Presumption: Worldwide Smartphone Growth Will Ease to Single Digits by 2017

I suppose that there is no denying the fact that just about everything has a saturation point. There comes a situation where almost every possibility is accounted for. Does the fact that smartphone sales for 2013 exceeded one billion units signify that we have reached that point?

This is the first time that the one billion mark was surpassed. That represents a year-over-year growth of 39.2 percent from 2012. If the International Data Corporation’s (IDC) forecasts are correct, this could be the last time we see double digit growth in this market.

The goal of IDC's Worldwide Quarterly Mobile Phone Tracker is to address the issue concerning the demand for detailed and timely information on the total mobile phone and smartphone markets for handset vendors, software developers, service providers, component suppliers and investors. It is designed to provide analysis through quarterly market share data by region.

The latest tracker report predicts that worldwide smartphone shipments will dramatically slow down in the next two years. By 2017 we can expect to see single digit growth of about 8.3 percent. The following year has an even lower expectation with only a 6.2 percent growth seen.

"In North America we see more than 200 million smartphones in active use, not to mention the number of feature phones still being used. 2014 will be an enormous transition year for the smartphone market. Not only will growth decline more than ever before, but the driving forces behind smartphone adoption are changing. New markets for growth bring different rules to play by and ‘premium’ will not be a major factor in the regions driving overall market growth." This is the prediction of Ryan Reith, program director with IDC's Worldwide Quarterly Mobile Phone Tracker.

Although the drop is expected to be seen in North America and Europe, with Japan not dropping quite as much, high growth is still seen for many emerging markets. We know that the mobile networks in emerging markets tend to be slower and possibly somewhat problematic. Because of this, feature phones or smartphones that have a lot less functionality are more likely to be used in these regions.

An area that this definitely has a direct correlation with market saturation is pricing. Often what happens is that service providers and carriers will try to create programs that offer great deals. Last year the average selling price (ASP) was $335 this is expected to drop to $260 by 2018. That is a significant reduction.

Concerning this point, Ramon Llamas, who is the research manager with IDC's mobile phone team said, "In order to reach the untapped demand within emerging markets, carriers and OEMs will need to work together to bring prices down. Last year we saw a total of 322.5 million smartphone units ship for under $150 and that number will continue to grow going forward. We've already seen numerous smartphone announcements targeting this price band this year, with some as low as $25. Just as the dynamics have changed for overall smartphone growth, so have the dynamics for smartphone pricing in the markets where continued growth is expected. Not all vendors will want to get into this space, but those that do must make deliberate choices about their strategies in order to succeed."

The following is a breakdown of three of the operating systems:

Android will maintain its reign as the leading operating system throughout IDC's forecast. With a strong presence within emerging markets and attainable price points for both vendors and customers, IDC expects both a commanding market share as well as prices below the industry average. What remains to be seen is which vendors will win the contest within emerging markets, as many local vendors have gained share last year.

iOS will remain the clear No. 2 platform behind Android and will have the highest ASPs among the leading platforms. Apple has maintained a tight focus on the high end of the market with its most current devices, a trend we expect to see continue into the future. This could keep iOS from realizing greater volumes within emerging markets, but sales in mature markets will offset much of the difference.

Windows Phone stands to grow the fastest among the leading smartphone operating systems, with continued support from Nokia as well as the addition of nine new Windows Phone partners. Most of these new vendors come from emerging markets and could help bring the Windows Phone experience to customers there.

You may have noticed that BlackBerry is not included in this list. That is because according to IDC, it is taking a conservative stance on this OS. Although BlackBerry has made some interesting and bold moves in recent months, it still has higher than average prices for its devices as compared to the above three platforms.

For those who like to look at numbers, the charts below will give you an idea of what the figures look like.

Worldwide Smartphone Forecast by OS, Shipments, and Market Share, 2014-2018 (Units in Millions)

* represents forecast data

Source: IDC Worldwide Mobile Phone Tracker, February 26, 2014

Worldwide Smartphone Average Selling Price (ASP) by Region and 5-Year CAGR (ASPs in $USD)

* represents forecast data