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New smartphone figures highlight continued struggles to grow market

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In some corners, the smartphone market is showing its first signs of life in some time.

Recent figures from Canalys indicate a small but notable uptick in the European market as shipments grew 3%, year-over-year in Q3.

The analyst firm put global growth at 1% globally in another recent report. Generally, such numbers wouldn’t warrant much celebration, but the way the market has been going, most manufacturers will take what they can get.

New numbers out this morning from Gartner paint a less rosy picture, with sales numbers declining 0.4%. It’s not a huge discrepancy between shipping and sales figures, but it’s the difference between being in the red and being in the black for the quarter.

In both cases, however, the conclusion is essentially the same: the luster has worn off the category. After a decade of so of being the hottest property in consumer electronics, the devices are have transformed from objects of desire to commodities. Explosive growth has given way to saturation.

That, coupled with slowed upgrade cycles, means that the occasional 1% increase in smartphone shipments is regarded as a net positive. Obviously, those aren’t the kinds of numbers you want to offer shareholders.

Both reports highlight two other related trends. First, people don’t want to spend as much money on their devices. As smartphone ownership has moved from flashy status symbol to utilitarian device, the price of flagships has continued to rise. We’re used to a more inverse relationship between these two factors, of course, but as sales have stagnated, the price of flagships have ballooned to over $1,000.

Is it any surprise that Samsung’s recent success in markets like Europe has been driven by its Galaxy A line? The company now commands more than a quarter of that market, with all four of its top spots occupied by entries in that mid-tier line.

The other key takeaway here: many users are simply waiting for the next big thing. That, I assume, applies to many traditionally early adopting big spenders. Analysts have long suggested that 5G will help reverse flagging smartphone sales — at least temporarily. But the flip side of that is many premium device purchasers sitting out this round, in anticipation of more 5G devices, and/or network rollouts in their area.

After all, for all of the 5G bluster we’ve heard from carriers, we’re still a ways away from the sort of critical mass required for such purchases to make sense. We’ll likely begin to see some of these numbers begin to turn in the right direction next year. It will be a welcome reprieve after several dismal quarters for sales figures.

That said, the larger trends here are still the dominant ones. After initial purchases of 5G devices, I suspect we’re going to see a regression to earlier figures, short of some new revolution happening in the category. Companies like Apple need to brace for this reality and find a way to further appeal to price-conscious consumers, lest they cede even more marketshare to budget smartphone makers.

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