Apple isn't alone: Data confirms smartphone sector slow-down

The entire smartphone industry, not just Apple, appears to be feeling the pain.

Apple, iPhone, Smartphones, Tim Cook

Claims the smartphone market is contracting are confirmed by new data received from SEMRush — and the entire industry, not just Apple, appears to be feeling the pain.

What’s the story?

Apple recently admitted to slower than anticipated iPhone sales in its biggest-selling quarter, reducing estimates and attributing this damage to a variety of factors.

The world’s biggest smartphone vendor, Samsung Electronics, has also confirmed its own big dive, with a 30 percent decline in profit.

Since then, we’ve seen component vendors worldwide report disappointing, lower than anticipated, or more or less flat results in the quarter.

Analysts describe a contraction in sales volumes across most markets, and there is concern this contraction is likely to impact other industries, suggesting a more widespread pattern that could lead bigger challenges.

What’s driving this activity?

Consumers aren’t buying.

I believe that if consumers aren’t buying products, then it is likely we will see less general interest in those items.

If that is the case, then I thought we might see a decline in interest shown in those items online and contacted SEMRush to see if they could provide data that supports my theory.

They did.

Take a look at the below charts. They track interest (defined from search-related activity) among global consumers to the following:

  • iPhone XS/XR against iPhone X/8
  • Google Pixel in 2016, 2017 and 2018
  • Samsung Note in 2017 and 2018

All three show decline.

iphones chart SEMRush
googlpixelchart SEMRush
samsungchart SEMRush

The charts reveal, for example that there is less interest in the current crop of Pixel devices than met the introduction of the first-generation device. They suggest little excitement around Samsung’s new models, and they confirm what we already knew about iPhones.

What’s really important about these charts is that they help indicate future consumer purchasing patterns (as reflected in search traffic, so not a perfect measurement) on a global scale.

Is this cold contagious?

Together, the charts suggest the biggest names in smartphones will experience tough market conditions in the coming months, as interest is clearly not as strong as before.

While attention is focused on smartphones, questions must inevitably be asked around other markets. Car sales, for example, are predicted to decline following a surprising bounce in 2018.

We don’t yet know how U.S. retail spending performed across the holiday season, as the Commerce Department is closed, though it is interesting that Apple seemed to remain buoyant in the U.S.

What happens next?

If I’m right, that smartphone industry weakness isn’t just an Apple problem, but a universal challenge, then I think it may also be correct to make some more assumptions:

  1. We can anticipate some smaller smartphone manufacturers will be forced out of the market – they will find it harder to create sustainable revenue as pricing pressure moves the top segments down a notch.
  2. Some incoming start-ups may find business models predicated on continued market strength no longer appropriate for this chapter in the smartphone story,
  3. We can expect fierce competition across the mid- and low-range markets as companies (including the big names) attempt to stimulate market activity through price cuts, discounts, and rebates. (Apple already offerd deals on its devices in some territories.)
  4. Smartphone manufacturers with their own unique technologies (such as Apple’s industry leading processors), operating systems, or production facilities will fare better than commodity players.
  5. Peers in the Android market will be under intense pressure from low-cost manufacturers, incoming players expanding their reach (Huawei, for example), and the need to fight for profit share in a highly competitive sector while offering more or less the same product/OS, further eroding already tight margins.
  6. The company that most quickly makes the transition to delivering attached product and services sales, such as headphones, wearables, music and media services, to its existing customers will hold a significant advantage over those who do not. It will have revenues competitors lack.
  7. Customer loyalty is a very important metric in this brave new world. Even if customers shop less frequently, happy shoppers are far more likely to stick with the same brand.

This game’s not over, but a transition has certainly begun.

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Copyright © 2019 IDG Communications, Inc.

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