Just before Apple reported a decline in sales, the International Data Corp. (IDC) released its Worldwide Quarterly Mobile Phone Tracker where smartphone vendors shipped a total of 375.4 million units during the fourth quarter of 2018 (4Q18), down 4.9% year over year and the fifth consecutive quarter of decline.

The industry analyst firm said it’s the “worst year ever for smartphone shipments” recording a 4.1 percent decline in 2018 in terms of global smartphone volumes with a total of 1.4 billion units shipped for the full year. IDC sees this trend to continue into the first quarter of 2019.

Replacement cycles

“Globally the smartphone market is a mess right now,” said Ryan Reith, program vice president with IDC’s Worldwide Mobile Device Trackers. “Outside of a handful of high-growth markets like India, Indonesia, Korea, and Vietnam, we did not see a lot of positive activity in 2018. We believe several factors are at play here, including lengthening replacement cycles, increasing penetration levels in many large markets, political and economic uncertainty, and growing consumer frustration around continuously rising price points.”

Once the most sought-after market in the world, China, which accounts for roughly 30 percent of the world’s smartphone consumption, had an even worse 2018 than the previous year with volumes down just over 10 percent. Consumer spending is down as well.

Chinese brands

However, the top four brands, all of which are Chinese — Huawei, OPPO, vivo, and Xiaomi — their share of the China market to roughly 78 percent, up from 66 percent in 2017.

Still, IDC says that the Top 5 smartphone companies continue to get stronger and now account for 69 percent of smartphone volume, up from 63 percent a year ago. If vivo is included, which is currently No. 6 and has been in and out of the Top 5 in recent quarters, the share of the top companies is 75 percent and growing. While the market faces some very serious challenges in general, none are greater than the challenges facing the brands that continue to lose market share and channel positioning.

“With replacement rates continuing to slow across numerous markets, vendors will need to find a new equilibrium that balances the latest smartphone features, compelling design, and affordability,” said Anthony Scarsella, research manager with IDC’s Worldwide Quarterly Mobile Phone Tracker. “The arrival of both 5G and foldable devices later this year could bring new life to the industry depending on how vendors and carriers market the real-life benefits of these technologies. However, we expect these new devices to elevate average selling prices as new displays, chipsets, and radios will bring an increased price to the BOM (bill of materials), which will translate to higher price points for consumers. To combat this, carriers and retailers will need to fully maximize trade-in offers for older devices as a type of subsidy to push upgrades throughout 2019.”

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