WHAT THE FUTURE HOLDS

After years of sustained revenue growth, the Mobile Devices market will decline -2.6% in 2016 and exhibit a -0.3% CAGR for three years with a slight recovery expected in 2018-19. The revenue drop will be driven by falling prices of all product types (-3.4% average selling price CAGR). All product types will exhibit flat or negative revenue growth. Also premium phones, so far a growth pocket, will experience losses (USD -1.3bn by 2018).

In terms of units sold, the market will grow annually by +1.8% (CAGR) by 2018, with shipment volumes being shared rather equally among Premium, Basic, and Utility phones. Interestingly, Utility phones will represent 32% of shipments in 2018, despite representing only 5% of total 2018 market revenues. On the contrary, Premium phones (including high-end smartphones) despite representing 79% of revenues will only represent 37% of all phones shipped in 2018.

Overall, the Mobile Devices market will decline by USD -2.6bn from 2015 to 2018. However, pockets of growth still remain in key regions as Middle East & Africa and Emerging Asia Pacific are originating increments of USD +6bn and USD +2.6bn, respectively. Among the countries that will drive most growth, India will bring a revenue increment of USD +2.5bn by 2018, followed by Indonesia (with USD +1.1bn) and Saudi Arabia (USD +0.9bn). These growing markets are characterized by strong demand for mobile devices combined with high price sensitivity among consumers. To better take advantage of these conditions, large vendors are launching mid-segment product series (like the iPhone SE or Samsung Galaxy J Series).  Some Asian rising companies are leveraging their presence in second-tier cities of Asia. In an overall declining market, companies´ strategies are competing to increase their market share in the last few areas of growth.

Referring to price dynamics, market competition will be strongly affected by price declines, making the sale price of phones decline by 10% in three years’ time. Depreciation will be partly driven by increasing price competition from low-end phone makers as well as the increased price sensitivity of buyers who will be less likely to invest in devices that will be soon outdated.

Mobile Devices market development will have a rather profound impact on the supply chain. Short innovation lifecycles will make time-to-market critical, putting additional requirements on the design of supply chains. Moreover, in order to meet fast-changing and pressing customer demands, companies will demand increasingly flexible and agile supply chains. Despite the shrink in revenues, the market will continue to growing in shipments, leading to more devices being shipped for lower prices. This will clearly put emphasis on cost efficiency and more competitive supply chain solutions.

WHAT COMES NEXT

DHL will be publishing more Technology Subsector Market Monitors about PCs & Notebooks, Mobile Devices, Imaging and Printing, Semiconductors, Networks, Consumer Electronics and Enterprise Computing.

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DHL TECHNOLOGY MARKET INTELLIGENCE SUBSECTOR DEFINITION

The Mobile Devices Technology Subsector is among the key subsectors regularly monitored by DHL. This subsector includes three device types, classified according to their functionalities: Premium devices (that offer rich communication experiences beyond voice telephony and target high-end market), Basic devices (data-centric devices with limited features), and Utility devices (voice-centric, entry-level mobile devices typically low-cost with limited functions and specifications). CAGR is used as an abbreviation for Compound Annual Growth Rate and refers to the period 2015-2018. Data Source: Gartner 1Q 2016.

Published: July 2016

Images: DHL