, 12:30pm :

TheShark said,

After all WP has already overtaken iOS in some markets, with more phones and lower prices that is only going to happen more and more this year. By 2018 I cannot imagine any market (not even the US) where WP isn't selling more phones.

WP is overtaking iOS in markets where cost is an issue. Apple only sells expensive phones.

I don't know why you're so fixated on market share percentage anyway. If Apple really does sell 250 million iPhones in 2018... they will certainly be happy. That's an incredible amount of phones (expensive phones too) for a single company. That's more than enough.

Windows Phone's biggest competitor is actually Android.

Android has a similar average selling price... and tons more choice. If you look at the popularity of Android now... do you really think that will change in 4 years?

Windows Phone needs to take sales away from Android... not iOS.

market share percentage is incredibly important for smartphones. It determines how many developers they can attract to their platform.

Michael Scrip said,

WP is overtaking iOS in markets where cost is an issue. Apple only sells expensive phones.

I don't know why you're so fixated on market share percentage anyway. If Apple really does sell 250 million iPhones in 2018... they will certainly be happy. That's an incredible amount of phones (expensive phones too) for a single company. That's more than enough.

Windows Phone's biggest competitor is actually Android.

Android has a similar average selling price... and tons more choice. If you look at the popularity of Android now... do you really think that will change in 4 years?

Windows Phone needs to take sales away from Android... not iOS.

You misunderstood me, I agree they need to take share from Android. That's why in my figures I kept iOS sales exactly the same and took 230m off Android and gave it to WP. I realise my numbers were off and I lost 100m somewhere, let's split that now. By 2018 Android (1050m), iOS (250m) and WP (400m).

I was just pointing out that as an aside in doing that they will overtake iOS in market share which will be beneficial in WP getting apps at the same time as the other two. Once WP reaches that point it will actually take market share from iOS as well as I expect a lot of businesses will adopt it as the best professional phone; but the first and main place to gain market share is against the robots.

TheShark said,

I was just pointing out that as an aside in doing that they will overtake iOS in market share which will be beneficial in WP getting apps at the same time as the other two.

If we're talking about apps... you can't deny that iOS is already the hottest platform for developers.

Market share is just the percentage of sales over the last 3 months. And right now Apple has 17% smartphone market share.

But iOS users tend to spend more money on apps. That's one reason why iOS is a VERY attractive platform for developers... despite what their market share happens to be at any given time.

And you're obviously ignoring installed base... in which Apple has a few hundred million iOS devices out in the world right now. THAT'S the number that developers are more interested in. And that's another reason why there are so many iOS-first or iOS-only apps today.

Sure... as time goes on... WP will sell more phones and that will increase their installed base and that should make WP more attractive to developers.

But Apple will be adding even more iOS devices to their already substantial installed base.

Some key points:

* iOS users spend more money on apps
* iOS already has hundreds of millions of users
* Apple sells 40-50 million iOS devices every 3 months

Now extrapolate that over the next 4 years.

Do you really think developers will put more focus on Windows Phone over iOS?

Just goes to show you how big the smartphone market is expected to be, you could have a lower % overall but still be selling millions of phones and making money.

Yep.

150 million phones is the same whether that happens to be 10% of the market or 50% of the market.

Companies make money from the number of phones they sell... so it doesn't really matter what their percentage is.

You can have a decline in percentage while also having an increase in unit sales.

But it's the unit sales that actually makes them money... not their percentage of the total market.

I'm surprised they only show Apple losing 0.5 points of market share in four years when it seems to be dropping much faster than that already.

Maybe I'm an optimist, but I think it's totally possible that Windows Phone will surpass iOS by 2018... particularly with the lowering of licensing fees coming and the ability to put Windows Phone on hardware almost identical to Android phones (thus, making it cheaper and easier for OEMs to build Windows Phones).

I guess we'll see.