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Why 2016 Could Be The Toughest Year For Smartphones Yet

Michael Moore joined TechWeek Europe in January 2014 as a trainee before graduating to Reporter later that year. He covers a wide range of topics, including but not limited to mobile devices, wearable tech, the Internet of Things, and financial technology.

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BLOG: Initial signs show that the smartphone market could be in for a rough ride in 2016 – but what’s to blame?

This week has seen a lot of attention cast upon prospects for the mobile device market, as its two leading heavyweights, Samsung and Apple, both released their latest sets of financial results.

However far from being the usual back-slapping celebration that normally accompanies these announcements, it seems that the world may be reaching an important saturation point when it comes to smartphones.

For the first time, Apple warned that it may struggle to record a profit in smartphone sales, despite almost continued growth since the last of the first iPhone, with Samsung also hinting that it may be diverting it’s attentions to diversifying away from smartphones in 2016. But why has the crunch point come now?

Takeover

touch screen smartphoneOne of the most basic reasons is that nearly everyone who wants a smartphone, wherever they may live around the world, now has one. Smartphones are no longer limited to first-world economies, but can be found in all countries of the world – with industry reports out this week finding that 1.4 billion devices were shipped in 2015.

Saturation is a crucial challenge to overcome for any industry, and smartphone manufacturers need to overcome it effectively whilst still maintaining brand loyalty – a tricky challenge in what is an increasingly crowded marketplace.

Android manufactures are particularly badly affected by this, as the sheer number of companies developing smartphones, whether low-cost or high-end, grows each year. With most devices themselves offering similar hardware specifications, it is down to the manufacturers to provide a software or user experience that will draw in customers and keep them engaged.

This is not such a challenge for Apple, as its yearly release cycle keeps customers hanging on for the next iteration of the iPhone – its problem instead is price. Although it may not sound like an issue, consumers see Apple’s devices as a premium product, and for developing markets (where the big bucks can be made) this is often a turn-off, as users are unwilling to spend hard-earned cash on a product they will only use for a few years. Apple need to diversify beyond its plastic-backed iPhone 5C if it wants to stay relevant.

Samsung realised this, and its Galaxy A family of smartphones has allowed it to reach customers looking for budget devices, but now it needs to ensure it can continue attracting new users if it wants to remain successful.

Powered

qualcomm snapdragon CES 2013As noted above, hardware is becoming one of, if not the, most crucial factors affecting consumer device choices, as the need for fast power, detailed cameras, and long battery life all become more important than ever before.

Qualcomm, which supplies the processors and modems for nearly all of the world’s top smartphones, also revealed its latest financial results this week, providing another indicator that all may not be that rosy in the smartphone garden.

Reporting profit below analyst expectations, the company warned that demand was weakening for its chips as the entire market slows – estimating that its mobile chip shipments would fall by 16-25 percent in the next quarter compared to last year.

The company is facing constant competition from the likes of Intel, MediaTek and Nvidia, but to post such dire warnings, particularly with big-name smartphone announcements set to appear at Mobile World Congress next month, is worrying.

The company is trying to protect from these losses by moving into wider spaces, particularly around the Internet of Things, but if the world’s largest smartphone chipmaker predicts trouble ahead, it could be time to worry.

“Qualcomm is rightly prioritising investment for expansion into new segments including servers, automotive, healthcare, networking and the Internet of things despite cost-saving measures,” noted analysis house CCS Insight.

“The company must maximize its leadership in its core market and control the components critical to adjacent segments to provide the investment needed to diversify successfully.”

Going on

smartphone cameraSo where does the responsibility lie with bucking up the smartphone market? It is a challenging field for manufacturers and developers, as they try to stay ahead of their competitors, but it is not too tough to discern what the public wants, and even to predict what they will want in the coming months and years.

Consolidation may be a solution, but the sheer number of manufacturers, particularly in the Android space, but as the Motorola-Lenovo partnership shows, it can pay off handsomely. But with companies (particularly Samsung and Huawei) looking to build their own-brand hardware into their devices, is the time of inter-reliance coming to an end?

Ultimately, investment drives development, and investment only comes from selling products. Let’s hope that a magic cure isn’t needed, and that smartphones, which have certainly become a key part of my life, continue to thrive.

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