Mobile phone market to stagnate for five years

Research from CCS Insight has forecast a glass ceiling for mobile phone growth capping the market at two billion units a year for the next five years.

Although the smartphone segment is expected to grow its proportion of sales over the period, the total number of mobile phone shipments will remain consistent at two billion. The doom and gloom forecast has been a favourite topic of analysts for some time now, so this prediction shouldn’t come as a shock and not many tears are likely to be shed in the broader industry if the multi-billion dollar profit margins of the likes of Apple are eroded slightly.

Alongside stagnated sales, rising component prices may also play a role in the misery of smartphone manufacturers, though this is more likely to impact the smaller players. CCS expects component prices to be hiked in the second half of the year due to shortages of screens, camera modules and memory. The blame here lies with larger players greedily gobbling up available output, while recent earthquakes in Taiwan that have disrupted production.

“This is the first time we have seen component price rises for years,” said Marina Koytcheva, Director of Forecasting at CCS Insight. “Phone makers with low volumes will find it almost impossible to turn a profit in these conditions without raising the prices of their products.”

In a time where product innovation is a scarcity, increasing the prices of individual units may not be a popular move. The unfavourable market conditions may play into the hands of the larger players such as Samsung and Huawei, whose significant market share and distribution channels may help maintain lower prices and squeeze the smaller players out of the picture.

The question of how to innovate in the mobile phone market is one which has been asked for a number of years, and it looks like competition will be driven by pricing strategies for the near future. While the whole market may be screwed for the next few years, the smaller players seem likely to get the worst of it.