RESEARCH FORECAST REPORT SMARTPHONES: WORLDWIDE TRENDS AND FORECASTS 2015 2020 KEREM ARSAL and HEENU NIHALANI Analysys Mason Limited 2015 analysysmason.com
About this report This report analyses the smartphone market and describes the key worldwide and regional trends that affect sales and adoption. It is based on several sources: Analysys Mason s internal research, including global and regional telecoms forecasts and the Connected Consumer Survey (conducted in 16 countries in 2015) interviews with key stakeholders in the smartphone market secondary information from vendors, operators, regulators and other formal sources. WHO NEEDS TO READ THIS REPORT Operator-based strategy executives and mobile device managers who are interested in smartphone market trends, the role of operators as smartphone distribution channels, and recent changes in device bundling, financing and upgrade plans. Device manufacturers that want to identify worldwide and regional opportunities in terms of smartphone unit sales growth and primary regional drivers. Smartphone distributors and wholesale executives who are interested in learning more about operator and vendor initiatives for smartphone sales, regional growth expectations and key trends. GEOGRAPHICAL COVERAGE Worldwide Central and Eastern Europe Developed Asia-Pacific Emerging Asia-Pacific Latin America Middle East and North Africa North America Sub-Saharan Africa Western Europe Worldwide KEY METRICS Unit sales of mobile handsets (smartphones and nonsmartphones) Mobile handset connections (smartphones and nonsmartphones) Unit sales of smartphones by vendor and by operating system Regional Unit sales of mobile handsets (smartphones and nonsmartphones) Mobile handset connections (smartphones and nonsmartphones) Analysys Mason Limited 2015 2
Contents [1] 7. Forecast summary 8. Executive summary 9. Worldwide trends 10. Smartphone markets are saturating operators and vendors must reassess their priorities 11. Growth in unit sales will depend on emerging markets and will come mostly from emerging Asia Pacific 12. Operators are key sources of smartphones in most regions, but they lost some ground to other channels in 2015 13. Vendor financing is the end-point of gradual shifts in operator device strategies rather than an abrupt change 14. Vendor financing plans are most likely to succeed in countries where users are ready for SIM-only contracts 15. Operator bundles are in demand and play a role in prepaid-to-postpaid migration 16. Apple leads the high-end market and Chinese vendors are capturing demand at the low end 17. ios s market share of unit sales will remain stable at around 15% until 2020 18. Western Europe 19. Migration to 4G boosts smartphone sales, but replacement cycles are slow and SIM-only contracts grow 20. Key regional trends 21. Central and Eastern Europe 22. Smartphone sales will grow strongly despite economic obstacles in key markets 23. Key regional trends 24. Middle East and North Africa 25. Surges in replacement activity and a large pool of potential first-time buyers will drive growth 26. Key regional trends 27. Sub-Saharan Africa 28. Low-cost models are still critical to smartphone adoption, but structural challenges remain 29. Key regional trends 30. Emerging Asia Pacific 31. Low penetration rates and demand for mobile data usage will boost smartphone sales 32. Key regional trends 33. Developed Asia Pacific 34. Apple provides growth in the high-end segment in an otherwise stalling smartphone market 35. Key regional trends Analysys Mason Limited 2015 3
Contents [2] 36. North America 37. Operators and vendors switch to new device financing and upgrade plans to stimulate demand 38. Key regional trends 39. Latin America 40. Demand for smartphones remains strong as mobile data connectivity and prices improve 41. Key regional trends 42. Forecast methodology and assumptions 43. Forecast methodology and assumptions 44. About the authors and Analysys Mason 45. About the authors and Analysys Mason 46. About Analysys Mason 47. Research from Analysys Mason 48. Consulting from Analysys Mason Analysys Mason Limited 2015 4
List of figures [1] Figure 1: Mobile handset unit sales by type, and smartphones share of handset connections, worldwide, 2012 2020 Figure 2: Mobile handset unit sales by type, and smartphones share of handset connections, worldwide, 2012 2020 Figure 3: Smartphone unit sales by region, 2014 and 2020 Figure 4: Percentage of respondents who bought their most recent handset from an operator, 16 countries, and averages for 2014 and 2015 Figure 5: Device bundling and financing plans by type Figure 6: Seven areas of consideration for operators when assessing the potential impact of SIM-only and vendor financing take-up Figure 7: Choice of next mobile tariff by type among those who plan to change their tariffs, by current tariff type, 6 European countries, USA and South Korea Figure 8: Choice of next mobile tariff by type among those who plan to change their tariffs, by current tariff type, 8 countries in MEA and emerging APAC Figure 9: Smartphone unit sales by manufacturer, worldwide, 2012 2020 Figure 10: Smartphone unit sales by operating system, worldwide, 2012 2020 Figure 11: Mobile handset connections by type, and smartphones share of