IDC: Android, iOS Smartphones Face Challenges In Market Slowdown

The smartphone market will begin to slow to single-digit year-over-year growth in 2016, according to a new report released Thursday by market research firm IDC.

Solution providers touting mobility services say that manufacturers like Apple and Samsung will need to step up their mobile innovation to increase smartphone trade-ins.

Jay Gordon, vice president of sales at Plano, Texas-based Enterprise Mobile, said the smartphone market has reached its "market peak" -- a consequence of the initial rush by consumers to snap them up when these products debut.

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"The slower rate of innovation on new smartphones is not driving consumers to always upgrade to the latest and greatest as they once did," said Gordon. "There are many people still walking around with iPhone 5s devices, for example, despite the release of the iPhone 6 and 6s."

According to IDC's projections, in 2016, shipments will grow 5.7 percent over the previous year's -- a major slowdown compared with 2015's 10.4 percent smartphone shipment growth from 2014.

Part of the reason behind this projection, Gordon said, is that once smartphone manufacturers gain share, they limit growth prospects as the life cycle of a mobile device lengthens.

Meanwhile, as wireless carriers back off from providing hardware subsidies toward a device payment plan, consumers are "locked in" to their devices over the payback period, typically 24 to 36 months, he said.

"During this period, consumers are typically not shopping for new phone technology, as they cannot justify the added expense of upgrading out of pocket," Gordon said. "On the enterprise side, the device upgrade path is more often shorter, ranging from 18 to 24 months, which does present shorter opportunity for smartphone manufacturers."

IOS and Windows Phone smartphone devices will face declining shipments in 2016, according to IDC's projections -- iOS devices are expected to decline by 0.1 percent in 2016, while Windows Phone is projected to drop 18.5 percent. Android smartphones will grow 7.6 percent in 2016, according to the report.

Ryan Reith, program director at IDC, said the slowdown may be dire for premium smartphone manufacturers such as Apple and Samsung.

"The mature market slowdown has some grave consequences for Apple, as well as the high-end Android space, as these were the markets that absorbed the majority of the premium handsets that shipped over the past five years," said Reith.

However, he noted, Apple's new trade-in business program, called Trade Up With Installments, may further increase churn in lucrative markets despite high penetration rates -- meaning the Cupertino, Calif.-based company can more firmly control trade-in offerings.

IDC also projected that phablets, or large-screened smartphones, will continue to gain popularity in 2016, as phablet volume is expected to grow to make up 32 percent of all smartphones in 2020, compared with 20 percent in 2015.