Worldwide smartphone shipments are expected to reach 1.46 billion units, with a year-over-year growth rate of 1.6% in 2016.
This is according to the latest forecast from IDC's Worldwide Quarterly Mobile Phone Tracker. Although growth remains positive, IDC says it is down significantly from the 10.4% increase in 2015. Much of the slowdown is attributed to the decline expected in developed regions in 2016, while emerging markets continue with positive growth.
Rival market analyst firm Gartner says overall sales of mobile phones in the second quarter of 2016 contracted by 0.5%, with only five vendors from the top 10 showing growth.
IDC says developed markets as a whole (US, Canada, Japan and Western Europe) are expected to see a compound annual growth rate (CAGR) of 0.2%, while emerging markets (Asia-Pacific, excluding Japan, Central and Eastern Europe, Middle East and Africa, and Latin America) will experience a CAGR of 5.4% over the 2015-2020 forecast period.
"Growth in the smartphone market is quickly becoming reliant on replacing existing handsets rather than seeking new users," says Jitesh Ubrani, senior research analyst with IDC's Worldwide Quarterly Mobile Device Trackers.
"From a technological standpoint, smartphone innovation seems to be in a lull as consumers are becoming increasingly comfortable with 'good enough' smartphones. However, with the launch of trade-in or buy-back programmes from top vendors and telcos, the industry is aiming to spur early replacements and shorten lifecycles. Upcoming innovations in augmented and virtual reality (AR/VR) should also help stimulate upgrades in the next 12 to 18 months."
IDC notes that consumer preference for larger screens is expected to continue and the growing interest in AR/VR will only drive that forward as phablets (5.5-inches and larger) go from roughly one-quarter of the smartphone market to one-third by 2020.
"As phablets gain in popularity, we expect to see a myriad of vendors further expanding their portfolio of large-screened devices but at more affordable price points compared to market leaders Samsung and Apple," says Anthony Scarsella, IDC's research manager for mobile phones.
"Over the past two years, high-priced flagship phablets from the likes of Apple, Samsung and LG have set the bar for power, performance and design within the phablet category. Looking ahead, we anticipate many new 'flagship type' phablets to hit the market from both aspiring and traditional vendors that deliver similar features at considerably lower prices in both developed and emerging markets.
"Average selling prices (ASPs) for phablets are expected to reach $304 by 2020, down 27% from $419 in 2015, while regular smartphones (5.4-inches and smaller) are expected to drop only 12% ($264 from $232) during the same time frame."
Market share
In terms of share, IDC does not expect much to change as Android will maintain greater than 85% of the smartphone market. Google's introduction of Daydream and Project Tango will help usher in new use cases and will help participating hardware vendors to offer differentiated experiences in the premium segment, the market analyst firm says.
It believes the latest release of Nougat and Google's ongoing ambition to secure Android will help the OS gain a better footing in the commercial segment. Overall, Android's ASP is set to remain flat in 2016 ($217) compared to last year and will decrease to $190 by 2020.
According to IDC, the rumoured removal of the headphone jack and the expectation of a significant hardware refresh in 2017 - the 10th anniversary of the iPhone - are contributors to the first full-year decline in iPhone shipments in 2016. However, IDC does expect a rebound in 2017 and beyond as iPhones reach nearly a quarter billion units in 2020.
IDC anticipates further decline in Windows Phone's market share throughout the forecast. Although the platform recently saw a new device launch from one of the largest PC vendors, the device (like the OS) remains highly focused on the commercial market. Future device launches, whether from Microsoft or its partners, are expected to have a similar target market.
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