connections, Western Europe, 2012 2020 Figure 12: Smartphone unit sales and smartphones share of mobile handset unit sales, Western Europe, 2012 2020 Figure 13: Key regional trends in handset markets, Western Europe Figure 14: Mobile handset connections by type, and smartphones share of connections, Central and Eastern Europe, 2012 2020 Figure 15: Smartphone unit sales and smartphones share of mobile handset unit sales, Central and Eastern Europe, 2012 2020 Figure 16: Key regional trends in handset markets, Central and Eastern Europe Figure 17: Mobile handset connections by type, and smartphones share of connections, Middle East and North Africa, 2012 2020 Figure 18: Smartphone unit sales and smartphones share of mobile handset unit sales, Middle East and North Africa, 2012 2020 Figure 19: Key regional trends in handset markets, Middle East and North Africa Figure 20: Mobile handset connections by type, and smartphones share of connections, Sub-Saharan Africa, 2012 2020 Figure 21: Smartphone unit sales and smartphones share of mobile handset unit sales, Sub-Saharan Africa, 2012 2020 Figure 22: Key regional trends in handset markets, Sub-Saharan Africa Figure 23: Mobile handset connections by type, and smartphones share of connections, emerging Asia Pacific, 2012 2020 Figure 24: Smartphone unit sales and smartphones share of mobile handset unit sales, emerging Asia Pacific, 2012 2020 Figure 25: Key regional trends in handset markets, emerging Asia Pacific Figure 26: Mobile handset connections by type, and smartphones share of connections, developed Asia Pacific, 2012 2020 Figure 27: Smartphone unit sales and smartphones share of mobile handset unit sales, developed Asia Pacific, 2012 2020 Analysys Mason Limited 2015 5
List of figures [2] Figure 28: Key regional trends in handset markets, developed Asia Pacific Figure 29: Mobile handset connections by type, and smartphones share of connections, North America, 2012 2020 Figure 30: Smartphone unit sales and smartphones share of mobile handset unit sales, North America, 2012 2020 Figure 31: Key regional trends in handset markets, North America Figure 32: Mobile handset connections by type, and smartphones share of connections, Latin America, 2012 2020 Figure 33: Smartphone unit sales and smartphones share of mobile handset unit sales, Latin America, 2012 2020 Figure 34: Key regional trends in handset markets, Latin America Figure 35: Main enablers and constraints for our smartphone forecasts Analysys Mason Limited 2015 6
Worldwide: Smartphone markets are saturating operators and vendors must reassess their priorities As smartphone markets saturate, operators need device bundles with the flexibility to address demand for replacement cycles of various lengths. Smartphone sales growth rates will be flat in developed markets and will decelerate in emerging markets during the forecast period. We expect the following dynamics to affect smartphone sales during the forecast period. Consumer demand will be split across a few high-end smartphones and a large variety of low-end ones. Vendors will struggle to communicate distinct selling points for mediumrange models. Apple will consolidate leadership in the high-end market. Other vendors with ambitions in this segment will need to innovate quickly in order to shift operators focus away from Apple. Emerging markets, particularly the large emerging Asia Pacific countries, will account for much of the unit sales growth because of the presence of many potential first-time buyers. Operators in developed markets can maintain relevance as smartphone distributors by being more selective in their device portfolios and devising bundles and upgrade schemes that adapt to different replacement cycles. In emerging markets, the challenge will be for operators to provide smartphones to prepaid subscribers without vendor-led price reductions. Figure 2: Mobile handset unit sales by type, and smartphones share of handset connections, worldwide, 2012 2020 Unit sales (billion) 2.5 2.0 1.5 1.0 0.5 0.0 21% 2012 2013 2014 2015 2016 2017 2018 2019 63% 2020 70% 60% 50% 40% 30% 20% 10% Non-smartphones Smartphones Smartphones' share 0% Percentage of handset connections Source: Analysys Mason Analysys Mason Limited 2015 10
Smartphone unit sales (billion) Worldwide: Growth in unit sales will depend on emerging markets and will come mostly from emerging Asia Pacific Emerging Asia Pacific will be the primary driver of growth in unit sales, thanks to the presence of many first-time buyers in populous countries. The growth in smartphone units sold will come primarily from emerging markets. Sales in developed Asia Pacific, North America and Western Europe will stagnate, but sales in the rest of the world will increase at a CAGR of 8% between 2015 and 2020. Emerging Asia Pacific will represent the best opportunity for smartphone vendors because of the presence of many firsttime buyers in large underpenetrated markets, such as China, India, Indonesia and Pakistan. By 2020, annual sales in this region will have grown by nearly 300 million units, compared to 2015; this will be double the total increase in annual units sold between 2015 and 2020 in all other emerging markets. Already high levels of smartphone adoption will limit the number of first-time buyers in many developed markets. Furthermore, consumers are increasingly difficult to impress with incremental innovation in smartphones and are therefore unwilling to accelerate their replacement cycles. This is a problem that vendors and operators began to address in 2014 and 2015, particularly in the USA, with device financing and early upgrade schemes. Figure 3: Smartphone unit sales by region, 2014 and 2020 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2014 2020 Central and Eastern Europe Developed Asia Pacific Emerging Asia Pacific Latin America Middle East and North Africa North America Sub-Saharan Africa Western Europe Source: Analysys Mason Analysys Mason Limited 2015 11
