Gartner: Device Spend To Decline For First Time, Shipments Grow Only 1.9% In 2016

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The slowdown in hardware sales continues apace. Gartner today published its latest forecasts for device sales — covering PCs, tablets, ‘ultramobiles’ and smartphones — and it predicts that while end-user sales overall will continue to grow to 2.4 billion units in 2016, it will be at a snail’s pace, up just 1.9% on 2015. On top of that, those who are in the device business are likely to see even more margin pressure: overall spend on devices will decline for the first time since 2010, when Gartner started tracking the market.

The constant currency figure for 2016, Gartner says, is $667 billion, down -0.5% on 2015, dragged down by the declining price of phones and the rise of the sub-$50 smart device.

As a point of comparison, last year device shipments increased by 2.7%, according to Gartner’s calculations.

Worldwide Devices Shipments by Device Type, 2015-2018 (Millions of Units)

Device Type 2015 2016 2017 2018
Traditional PCs (Desk-Based and Notebook) 246 232 226 219
Ultramobiles (Premium) 45 55 74 92
PC Market 290 287 299 312
Ultramobiles (Basic and Utility) 196 195 196 198
Computing Devices Market 486 482 495 510
Mobile Phones 1,910 1,959 1,983 2,034
Total Devices Market 2,396 2,441 2,478 2,545

Note: The Ultramobile (Premium) category includes devices such as Microsoft’s Windows 8 Intel x86 products and Apple’s MacBook Air.

One of the bigger trends in computing devices has been the massive switch from PC-type devices — both desktop and portable equipped with keyboards — to smartphones and tablets. This is still very much weighing on the numbers here, too.

Not only are mobile devices outpacing PC shipments nearly eightfold, but they are also outpacing overall device growth, with a 2.6% increase expected this year. Smartphones are definitely leading the way, accounting for a full 82% of all mobile phone shipments, up 12%. However spend on these is getting a lot of pressure and it seems that many users are happy with “basic” smartphones rather than high-end models.

“We are witnessing a shift to basic phones in the smartphone market,” Roberta Cozza, research director at Gartner, writes. “Users are also opting to replace within the basic smartphone category without necessarily moving to high-end smartphones, especially in China and some other emerging markets.”

While big brands like Apple, Samsung and Xiaomi will continue to dominate headlines and the top of the ranks for sales, smaller brands will continue to leave the market fragmented. “Local and Chinese brands are delivering more capable basic smartphones with appealing features at a lower price, which means that there is less of a need for users to upgrade to a premium smartphone. Instead, these more advanced and attractive basic smartphones fulfil user’s needs at a lower cost,” Gartner writes.

The trend of highlight how one specific market, China, is doing is another important factor in how devices are being sold and purchased. Gone are the days of global marketing campaigns, it seems, as “country-level” economic conditions impact sales.

“It’s clear that vendors can no longer market their products with the mind of only targeting the mature and emerging markets,” writes Ranjit Atwal, research director at Gartner. He says that the classic two-category view has now split into four:economically challenged mature markets, economically stable mature markets and the same for emerging markets. (I’d argue that it’s even more granular: you have places like the U.S. that will encompass both of these groups.) “Russia and Brazil will fall into the category of economically challenged emerging markets while India will be stable, and Japan will belong to the economically challenged mature market.”

Going back to the beleaguered PC market, although we will see another decline of 1% in 2016, by 2017 it will go up 4%, Gartner predicts, led by the superslim and superlight “Ultramobile” PC pushed by the likes of Intel.

“Ultramobile premium devices are expected to drive the PC market forward with the move to Windows 10 and PCs built around Intel’s Skylake architecture,” said Mr. Atwal. “We expect that businesses will deploy Windows 10 faster than with previous Windows upgrades.” Gartner says its predictions come by way of a global survey of 3,000 business respondents conducted in the fourth quarter of 2015 across six countries (Brazil, China, India, France, U.K. and U.S.), where “nearly 80 percent of businesses are expected to have completed the testing and evaluation of Windows 10 within 12 months and over 60% within nine months.”