Smartphone sales are falling: Bad for the industry but a godsend for the savvy consumer

How old is your TV? Chances are it’s fairly old, although if you have just bought a new one, the average time of ownership is seven years, so you’ll probably be keeping it for a while.

And how about your PC? Unless you’re a gamer always needing the best spec, or need it for heavy duty work like video editing, chances are that’s getting on a bit too, even if you’ve possibly updated the OS and added some RAM. Is there any desire to change it? Not if it’s still working, I’d wager.

And your laptop? Tablet? Kitchen appliances? You probably keep all of them until they break down, right? More and more people are now holding on to their cars for longer too, especially as modern cars don’t just fall to bits after their first MOT.

Now smartphones are going the same way and it’s something that was quite easy to predict, even if most people in the industry were hopeful it wouldn’t happen just yet (or at all). They’re all in denial, clearly.

Fact is, the big manufacturers are now struggling to sell their new wares in the same numbers as they did, most likely because most people now see no rush to change unless they have to. Even emerging markets like China are seeing falls as anyone who wants a smartphone probably now has one.

• Samsung’s continued fall in sales and profits
• HTC’s revenues halved as losses reach £167m

Surplus to requirements

Even though the likes of Samsung and LG recently launched amazing new devices, making such a big deal about their improved cameras and displays, I’d bet that most people today are happy with whatever phone they already have. The things that now excite consumers most won’t be new hardware features (for the most part), but downloading new apps.

For all intents and purposes, people now have a device that appears as powerful as their home computer, and a lot more convenient. As long as it switches on and works, what else do people need?

Mindful of the difficulty in selling new hardware features that the average consumer isn’t that bothered about, front-facing cameras are now getting the upgrade treatment, which I assume is a desperate attempt to convince people they have to buy a new phone simply to get better photos to share on Facebook or Instagram (the latter which has only just switched from 640×640 to 1080×1080 pixels).

Likewise phone displays at the top-end are gettinn silly too, presumably to keep up with the Joneses. A lot of people agree that QHD-resolution is gratuitous on most smartphones, at least until you start using screens that are around six inches or so (i.e. tablets and some phablets). Yes, there are times when the extra resolution has benefits, but usually it’s just an additional drain on the phone.

Your current phone is probably still just fine, whatever the industry wants to suggest.

And what about chipsets? What a year we’ve had for the introduction of high-end octo-core 64-bit processors appearing in loads of new phones, but often for little to no meaningful benefit.

Qualcomm has had a particularly shocking year with Snapdragon 810 and its overheating problems (forcing manufacturers to solve the issue by extreme throttling measures) and even last year’s Snapdragon 801 had similar issues. And the heat generated also results in an inevitable hit on battery life. Talking of which, we seem to be going backwards on battery performance as manufacturers try to convince us we all want phones the thickness of tracing paper.

Do we? Did anyone ask me or the many others that would sooner have a larger battery any day of the week?

And all of this new processing power is for what? Better 3D gaming? No lagging when using the phone?

Well newsflash: Many cheaper, and indeed older, phones can comfortably handle high-end games, and even a £100 Android phone running Android 5 and with just 1GB of RAM can offer a fluid user experience these days. Motorola, ZTE, Huawei/Honor and Alcatel all have devices on offer that won’t disappoint, even if they’re not claiming to be in the same league as the flagships.

You probably don’t need all that extra power, unless you need to have something that gives high numbers in benchmarking apps – or you believe the hype that the industry has to put out to try and get you to part with your hard earned.

Sure, a couple of years ago it would have been a bad idea to buy a cheap phone because the user experience would have likely been awful, but times have changed.

Time to take advantage

As time goes on, more and more people are going to wise up to the fact you can get a far better deal buying a phone outright and hunting around for the best SIM only deals. It doesn’t even have to be the latest release.

Many people are now snapping up the Xperia Z3 instead of the Z3+, the Galaxy S5 instead of the S6, or LG’s G3 instead of the G4. None of them are anywhere near obsolete and any of them will exceed most expectations for a long time to come.

If you must have the newest model, the Galaxy S6 is now available for significantly less than it was at launch, assuming you steer clear of the latest colour choices.

For a start you can now commit to 12 months, or even just 30 days, giving you the upper hand in a market where prices and offers change regularly. Why get stuck into a long contract, where your network will reward you by increasing your bill in line with inflation every year? How about telling the network to get stuffed if prices rise, and port your number elsewhere? Far easier to do on a SIM-only deal.

Currently there are some amazing SIM only deals on offer from Three, Vodafone, BT Mobile, The People’s Operator and many more. Even EE has started to show signs of wanting to get back into the game with the return of its 10GB plan. You can now get unlimited calls and texts for under £20, with data allowances of 20GB, 31GB or even unlimited available. All for around the same monthly cost.

There might still be a long way to go to convince more people to go down this route, but it’s going to happen. The trend certainly isn’t going to reverse itself, unless the industry does something radical – and there’s no sign of that happening anytime soon. I am not even sure what could be done.

Given the number of decent low to mid range phones now on offer, you could now own a very powerful device for not a great deal of money, and keep it until you have to change it.

Show no fear

In the case of Android, a lack of OS upgrades after 18 months might put many people off keeping or buying an older phone, but it’s not really the big issue that a lot of the tech press makes out.

After all, most Google apps and services are upgraded independently of the OS, so your phone will still get upgrades after two years and probably even longer. It’s really not a massive problem for the majority of customers.

iOS users are pretty much sorted for longer than that, and even Windows Phone seems to be pretty much future proofed in terms of upgrade – even if the future of the platform is currently up in the air.

