Peak Smartphones

The End of the Smartphone Era

By Jon Carter
Monday, July 22nd, 2013

Is it all downhill for smartphones? Apparently so, according to analysts and company insiders.

Newer model smartphones aren’t flying off the shelves, and Apple (NASDAQ: AAPL) CEO Tim Cook expects slow growth for the quarter ending in June, Forbes reports.

iphoneThis does not necessarily mean the slow death of the smartphone itself, but the days of eager Apple fans lining around the block to get the latest iPhone are over.

In a way, what we’ve come across is a smartphone glut; there are just too many versions on the market to usher in future innovation and growth.

Roughly half of Americans have smartphones, and there are a growing number of smartphones that are more accessible to people living on a budget. In essence, virtually anyone who wants a smartphone can get his or her hands on one.

And cheaper smartphones, running anywhere from $50 to $200, suck out the air from higher-end phones going for over $500.

Currently, one of the cheapest places to get the newest iPhone 5 or the Galaxy S4 is from Amazon.com (NASDAQ: AMZN), which will set you back at least $600.

Many of today’s budget phones have the same perks as upper-scale phones, so consumers are now questioning why it's necessary to make such an expensive purchase.

Smartphones may be on the downturn, but there is still plenty of growth for the low-budget variety.

Mozilla has created Firefox OS, an operating system designed for high Internet functionality in feature phones. It not only makes for a better web-browsing experience, but the OS taps into the hardware of smartphones, where consumers can access the camera and other components.

Market Evolution

There is room for second-tier companies to grow, but Apple and Samsung (KRX: 005935) can still dominate their competitors in an electronics world where smartphones are not the center.

HTC (TW: 2498) is still a large player in the market and can certainly adapt to the future. Other smartphone makers like Motorola Mobility (NYSE: MMI) and LG (KRX: 003550) also have the potential to expand.

But Apple may begin manufacturing cheaper iPhones for the Chinese market. In 2012, China surpassed the U.S. and is now known as the world’s largest market for smartphones.

Emerging markets in developing countries will account for 65% of all shipments worldwide in 2013. And demand in the developed world will grow by 45%.

But in Europe, smartphone sales increased only 12%, the smallest year-to-year growth since 2004, according to the International Data Corporation.

As the economy lags in Europe, many consumers do not see a point in spending extra money on a new phone when feature phones are available in the same price range as their current phones, and the same can be said of consumers in the United States. There is also a growing distaste for purchasing a newer model expensive phone simply because it is on the market.

Keep in mind the smartphone demographic as well.

The people most likely to buy the latest smartphones are young people with disposable income. But even for that group, now presented with so many other gadgets like tablets and kindles, the smartphone simply does not have the same excitement and demand as it once did five years ago.

The smartphone has pretty much run its course, and now other gadgets are being looked upon as possible purveyors of the next tech boom.

Google (NASDAQ: GOOG) Glass is catching on in today’s surveillance-oriented age, and Apple’s rumored iWatch is worth keeping an eye on.

And with the Sony’s (NYSE: SNE) PlayStation 4 and Microsoft’s (NASDAQ: MSFT) Xbox One set to debut, young people steeped in the electronics and gaming world are saving up now more than ever. Pre-orders for PlayStation and Xbox hardware have already seen record levels on Amazon. And the next wave of gaming consoles are increasingly app-oriented, which could compete head-on with smartphone manufacturers.

And the apps themselves seem to have more excitement and growth than the actual platforms. Apps like Angry Birds have soared on platforms other than smartphones, including gaming consoles like the PlayStation 3.

Even newer model laptops are being marketed as app friendly.

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Tablets

If you’re starting to feel bad for Apple and Samsung, you need not worry – both companies have long had a foot in the tablet market.

Some may see tablets and smartphones as two different markets, but the tablet essentially functions as a larger smartphone. Some tablets, like the ones offered by Samsung, will allow you to make and receive calls, and it is a better device for users who like to surf the Internet on the go.

While smartphones have excellent Internet capabilities, the tablet’s larger screen size makes for an easier web-browsing experience.

Devices like tablets are also excellent choices for people interested in electronic reading, YouTube, or other streaming services. If a family member is hogging the television, tablet users can easily watch many shows in a room without a television.

But where the tablet really has the smartphone dead to rights is the price factor. You can find a Samsung tablet for a retail price of around $300 on Amazon.com – under $200 if you choose a third party seller or a used device.

People who already have a smartphone are more likely to gravitate toward a new gadget that will add a different dimension to their lives. If users are keen on purchasing a new gadget, they could just as easily keep their current phones and invest in a tablet rather than spending an additional $200 on a newer version of the smartphone.

Low-cost, smaller tablets could be the next boom, taking up the smartphone market void. All you need to do is traverse through college campuses and hipster cafés to see the faces of young people glued to tablets of all shapes and sizes.

 

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