News: Press Clippings

iTWire: Mobile upgrade cycles getting much longer

Reposted from  ITwire

Publication date 7/4/2016

Attempts by smartphone makers to shorten or hasten the replacement cycle have failed. Instead, they are getting longer, and in a saturated market that spells financial woe.

Advertising and marketing technology company Fluent conducted a survey of US smartphone users, and it has revealed major changes in ownership patterns.

It found around 30% upgrade every two years due to contracts. But the trend (at least in the US telco space) is away from “contract bundles” due to the realisation that consumers are paying not only the full price of the phone but considerable “interest” for the use-now-pay-as-you-go programmes. Cross-subsidy of call revenue and handset prices has almost stopped.

A startling 42% said they would now wait until the system breaks — which is estimated to take four to six years — and would entertain the interim cost of a battery replacement if it extended the useable life of the handset.

iPhone owners were a slightly different lot. First some back story. The iPhone 6/Plus with iOS8 was a massive technology leap including larger screens and more memory. It did very well. Analysts call that a “tick” year where Apple releases something new and even more desirable, causing queues at its stores.

But the iPhone 6S/Plus were more of the same: a “tock” year. That did not drive sales as its predecessor did. Rumours are that the iPhone 7 will be more of the same, perhaps with beefed up features in iOS 10, and these do not require more than an iPhone SE or 6/S to run. It won’t drive sales.

A total of 49% of Apple users said they would probably get a new phone next year. The caveat is “if the iPhone 7 excites them.” These are likely those still using a 4/5 series or coming out of contract on a 6. As Fluent puts it “Apple: A strong core, but still seeking the wow of yesteryear.”

Gallup (a professional polling company) found in May 2015 that 54% of users would wait until their phone stops working or becomes totally obsolete and won’t run the apps they want. It found that only 2% upgraded when a new model was released, putting paid to the myth that iPhone users have more money than sense [cents].

Research company Gartner, says the smartphone market will no longer grow at the levels reached over the last seven years. Smartphone sales recorded their highest growth in 2010, reaching 73%. The smartphone market has reached more than 90% penetration in the mature markets of North America, Western Europe, Japan and Asia/Pacific, slowing future growth. Users in these regions are not replacing or upgrading their smartphone as often as in previous years.

Comment

Empirically Australia has had a love affair with telcos and contracts, meaning a new handset every two years or so. But the advent of quality, feature-packed Android handsets like OPPO’s R7/Plus and now its R9/Plus have helped change the paradigm. Contracts are on the way out in favour of unlocked phones, often with lower cost pre-paid SIM providers.

I spoke to my “sources” at JB Hi-Fi who confirmed that people were overwhelmingly choosing cost over the brand and outright purchase instead of contracts. That is what happens when a “category” becomes commoditised.

I asked about buy-back and trade-in, but the source said that the average consumer did not have easy access to these, and more likely the old handset went to family or a friend or into the bin.

While the PC market was fuelled by Moore’s Law — doubling of power every 18 months — there has been little innovation in glass slabs for some time. While 2016 has seen better cameras, more memory, and larger screens, it is not enough of a WOW factor to shorten the cycle.

Fluent
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