Breaking free from the lock-in

More and more people tied into two-year contracts are likely upgrading purely because it doesn’t make sense not to. It’s these people that the industry are so desperately relying on, for obvious reasons.

But why play their game?

If you’re paying £50-60 a month for your iPhone or Galaxy S6, it makes sense to upgrade when the two years are up. After all, your network will continue to take the same amount from you each month, even though the subsidy is paid off, so you’d be a fool not to.

Don’t sign a two-year contract in the first place! Have you sat down and worked out the total cost of ownership over that time? Scary isn’t it? Do people really £50, £60 or £70 a month? Yes, they do. And it’s insane.

If you’d bought your dream phone SIM-free, you could have gone on a £15 or £20 a month tariff from day one, and carry on with it for as long as you want. You might have to shop online for your phone, as few retailers want to sell you a phone without a contract, and there are some excellent deals to be found – especially if you’re willing to consider importing the phone you want from another EU country.

Germany is often far cheaper, and from the likes of Amazon, you can still get it within a day or two of ordering if you’re a Prime customer. The downside? Needing to buy an adapter for the two-pin PSU. I think most people can live with that.

Don’t think that having to pay hundreds up front for a phone is a bad idea, as you’ll be saving in the long run. Even if you put the purchase on your credit card, just try and remember to pay off a set amount each month over a six, 12 or 24 month period (and factor in the interest for a fairer comparison).

Selling the phone is also going to be easy. It’s unbranded and unlocked, so when you want something else, flog it and use the money towards your next purchase. If that’s sooner than two years, it’s not actually a problem.

And for the future?

So how does the industry fix this and get sales back up to where they were? Well, I’m not entirely sure it can fix anything.

Once more people wise up and stick with what they have for longer, or shop around for better deals on slightly older or lower-spec models (still meeting their needs now and into the foreseeable future), how will Samsung, LG, HTC, Sony, and even Apple, hook you into buying a new flagship every 12 or 24 months?

Apple has had an incredible year with the iPhone 6 and 6 Plus. There are probably two reasons for this, so can Apple enjoy the same success with the facelift models coming later this year?

Firstly, Apple was late to the party with big screened phones. It has now satisfied that market with two excellent choices, and no doubt that contributed a great deal to a the incredible number of sales to users who upgraded almost immediately – including those who bought out of their existing contract to upgrade early.

But now you have an iPhone 6, will you rush to get a 6s?

Secondly, there are always going to be early adopters and people that want the latest and greatest – including those with a high disposable income and potentially more money than sense. These people will buy the iPhone 6s and 6s Plus, or a Galaxy S6 edge, or the LG G4. They’ll swap and change every few months if they want.

Problem is, these people might be counted in the tens of thousands, even potentially hundreds of thousands if I’m feeling extremely generous, but smartphone makers need sales in the tens of millions. Face it, we’re the minority these days.

The problem for other manufacturers is also that if you’re an iOS user, there’s only one company you can go to. If you’re after the best flagship Android phone, you’re spoilt for choice and need show absolutely no loyalty whatsoever to any of them.

Samsung has the Galaxy S6 and S6 edge, LG has the G4, HTC has the M9, Sony has the Z3+, Huawei has the P8, and then there’s all the other great devices that any enthusiast will know about. So, sales will always be shared between a number of companies, which is only going to get worse when we get more Chinese and Taiwanese manufacturers entering the European market through official channels.

Wearables to save the day?

The hope that wearables would come along and fill the gap in profits hasn’t really happened, and anecdotal evidence suggests that this is a market made up almost exclusively of early adopters.

Apple, Pebble, Samsung, Motorola, LG and others get an initial surge of sales which quickly tails off – as suggested by the recent claim that Apple’s smartwatch sales have plummeted by 90% since they first went on sale. Arguably based on limited data, you could question the accuracy of the 90% claim, but it’s safe to say it’s still a significant tumble.

Even Pebble, which broke records on Kickstarter with the Pebble Time and Pebble Time Steel will probably discover that when the watches go on sale to everyone else later this month, sales will probably slow.

Wearables still represent a small market, and one where it’s unclear if things are actually going to grow considerably or not. A lot of the emphasis is around fitness applications, of which there are arguably many other more viable (and cheaper) options to choose from.

Nobody is immune to what’s going to happen

Sooner or later, I expect even Apple is going to see a slow down of smartphone sales. It might not result in people keeping a smartphone for as long as a TV just yet (mostly because the battery will die long before then), but as long as you can still download and run apps and games in the app store, why change the hardware?

And if all of this isn’t a problem for the industry, what about the growing concern about people getting addicted to their screens? There’s no doubt that being glued to your phone display, even when out with other people you might otherwise have to talk to, is becoming a real problem.

While I’m not sure I’d like to be working for a phone manufacturer right now, as a consumer, this is mostly good news. If you can make do with a phone for longer, as more and more people are, you’re perhaps in the best position ever.

Of course nobody wants any manufacturer to go out of business, but as long as they’re showing signs of struggling you can go in for the kill and not feel too guilty.

It’s rare that the consumer has the upper hand these days, so don’t squander the opportunity by making a rash decision when it comes to your next purchase. And don’t get too envious of the new features promoted on the latest release, as you’ll probably not be missing as much as you think.

Poll

• What are your thoughts? The above is my opinion so you can easily disagree and offer up your own thoughts below, or via Twitter @jmcomms.