Who will feel the pinch from the smartphone slowdown?
People are as tired of upgrading their smartphone as they are their PC. So who has the most exposure here?
The numbers are mixed, but a slowdown might be headed to the smartphone industry. Why do I speculate? Well, numbers are not the sole answer.
IDC puts 2012 smartphone sales at 720 million, and projects 2013 will top one billion units sold. That only tells half the story. The fact is smartphones are pushing their way down into the mass market and displacing feature phones and are growing worldwide. So numerically, there is still plenty of room for growth.
On the other side of things, however, a Canaccord Financial analyst cut his 2013 smartphone sales forecast by 20 million to 959 million units and his 2014 forecast by 40 million to 1.25 billion units, citing surveys pointing to softer high-end sales, especially in Europe.
This isn't surprising. The U.S. and Europe were the first markets to reach near-saturation of smartphones in the U.S. and now it seems we're becoming the first to get tired of constant upgrades. I'm seeing more and more stories that echo this sentiment. It may be one story but I've seen others; I just didn't think to save them.
Just like PCs, smartphones have gotten fast enough and powerful enough that people just don't want to keep upgrading all the time. They are tired of transferring contacts, apps and other data. The thrill is gone for new phones. Nothing can match that original rush when the iPhone came out in 2007. Sure the Galaxy S4 is technically superior in any way but the magic is gone. We're over it.
For a while, the life span of a smartphone was around 18 months. That meant people were upgrading to a new phone with six months left on their contract, which is usually when carriers will let you upgrade and renew for two years without hitting you with an early termination fee.
But IDC tells me phones are now up to 20 months, so people are being a little more patient. They aren't rushing to upgrade.
Of course it's way too soon to predict any kind of major slowdown. We might see a tapering and plateauing of sales just like PCs. And unlike every other wanna-be analyst, I make no prediction of a market implosion, either smartphones or PCs. They are reaching market saturation and have become standard features in our lives, just like stereo equipment or TVs.
When was the last time you saw excitement over the unveiling of a stereo receiver? Yet they sell and occupy a nice chunk of the wall at Best Buy. PCs have reached that point of just being a part of our lives as well, and soon, smartphones will also be in the same boat. Just another piece of electronics in our lives.
The question now becomes who will feel the pinch. For once, Intel will be glad it has no exposure to the mobile phone business. Its exposure is entirely for PCs. Ditto for AMD.
Nvidia will luck out as well because the majority of OEM licensees are tablets. Its Tegra 3 are found in things like Asus Transformer Pad, IdeaTab K2, Lenovo IdeaPad Yoga 11 and Microsoft Surface (that's unfortunate).
Qualcomm and Broadcom face the most exposure since mobile devices are their bread and butter. Broadcom might take a hit but Qualcomm almost certainly won't, in part to its own diversification. It recently struck a deal with Alcatel-Lucent worth $133 million to develop products for the burgeoning small cell base station market, which covers homes and offices. Qualcomm purchased a small stake in Alcatel-Lucent as part of an R&D deal to make new wireless transmitters for the small cell base station market. We may not always need a new phone but we can't always use more coverage, and the base station market will continue to grow worldwide.
Time will tell if a smartphone slowdown does take place. T-Mobile has shaken up the market with its no-contract plan but it's way too early to predict an impact. Still, if the hints bear out, it's rather remarkable that smartphones managed to do in about five years when PCs needed 30 years to do, and that is go from cool to boring, necessary evil.