Global Mobile Phone Sales Post First Decline Since 2009

Tyler Durden's picture

One of the fundamental creeds held by the proponents behind every new technology and gizmo market, including cell phones, smart phones, tablets, Sony Walkmen, 8-tracks, VHS tapes, juice extractors, tape rewinders, etc., is that their growth rate (and by implication the consumers' discretionary income), is completely dissociated with gravity and will grow at a far faster pace than global economic growth virtually in perpetuity. This is the case until empirical evidence reminds them, and everyone else, that gravity eventually always wins. Which is precisely what happened with global mobile phone sales, which in 2012 posted their first decline since the cataclysmic 2009. Gartner reports that the global cell phone market declined by 1.7% in 2012, down from 1.78 billion devices sold in 2011 to 1.75 in 2012. "Tough economic conditions, shifting consumer preferences and intense market competition weakened the worldwide mobile phone market this year," the report says.

More on the findings:

Samsung and Apple continued to dominate the market, with the Korean giant selling 385 million phones in 2012, of which 53.5 per cent were smartphones, with Apple selling 130 million smartphones.

 

Chinese company Huawei was third spot in worldwide smartphone sales for the first time in the fourth quarter, Gartner said, selling 27.2 million smartphones in 2012, an increase of 74 per cent.

 

Gartner said it expects sales of feature phones – ie any phone that is not a smartphone - to continue falling this year.

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Another reason for the drop is the weakening demand for feature phones, which possess some smartphone abilities but are limited. While smartphones had record sales and were up 38.3% for the fourth quarter of 2012, feature phone sales fell by 19.3% -- and that decline is expected to continue.

Before smartphone proponents argue this is merely rotation out of a commodity into a premium space, read this:

Gartner said while the demand for iPhones in the fourth quarter, consumer demand favoured the less expensive iPhone 4 and 4S. It added the arrival of the iPad Mini also created a dilemma for some users when deciding if to upgrade an iPhone 4 or iPhone 4S to an iPhone 5, or buy the new tablet.

So while there is an element of conversion into ever more feature rich offerings (aka margin compression), the fundamental gating factor is no longer coolness, or hipness, but the simplest one of all: the bottom line.

This also means that the margin compression that has been haunting firms such as Apple will not only continue but accelerate, as the peak growth phase has passed, and now, just like in the sovereign arena, it is a race to the margin bottom.

Finally, since the preservation of optimism is key, Gartner leave on a slightly bullish note:

As a whole, however, the report predicts the mobile market will do better next year. Gartner says it expects mobile sales to reach 1.9 billion in 2013 -- with a 1 billion coming solely from smartphones.

 

It also says 2013 will be the year of the third ecosystem, as carriers try to break free from the influence of Apple and Google Android while Microsoft's Windows Phone 8, BlackBerry 10 and others duke it out.

 

"Alternative operating systems such as Tizen, Firefox, Ubuntu and Jolla will try and carve out an opportunity by positioning themselves as profitable alternatives,” the report says.

Alas, Gartner's forecast is surprisingly reminiscent of what it said a year ago, when it too forecast a continuing growth in sales. Sadly, for both Gartner, and the entire human race, what happens next nobody can see, as whatever will be, will be purely a function of the unintended consequences of the actions of a few select central planners who do everything in their power to convert fiat into wealth (by dilution).