Smartphone Sales Are Crashing (Maybe) - Why?

The usual 'narrative' on smartphones is that they've never been more important and central to modern life.

So why aren't we buying them any more?

According to a new report by CCS Insights, smartphone sales are actually set for an annual drop in the UK after slowing "dramatically" in the first half of 2014.

CSS says that mobile phone sales as a whole will drop by 11% in a year - a huge fall (if they turn out to be right). And even that prediction is optimistic: so far in 2014 smartphone sales are down 20% compared with 2013. If the trend continued, the UK would see phone sales slip to 27 million down 5 million in a year.

And it's not just phones. CCS says that tablet sales will drop by an even sharper margin, with a 14% annual slump expected.

Among the reasons given for the fall are:

  • A rise in customers choosing cheaper SIM-only deals rather than pricey two-year "lock-in" contracts, which usually come with apparently discounted upgrades
  • A slower pick-up in 4G adoption compared to 3G
  • A lack of key new features or obvious improvements in new handsets
  • Major lack of interest in specific phones like the Samsung Galaxy S5 and HTC One M8 compared to previous years' models. Budget models are also closer than in recent years to their full-price counterparts. Which would appear to be borne out by a quick Google Trends search. (See below)

Marina Koytcheva, director of forecasting at CCS Insight, said, "The slowdown in tablet sales should come as no surprise to the industry. We warned back in December that the spectacular tablet growth we've been seeing in the last two years was unsustainable. With replacement rates for tablets slower than those of smartphones, a temporary lull was inevitable."

Okay, let's be clear though. A fall of 11% is serious, but 27 million phones sold is still pretty decent, being as it is a fairly decent chunk of the entire adult population.

But there are other signs that the UK is becoming less interested in keeping up with the latest tech trends. Samsung reported this week that the average "tech spend" in the UK over the last three months is £218 - less than half that of Italy, and one of the lowest in Europe.

Google Trends also offers and interesting glimpse at how attitudes are changing:

Even interest in 'smartphones' as a whole appears to have peaked back in December, falling steadily ever since. As CCS said: "Brits love their gadgets and now they have to spread their money across more devices. It's no longer just about having the latest and greatest smartphone".

With all that in mind, there is one obvious elephant in the room. It's thin, light, made of sapphire and doesn't technically exist yet.

The iPhone 6.

Let's overlay that search term on 'smartphones' as a whole, and see what it does to the graph:

Yep. As CCS notes, the interest in Apple's new smartphone continues to buck the wider trend, regardless of its supposed feature set.

"CCS Insight expects the market will get a lift when Apple unveils the next iPhone. Strong sales of the new device will revive people's interest in mobile gadgets."

We'll have to wait and see about that. But in the meantime it's clear the market is maturing - as smartphones become more and more similar year after year, consumers are more concerned with protecting and using their smart devices, not just blindly upgrading them.

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