CONTENTS FORECAST SUMMARY WORLDWIDE TRENDS REGIONAL TRENDS WESTERN EUROPE CENTRAL AND EASTERN EUROPE MIDDLE EAST AND NORTH AFRICA SUB-SAHARAN AFRICA EMERGING ASIA PACIFIC DEVELOPED ASIA PACIFIC NORTH AMERICA LATIN AMERICA FORECAST METHODOLOGY AND ASSUMPTIONS ABOUT THE AUTHORS AND ANALYSYS MASON Analysys Mason Limited 2015 44
About the authors Kerem Arsal (Senior Analyst) is a key contributor to Analysys Mason's Mobile Services research programme, which helps operators to understand, and monetise to maximum efficiency, the interplay between voice, messaging and data services. His work involves in-depth coverage of issues such as customer retention, mobile data pricing, MVNO strategies, and the impact of regulation and roaming. Previously, Kerem was a research manager at Pyramid Research, where he was responsible for setting the thematic research agenda across multiple tracks and regions. He also headed numerous projects around operator strategies, as well as commercialisation of, and demand assessment for, new products in the consumer and enterprise segments. Heenu Nihalani (Research Analyst) is a member of Analysys Mason's Consumer Services research team in London, contributing to the Mobile Services, Mobile Devices, Future Comms and Media, and Digital Economy Strategies research programmes. Prior to joining Analysys Mason, she worked as a financial knowledge broker in London, and as a journalist and copywriter in Hong Kong. Heenu holds an MSc in financial analysis from the Hong Kong University of Science and Technology, and a Bachelor's degree in philosophy, politics and economics from the University of Warwick. Analysys Mason Limited 2015 45
About Analysys Mason Knowing what s going on is one thing. Understanding how to take advantage of events is quite another. Our ability to understand the complex workings of telecoms, media and technology (TMT) industries and draw practical conclusions, based on the specialist knowledge of our people, is what sets Analysys Mason apart. We deliver our key services via two channels: consulting and research. Research We analyse, track and forecast the different services accessed by consumers and enterprises, as well as the software, infrastructure and technology delivering those services. Research clients benefit from regular and timely intelligence in addition to direct access to our team of expert analysts. Our dedicated Custom Research team undertakes specialised and bespoke projects for clients. For more information, please visit www.analysysmason.com/research Consumer and SME services Digital economy Regional markets Network technologies Telecoms software Strategy and planning Regulation and policy Performance improvement Transaction support Consulting Our focus is exclusively on TMT. We support multi-billion dollar investments, advise clients on regulatory matters, provide spectrum valuation and auction support, and advise on operational performance, business planning and strategy. We have developed rigorous methodologies that deliver tangible results for clients around the world. For more information, please visit www.analysysmason.com/consulting Analysys Mason Limited 2015 46
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PUBLISHED BY ANALYSYS MASON LIMITED IN DECEMBER 2015 Bush House North West Wing Aldwych London WC2B 4PJ UK Tel: +44 (0)20 7395 9000 Fax: +44 (0)20 7395 9001 Email: research@analysysmason.com www.analysysmason.com/research Registered in England No. 5177472 Analysys Mason Limited 2015. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher. Figures and projections contained in this report are based on publicly available information only and are produced by the Research Division of Analysys Mason Limited independently of any client-specific work within Analysys Mason Limited. The opinions expressed are those of the stated authors only. Analysys Mason Limited recognises that many terms appearing in this report are proprietary; all such trademarks are acknowledged and every effort has been made to indicate them by the normal UK publishing practice of capitalisation. However, the presence of a term, in whatever form, does not affect its legal status as a trademark. Analysys Mason Limited maintains that all reasonable care and skill have been used in the compilation of this publication. However, Analysys Mason Limited shall not be under any liability for loss or damage (including consequential loss) whatsoever or howsoever arising as a result of the use of this publication by the customer, his servants, agents or any third party. Analysys Mason Limited 2015