Finally Data on Second Hand Smartphones (Thank you Gartner!) including hand-me-downs, recycleds and resolds

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!)

GARTNER FINDINGS

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 

Comments

[RottenApple]

@Leebase:

"T-Mobile has shown that you can replace subsidy with financing...and users will still overwhelmingly choose the iPhone."

Huh? I have to say that it has been some months that I have looked at the data, but one thing was very clear:

iPhone's market share with this business model was quite a bit lower than the US average. It was also far from 'overwhelming' (20% if I remember correctly.)

"We are 30 years into the modern PC, and only 7 years into the modern smartphone. I think the "near 2 year" replacement cycle will be the rule for some more years to come."

Please don't start twisting numbers again. The 30 year span can hardly be compared to the 7 years since the first iPhone. You are both leaving out a sizable time period of smartphone evolution and at the same time add a significant period of early PC development that's more or less irrelevant in this context.
The smartphone's evolution was a also lot faster.
If you deliberately leave out the pre-iPhone era, by the same reasoning you can leave out the pre-Windows 95 era of PCs (as Windows 95 was the first mainstream OS that really got PC computing to the next level, just like the iPhone did for phones) - so it's 20 vs. 7 years.
The lengthening of PC replacement cycles started approx. a decade ago, shortening the relevant time period to 10 years. If we want to look for parallels that's 10 vs. 7 years with the faster smartphone evolution as an additional accelerator. Unless some magic boost to smartphone power happens we are very close to that point now, especially in countries where subsidised contracts are not the norm and can't drive phone replacements.

I believe the changes to the hardware that are to come will mostly be relevant to geeks and power users but not the average Joe on the street.

"They (Macs) are built to last and people take that into consideration when they buy them."

I hear this argument all too often but strangely enough I have yet to see any proof of Macs lasting longer than other manufacturers' hardware.
I still own a 7 year old Samsung laptop. Aside from being horrendously underpowered by today's standards it still works fine and is still in daily use (although I'll probably have to exchange its slow HDD for an SSD in the near future.)
My current desktop is 3 years old, of course it got two SSD upgrades over time (first for the system drive and later, as these things got cheaper also for the data drive), but unless the mainboard breaks, it's just going to be replacement parts in the foreseeable future.

[Catriona]

T-Mobile's customer base is much different from the US average, at least historically. AT&T and Verizon are moving away from subsidies, as well, toward financing plans. We have yet to see a real change in sales of iPhones in the US.

[abdul muis]

@LeeBase & @Tomi

"Great post Tomi. You are your best, Mr. Numbers Guru. Question, do you apportion your used numbers evenly? I would imagine that iPhones have a longer "second/third" life than average."

"yeah iPhone has longest life cycle also Blackberry serves far longer than average. Old Nokia used to do so too (huge second hand market) but not Windows Phone obviously...

Tomi Ahonen :-)"

I think it depends on how you see the number. I know a lot of iphone & BB have a second/third life right now. But NOT all the user were using it as as intended or categorized in smartphone or as you (LeeBase) & baron95 describe as bringing big ka-ching ($$) to the respective ecosystem.

For iPhone, I see lots of 'OLD' iphone in the hand of OLD people who use it only for phone/messaging/Family-Info, where messaging EQUAL to SMS/What's App and Family-Info EQUAL Facebook. That's it. These OLD people will NOT spend a dime on any other apps. And this market is NOT truly mobile because most of this old people mostly in home using WiFi, or in his kids/other family member using WiFi, most of them won't subscribe to mobile internet (not bringing extra $$$). Furthermore, most of this old people won't check their What's App while on street or in restaurant.

http://www.opptrends.com/2015/02/blackberry-ltd-nasdaqbbry-losing-non-business-uk-users-at-a-brisk-pace
Same as Blackberry, while in the past BB has a longer life than average, but NOT anymore, because BBM already available on Android and iphone. In UK (and also canada), this bb user NOW has MOVE ON to android or iphone. There were lots of BB user in SE Asia or Africa country that use BB, but not as a smartphone. They only use it for phone/Messaging, where messaging EQUAL to BBM. In the past, most of bb user use bb because they thought BB was cool (secure?, better?), but now, most of this BB user just use it because they don't think they NEED any other android/iphone feature such as apps(game), better web browser, etc.

