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November 27, 2013

Worldwide Smartphone Shipments to Grow Nearly 40 Percent in 2013 - Over a Billion Devices Will Ship

International Data Corporation's (IDC) new Worldwide Quarterly Mobile Phone Tracker has just been made available, which includes IDC's smartphone shipments forecast for all of 2013. As one should certainly expect, the numbers are quite impressive.

IDC is now projecting that worldwide smartphone shipments will surpass 1.0 billion units in 2013, which amounts to 39.3 percent growth over all of 2012. We certainly aren't surprised by this - even though we've heard lots of stories in 2013 about certain advanced markets becoming "smartphone saturated" the growth curve and market opportunity remains tremendous - at least for the very top tier players. Many users are perfectly open to going through rapid upgrade cycles, and in North America the wireless carriers are certainly doing their part to help shorten upgrade cycles.

Even so, IDC does note in its report that the demand for low-cost computing in emerging markets continues to drive the smartphone market forward. Without a doubt this is true. By 2017 IDC now predicts that total smartphone shipments will approach 1.7 billion units. This amounts to a compound annual growth rate (CAGR) of 18.4 percent from 2013 to 2017. The chart below clearly outlines this trend, and underscores the market shifts from, in particular, North America to the Asia/Pacific region.

From a volume perspective, the Asia/Pacific, Latin America, and Middle East and Africa (MEA) market segments will all post strong, market-beating growth rates from 2013 to 2017. It is interesting to note that the Asia/Pacific market will also continue to experience overall market share growth from 2013 to 2017. This also isn't surprising. It is certainly true as well that the developed markets, by contrast, will see market share erosion relative to all global market share, but even so the developed markets will to see volume increases during the same time period.

As we noted earlier the total market size may be reaching a saturation point but device manufacturers will continue to find steady and willing markets for upgrading to new devices. The desire for new technology remains unabated in the developed market segments. That said, there will be a shift in pricing dynamics between 2013 and 2017, which IDC’s research has clearly picked up. Note the chart below, which highlights the anticipated trends here.

There is an undeniable and steady decline in average selling prices (ASPs) underway for all device segments and across all markets. Declining ASPs have a huge effect as a market growth driver - more so than any other factor.

The Android market for low end smartphones is the primary cause of this shift and Android itself has clearly allowed a number of new manufacturers to enter the smartphone market. Many of these handset vendors have focused on low-cost devices as a way to build brand awareness, and the approach has been very successful.

For 2013, IDC is now forecasting that smartphone ASPs will come in at $337, a 12.8 percent decline from $387 in 2012. IDC believes that this trend will continue and the company now forecasts smartphone ASPs to gradually drop to $265 by 2017. This is significant and opens the doors to many more people being able to acquire smartphones on a global basis.

From a price perspective ASPs in the emerging markets will post single-digit CAGR declines from 2013 to 2017, led by Asia/Pacific. It is worth noting as well that these trends essentially mean that the death of the feature phone is imminent - smartphone prices will be such that users will simply bypass purchasing feature phones altogether.

image via shutterstock 

Ryan Reith, program director with IDC's Worldwide Quarterly Mobile Phone Tracker, notes, "The game has changed quite drastically due to the decline in smartphone ASPs. Just a few years back the industry was talking about the next billion people to connect, and it was assumed the majority of these people would do so by way of the feature phone. Given the trajectory of ASPs, smartphones are now a very realistic option to connect those billion users."

Finally, because there is such a huge untapped market still for manufacturers to sell smartphones into, even though the ASPs come down the volumes that become available will still drive significant revenue and profit for the device makers. We can certainly expect that the low end smartphones will also continue to grow their feature sets, so that low end users will also become "sophisticated" users over time. For the device makers it is a great position to be in and the rest of the decade should prove a heady ride - at least for the top tier device makers.

Edited by Ryan Sartor

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