Data Scout is LSA’s series that curates and draws meaning from third-party data. Running semi-weekly, it adds an analytical layer to the industry data that we encounter in daily knowledge building. For LSA original data, see the separate Modern Commerce Monitor™️ series.
After much handwringing that smartphone unit sales have plateaued, Q3 saw modest year-over-year growth. Canalys reports one percent growth while Strategy Analytics corroborates this story, but reports 2 percent growth. Though that’s essentially flat, it’s a turnaround from several quarters of decline.
This translates to total unit shipments of 352.4 million during the quarter. Broken down by manufacturer, that’s led by Samsung (78.9 million units), Huawei (66.8 million units), Apple (43.5 million units) and Xiaomi (32.5 million units). This positions Android far ahead of iOS in global operating system share.
Reversing the Trend
So what’s behind the rebound? It’s several factors, including active moves to counter previous quarters’ declines. That includes price competition to offset the upward pricing trend among premium smartphones like the iPhone. It’s also driven by new features like larger screens, less bezel and 5G compatibility.
“The global smartphone market grew for the first time since the third quarter of 2017,” said Strategy Analytics director Woody Oh in a statement. “Worldwide demand for smartphones is recovering, due to strong pricing competition among vendors and new innovations such as larger screens and 5G.”
In other words, device manufacturers are actively boosting features to lower the smartphone replacement cycle. Due to the sector’s maturation, hardware refresh cycles were getting increasingly incremental and non-substantial. So replacement cycles grew to 3.5 years on average. So it’s all about reversing that trend.
5G today is more of a marketing tool for OEMs and carriers. Network rollouts will happen over the next five years and are limited today to a few high-density test markets. But it also starts with hardware compatibility, so OEMs are appealing to early adopters with 5G compatibility (see our previous 5G analysis).
As for the market rebound, why is it important? Previous to this turnaround, smartphone market saturation and maturity has forced vested interests like Apple to cultivate new areas of innovation and diversify revenue. That’s been a key trend leading to investment and innovation in wearables like Watch and Airpods.
That’s not only the case in Cupertino, as other tech giants likewise see wearables as a rising star. As we’ve examined for Amazon and Microsoft, wearables could represent direct consumer touchpoints where they’re otherwise disintermediated by Apple and the other smartphone manufacturers listed above.
What’s the tie to local commerce? As we’ve examined, tech giants’ motivations with emerging tech are to future proof their businesses. And a few players battling for that wearable spot on your body have local commerce ambitions. That’s the case with Google’s Pixel Buds and Amazon’s new line of wearables.
Speaking of Google and wearable hardware, its acquisition of Fitbit comes into play. And Apple’s Q3 earnings last week have strong implications for wearables as a consumer hardware category. And that all relates to sagging smartphone unit sales, as wearables could be a sort of successor to the aging iPhone.
We’ll follow up next week with deeper analysis on Apple earnings, Google/Fitbit, wearables’ trajectory and more local commerce implications.