The different for this old BB & old iphone user were some percentage of this old BB user DO SPEND money on internet connection, as that's the only way to use BBM, but in the poor nation, this only translate into $2/month (BBM only, no email, no browsing). and not all of this old BB user use internet. I see an article in a couple of months back that one carrier said that as of now (was in 2014) less than 25% of BB user use internet, most only use it for phone call.

Last.... smartphone will ALWAYS have a shorter replacement cycle than notebook (or PC), because notebook user won't use the notebook while walking, but smartphone user will use it while walking, driving, pooping, peeing, showering, swimming, diving, spa, etc.

[abdul muis]

@Tomi

....and this bring me into the QWERTY equipped phone that you used to whine. No Nokia QWERTY Windows phone, No iPhone QWERTY phone etc.....

I was a Nokia E-series user, and my first QWERTY was E61i, and I love my last QWERTY phone the most, the E7. and I think typing with QWERTY thumb board is a BETTER way of input system compared to the 3.5" iphone. But right now smartphone are big, and touching the cold glass of smartphone is easier because it's not as small as 3.5" anymore. Furthermore, it's faster typing using swipe than QWERTY thumbboard, and I prefer the extra screen estate and extra lightness compared to smaller screen and heavier device with QWERTY.

I believe this is one of the reason that many smartphone company stop producing the QWERTY device. This 3 were the example of the LATEST android device with QWERTY:
http://www.gsmarena.com/samsung_galaxy_appeal_i827-4771.php
http://www.gsmarena.com/motorola_photon_q_4g_lte_xt897-4885.php
http://www.gsmarena.com/motorola_defy_pro_xt560-4868.php

[RottenApple]

@Leebase:

"Number 1 phone on T-Mobile is still the iPhone. Even without subsidies. You just swap buying a subsidized iPhone for buying a financed iPhone. Of course, when the two years are up, some folks will just stick with their 2yr old iPhone longer and see their monthly bill go down."

Of course it is. There's only 3 iPhone models but hundreds(?) of Android models that make up the rest of the market. I merely pointed out that 20% is nowhere near 'overwhelming'.

@abdul muis:

Why are QWERTY phones so unpopular these days? My guess is that it comes down to one single factor: Weight. You can't produce something as light as an iPhone with a physical keyboard.
And due to advances of touch control the only thing it's useful for is if you frequently have to write longer texts - and most people do not need that. In all other use cases it's just useless baggage.

[AndThisWillBeToo]

What killed QWERTY and paved the way to touch screen monoblock is the HW cost. If you have to create a different HW variant on each market it costs a fortune. (e.g. Denmark, France and Finland have all their own specific QWERTY key layout, all of which differ from the U.S. layout.)
With virtual touch screen keyboard you can not only go with one HW, but in addition to that you can actually switch layouts on the fly by selecting different keyboard from settings. Add to that the possibility of word suggestions, Swype, etc. And you start to realize why QWERTY keyboards just vanished the moment the screen size managed to match dimensions of physical keyboard.

[Crun Kykd]

Regarding the accessories discussion: a future smartphone accessory folks will all want: goggles that phones snap in to with lenses to convert it into a head up display VR set. Along with it, arm bands (iWatches?) with built-in accelerometers to act as VR game controllers. Binaural (head-tracking 3D) speakers.

BTW, I think the smartphone replacement cycle lengthens right up to when VR takes off. Then it speeds up again because the hardware is simply far from good enough.

[Tester]

@Crun Kykd:

>> Regarding the accessories discussion: a future smartphone accessory folks will all want: goggles that phones snap in to with lenses to convert it into a head up display VR set.

Yes, sure. This is just another wet dream of the high tech industry that will never go mainstream for one simple reason: It's far too clumsy.

VR is something I don't see reaching far beyond the geek population.

[aarohikapoor]

That's great you say but I also want a real smart phone this is something that I will be using everyday. No worries about that here are specs.

[bbbjez12]

Some really good stuff on here, some really interesting debates, I would be interested in hearing peoples thoughts on the evolution of the 2nd hand market?

1,230k new smartphones are sold every fortnight in the UK, in 2007 the average trade-in value was £20 and many o0ld units ended up in a drawer. By 2013 the average value had reached £108, today trade-in prices can reach up to £400.

This rising value has increased the likelihood of a second life for smartphones, Deloitte estimated that 40% of 2nd hand smartphones (13m units) were destined to stay in use with a new owner through handing down or trade ins in the UK.

There must be an innovative, new business model that profits from the growing used smartphone market - ANY THOUGHTS?