Singapore - After five years of blistering growth sales, high-end smartphones have hit a plateau and the $2-trillion industry - telecom carriers, handset makers and content providers - is buckling up for a bumpier ride as growth shifts to emerging markets, primarily in Asia.
While carrier subsidies have helped drive sales of high-end devices in mature markets, the next growth chapter will be in emerging markets where cost-conscious users demand cheaper gadgets and cheaper access to cheaper services.
That shift is a challenge to profit margins at Apple and Samsung Electronics, which together sell half of the world's smartphones.
Apple's revenues in Greater China slumped 43 percent in April-June from the previous quarter and were down 14 percent from last year. Executives blamed China's slowing economy. Analysts said a lack of lower-priced devices was more likely to blame.
Samsung has indicated its quarterly operating profit will fall short of estimates as demand for high-end smartphones slows.
Neither faces any kind of crisis. But, industry experts say, many users in mature markets who want a smartphone already have one. European smartphone shipments grew 12 percent in January-March from a year ago, the slowest growth since IT research firm IDC started tracking the mobile market in 2004.
This year, the number of mobile Internet users in the developing world will overtake those in the developed world for the first time - growing 27 times since 2007, compared to the developed world's fourfold growth, according to estimates from the International Telecommunications Union (ITU).
“The centre of gravity in the mobile ecosystem is likely to shift from the United States and Western Europe toward Asia,” Mary Ellen Gordon, director at mobile advertiser Flurry, said in an emailed interview.
Elsewhere, operators in the Philippines are experimenting with subsidies at the lower end, while in India the handset makers are trying to stimulate smartphone adoption. Apple offers installment plans for its iPhone, while Micromax bundles several free months of data together with a handset.
Apple CEO Tim Cook said on Tuesday's conference call that sales in India jumped more than 400 percent quarter on quarter.
As the industry matures, phone and tablet makers will have to settle for smaller margins and lower prices, says Joe Nguyen, Singapore-based analyst at Internet metrics company comScore.
“At the end of the day these are utility devices much like the PC was.” - Reuters