Gartner has given us rare data (smartphone replacement cycle) and previously never released data (what happens to smartphones after first buyer stops using them). This is magnificent and we can do some very rare analysis and also do a sanity check on one controversial number. So lets first get to Gartner's data.
Gartner has a brand new report, 'Reused, Recycled, Resold' about the afterlife of smartphones. There is a nice highlights-level summary of main points in their press release (thank you Gartner for this valuable info!)
So based on a survey of 5,600 consumers in the USA and Germany, on their smartphone habits, Gartner found that nearly 2/3 of smartphones are offered a second life. Some are sold as used. Some are handed in as trade-ins when buying the next smartphone. And many - 23% of all smartphones, are given to family or friends as hand-me-down phones. Incidentially only 7% of smartphones are properly recycled, so roughly 3 out of 10 smartphones will just linger somewhere in the bottom drawer of our desk wtih a dead battery and lost recharger, maybe a broken screen too...
Gartner also reports that for smartphones the replacement cycle is now down to between 18 and 20 months, and for just over half of the 'tech enthusiast' segment, the replacement cycle is less than a year. That accounts for 13% of all smartphone owners who are so in love with their pocket gadget they get one more frequently than once ever 12 months.
There also is data on 'refurbrished' phones that are resold. Gartner counted that 56 million refurbished smartphones were sold to a second owner in 2014, and this business was worth 7 Billion dollars in the wholesale market. If we assign a 33% markup to the phones, that means refurbished used smartphones have an average sales price of about 166 dollars globally (unsubsidised price). Not bad for a device that on average is 19 months old...
Now the actual second hand market is considerably larger than that 56 million 'refurbished' smartphones as especially in the Emerging World market there is a big second hand market for older phones. For that we don't have numbers. But we do have now some very interesting data points for the installed base calculation of smartphones.
GLOBAL SMARTPHONE INSTALLED BASE
There are not many who report the installed base of smartphones (I do here at the CDB blog of course) and when that kind of data comes out from some random sources, often it is an obscure data provider who may have bizarre numbers based on questionable methodology that often defies all published data on say new sales etc. But lets see what we now can calculate from Gartner's data.
The replacement cycle for smartphones is between 18 and 20 months. So lets see how many smartphones are then currently in use. We do have the data points for 18 months ago and 21 months ago. If all new smartphones sold in past 18 months are now still in use (by the first user obviously), that would mean 1,841 million (1.8 Billion) smartphones. If all smartphones sold in the past 21 months are still in use today (by first buyer) that is 2,074 million (2.1 Billion) smartphones. The weighted average at 19 month replacement cycle is 1,994 million (2.0 Billion) smartphones.
Now, 19 months old smartphones are no longer used by their primary owner. But 23% of those are given to family or friends (often our kids) as hand-me-down smartphones. How long are they used? Definitely not as long as the primary phones (on average) as these are older, already somewhat worn so they will show ever more wear. The single biggest group receiving them are our kids (and nieces, nephews, grandkids and little brothers and little sisters). They in turn will grow older, ask for a new smartphone for birthday or Christmas, and soon grow old enough to earn some money to buy their own smartphone. Yes, some of our hand-me-downs go to wives and husbands and parents etc, but most go to kids and thus we can say the average life is far shorter. Lets say half. So if we say they live one year on, lets take the smartphones that were sold in the 12 months ending October 2013, so 757 million smartphones, and take 23% of those that are given to family and friends as hand-me-down second hand used smartphones. That is 174 million smartphones.
Adding 1,994 million new smartphones still in use by their first buyer and adding 174 million hand-me-down second hand smartphones, we get an installed base estimate of 2,170 million (2.2 Billion) smartphones for end of 2014 Now as we measure slightly different things (new sales include some phones that shipped to market that were never sold) the reality is slightly less than this number but reasonably close. So what did your CDB blog calculate as the installed base of smartphones as of December 31, 2014? I said it is 2.110 million smartphones in use!
Haha that is almost exactly what this Gartner data supports, but my number is below it, as it should. That 2.1 Billion active smartphone installed base calculation is pretty perfect. If you needed the breakdown by OS it is of course:
INSTALLED BASE OF SMARTPHONES BY OPERATING SYSTEM AS OF 31 DECEMBER 2014
Rank . OS Platform . . . . Units . . . Market share Was 2013 . Main Manufacturers of current base
1 . . . . Android . . . . . . . 1,596 M . . . 76 % . . . . . . ( 66 %) . . . . . . Samsung, Huawei, Sony, ZTE, LG, Lenovo/Motorola, Xiaomi, Coolpad, TCL-Alcatel
2 . . . . iOS . . . . . . . . . . . 410 M . . . 19 % . . . . . . ( 21 %) . . . . . . Apple
5 . . . . Windows Phone . . 45 M . . . . 2 % . . . . . . ( 3 %) . . . . . . Microsoft(Nokia), Samsung, HTC
4 . . . . Blackberry . . . . . . 33 M . . . . 2 % . . . . . . ( 4 %) . . . . . . Blackberry
3 . . . . Symbian . . . . . . . 15 M . . . . 1 % . . . . . . ( 5 %) . . . . . . Nokia
Others . . . . . . . . . . . . . . 11 M . . . . 2 %
TOTAL Installed Base . 2,110 M smartphones in use at end of Q4, 2014
Source: TomiAhonen Almanac 2015
This data may be freely used and repeated
Returning to Gartner data. So we have about 174 million used smartphones that our family and friends use. Out of the total installed base of active smartphones that is 8%. And if we counted that the world sold 1.3 Billion new smartphones last year, in reality 1.47 Billion people last year received a new or second hand smartphone. The digital opportunity is essentially 8% larger than most sources have been reporting (except that readers of the CDB blog have known this the longest as I've been the expert to first introduce and measure this bizarre phenomenon of the second hand phone concept to the industry. And it turns out, I've apparently been darn accurate in estimating that market too haha)
Thats pretty awesome and truly rare to be able to verify that kind of hard-to-find number. Thank you Gartner for the data points. And on the CDB blog, I continue to share any info I find. Incidentially, if you have missed it, my brand new keynote presentation I just gave at the World Summit Awards in Abu Dhabi a few weeks ago is now up on Slideshare. It has (as always) plenty of new stats too and lots of interesting case studies as well as some smartphone industry forecasts.
Finally If you need more info on the handset market in 2014, get the TomiAhonen Phone Book 2014