We now have the Q1 numbers from Strategy Analytics and IDC, the two last remaining of the classic four big smartphone industry analyst houses we used on this blog to calculate the industry average of the total market size, back when the 'smartphone bloodbath' started six years ago. And both SA and IDC are in exceptional, near-perfect agreement on the exact size of the market, we get a total smartphone market for Q1 at 334.8 Million units. That is down 18% from the Christmas sales Quarter (normal that Q1 is down) but for the first time ever in this industry, the YEAR-ON-YEAR comparison of Q1, so the January-March quarter last year 2015 vs now, is down. This has not happened in the smartphone industry in any YoY period. And some are now talking about 'peak smartphone'. That number COULD be a signal that smartphone industry growth has stalled and now peaked and smartphone sales will either plateau flat, or decline into the next year(s).
That could be and the math would support such a conclusion. But it is a SUPERFICIAL view of the industry without understanding two aspects of it. The first was the pent-up demand of the 6 series of iPhone that created a one-off SURGE of phablet-screen-size iPhone sales - LAST YEAR. Because iPhone owners had seen rival smartphones issue phablets for years, they waited and finally when Apple did the iPhone 6 and 6+ that created a one-time surge in iPhone sales pushing Apple in 2014 Q4 Christmas sales - AND 2015 Q1 January-March sales of the total smartphone market to an exceptionally high level. It was a surge, a peak in iPhone sales which is not normal (there is a normal level of iPhone jump in sales any other year at that time).
That means, that last year Q1, January-March 2015, was at an artificially high level - see how much higher Apple's iPhone market share was Q1 of last year (was 16% in Q1 of 2014, surged to 18% in 2015 and returned to 15% now). That was not normal market wars where one brand gains and another loses. It was Apple loyalists buying the long-awaited phablet-screen size iPhone 6 and 6+ which created that surge. Because of Q1 of LAST YEAR being so high, thus the NORMAL decline of Q1 meant, that it now produced that one-off dip in the Year-on-Year smartphone market size. Also note, that 'loss' of 2% now is EXACTLY the RISE of 2% that Apple gained for 2015 that same quarter, when their phablet surge happened.
This quarter Q2 April-June of 2016 sees the two most popular bestselling smartphone brands with their latest phones on their first full quarters of sales - Samsung's Galaxy S7 flagship pair and Apple's entry-level iPhone 5 SE. Both companies have reported very strong early sales of these models. As these two companies hold 40% of the global smartphone market, when they both have good growth quarters, the whole industry is doing well. They are clearly signalling that Q2 will be a good quarter, we can expect a return to growth comparing both sequentially to Q1 and year-on-year compared to Q2 of 2015. Then in Q3 we will see the 7 Series of the iPhone which should have a strong Christmas sales period. All signs say that the next three quarters, Q2, Q3 and Q4 will return to solid growth in smartphone overall market. Because there is a FUNDAMENTAL reason why.
The second part those clueless analysts aren't aware of, is the fundamental issue of the smartphone market as distinct from most major tech markets that they follow. The smartphone market is not growing as an independent market like say cars, personal computers or TVs. It is a REPLACEMENT market where the smartphone is cannibalizing EXISTING market like say how DVD players replaced the VCR market or how tablet PCs are replacing desktop and laptop PCs. The total global HANDSET market is just shy of 2.0 Billion units (Gartner reported it at 1.92B mobile phones sold last year 2015 which includes both dumb and smart phones). That market will evolve to become 100% smartphones just like how black-and-white TV sets evolved to color TV sets, and CRT-based 'boxy' style old TVs evolved to flat panel TV sets. It is an unstoppable train, the dumbphone market will end, it is expected to end by 2020 (I have been saying end of 2019). So there is a MIGRATION going on, which won't be stopped. THAT IS WHY it is certain, the smartphone market will still continue to grow. We were at 1.44 Billion smartphones sold last year (75% migration rate) and we'll be at about 1.58 Billion this year (80% migration rate).
What is happening in many markets is a slowin-down of the overall economy. The Chinese economy is still growing but not at the break-neck speed it did before. The US economy is spluttering along with very modest growth rates. Europe has its problems. Those will cause some of the superhot smatphone market growth to slow down - but CONTINUE TO GROW.
The smartphone market did have yes, one Year-on-Year dip in its quarterly sales of smartphones for the first time now, of 2%. That could be a signal of the smartphone market peaking or shrinking even 2% this year. But those who say that, don't know WHY there was that mathematical dip (against a surge a year ago) and the fundamentals of this industry (migration). Separately, the CURRENT quarter already is KNOWN to have big growth with Samsung's Galaxy S7 and Apple's iPhone SE (Apple said they can't keep up with demand, SE early sales are so strong). So don't panic and keep trusting this industry. The smartphone market will continue to grow this year. I mean, who are you going to trust? I was literally the first analyst to call the iPhone peak, the Nokia collapse, the rise of Samsung rather than Blackberry or iPhone to take the top on smartphones and for example that Xiaomi was no Top 3 player. I explained why Huawei was going to be bigger than Xiaomi, but also, what of those new brands now, Oppo and Vivo? Who told you first that they were going to jump into the Top 10 as Nokia/Lumia/Microsoft was falling out with Sony following out of the Top 10. Always proven correct, each of those massive events about the smartphone industry was first called here on this blog. Ahead of all other 'experts' who write about iPhones and smartphones. I know this business. Maybe its time to trust the most accurate forecaster of the mobile industry for now over 15 years.
PS for those who want my full forecast for next years through 2018, that just came out last year, its here.