The Global Smartphone Boom Has Peaked, IMF Warns

As it turns out, Apple executives aren't the only ones who should be worried about slowing smartphone sales: The trend has the potential to hammer global economic growth - especially in Asia, where the rise of mobile technology has created increasingly complex supply chains.

The IMF highlights this dangerous trend in its latest World Economic Outlook (albeit buried on page 34 of the report's first chapter). In it, researchers lead with a stunning statistic. In 2017, global smartphone sales reached 1.5 billion units - that's one smartphone for every fifth person on the planet.

IMF

Taken together, smartphone production and sales contributed $3.6 trillion (4.5%) to the global economy in 2017. Across Asia, sales of smartphones and smartphone components are accounting for an increasing share of total exports. Furthermore, they account for one-sixth of the growth in global trade.

In 2017, China exported $128 billion worth of smartphones to the rest of the world, equivalent to 5.7 percent of its total exports. In Korea (the main supplier of smartphone components) semiconductor exports alone accounted for 17.1 percent of total exports. Similarly, components for smartphone production at the peak (October 2017) accounted for more than one-third of exports from Taiwan Province of China, 17.4 percent from Malaysia, and 15.9 percent from Singapore

However, these data mask a troubling trend: Smartphones' rising contribution to global GDP was last year largely driven by higher prices per unit. Looking past this, the number of units sold actually shrunk for the first time ever.

This growth was driven mainly by an increase in value added per unit, rather than units sold, which declined for the first time on record. As a result, the average sale price of an iPhone increased from $618 in 2016 to $798 in 2017, according to Apple Inc. quarterly financial statements. In the five main Asian economies involved in the tech cycle (China, Korea, Malaysia, Singapore, Taiwan Province of China), total exports grew by 6.7 percent in 2017. Even though tech exports accounted for less than 10 percent of total exports in the region, smartphone-related exports contributed about one-third the growth rate of total exports.

That's because, as the IMF explains, demand for smartphones is highly cyclical and dependent on release dates of new phones. This new cycle differs from tech growth cycles of years' past, which were mostly driven by personal computers.

Two

This new cycle unfurls in two phases, and is heavily dependent on the release of new models of the Apple iPhone:

Apple Inc.’s iPhone releases are the key determinant of the new tech cycle. Reflecting booming global demand, iPhone sales surged from 35.1 million units in the first quarter of 2012 to 78.3 million in the fourth quarter of 2016 (Figure 1.1.2). While a clear quarterly pattern is emerging—in which second- and third-quarter sales are usually weaker, reflecting the expectations of another release in the fourth quarter— the amplitude of this quarterly pattern has only really been established since the release of the iPhone 6/6 Plus in September 2014. Moreover, there are clear spillovers from the fourth quarter of the previous year onto the first quarter of the following year, ahead of the Lunar New Year in China.

The new tech cycle can be subdivided into two components. The first is the prerelease cycle, which comprises the export of all components from several Asian countries to China—the final producer of most smartphones. The second is the postrelease cycle, with shipments of smartphones from China to the rest of the world. Both pre- and postrelease cycles have a strong impact on growth and trade patterns in Asia and beyond.

Looking more closely, the IMF says that global sales of smartphones might actually have plateaued in late 2015, and the market is showing warning signs of becoming over saturated.

Global sales of smartphones may have plateaued in late 2015. By decomposing the cycle from trend for Chinese exports of smartphones, regression results show that the trend is nonlinear and may have reached its peak in September 2015, suggesting that future global demand for smartphones may grow more slowly (driven more by replacement demand than new acquisitions). This is confirmed by updated regression results on Chinese export data up to December 2017 (see Figure 1.1.3). In fact, global shipments of smartphones declined in 2017 for the first time on record (IDC 2018).

Fortunately for the Asian economies where a slowdown in smartphone sales might have the biggest impact, wearable devices, smart appliances and car computers are all seeing gains accelerate - meaning any slowdown in smartphone sales might be offset by increases in other tech products.

Three

In any event, the tech sector's importance to Asia's economy remains paramount - which is perhaps one reason why the Trump administration backed out of adding a plethora of consumer tech products to a list of Chinese goods that have been threatened with tariffs.

Comments

Old Skool adamas Thu, 04/19/2018 - 12:10 Permalink

There's something else buried in the text that caught my eye.

The report was produced by the IMF and they kept referring to Taiwan as 'Taiwan Province of China'.

Looks like the IMF have given the game away and crept into China's bed which indicates that for all the public Western support for Taiwan is bluster. It looks like they're going to be left out to hang and when China takes them with only false howls of derision from the West at China's action. Decision already made.

In reply to by adamas

PT The First Rule Thu, 04/19/2018 - 07:12 Permalink

What?  Are you trying to tell me that people no longer want to get out of their two year contracts after six months so they can get the next latest, greatest phone becoz it is free!!!!  ???  Unpossible!

Come on, tell us really happened.  Customers changed?  Customers got smarter???  NO!  Don't insult us with that silly BS.  Really, come on, tell us what REALLY happened!!!

In reply to by The First Rule

silverer Shillinlikeavillan Thu, 04/19/2018 - 09:11 Permalink

"acts the same as the previous 3/4 "generations"

Yes. And if you own an Apple computer, my advice is to NOT upgrade to Sierra or High Sierra. If your key chains get out of sync, you'll be sorry. Really sorry. More likely to happen if you have multiple users on your machine or a second boot drive installed. Apple now wants you to use (let's say strongly encourages) the cloud, and is now syncing keychains using the cloud. Your computer is slowly being migrated to the internet, like it or not. At some point in the future, it won't work if you unplug it from the internet (and you'll likely pay a subscription fee of some sort to keep it enabled to work). Danger! Danger! Will Robinson. Software shifted from your box to the net won't be 'free'. Adobe has already moved its software to the net. No more "in the box". How many monthly subscriptions can you afford?

In reply to by Shillinlikeavillan

silverer keep the basta… Thu, 04/19/2018 - 09:14 Permalink

I kept two of mine, and they still work. Stick in your micro card, and tape it in the center to keep it from slopping around, and it will work. (The Chinese also thoughtfully make cheap adapters). Your old phones are more secure, and last for two days without a charge. You will also note the old phones don't demand face time. Nothing to see here, move along...

In reply to by keep the basta…

MadHatt Thu, 04/19/2018 - 02:48 Permalink

If you just want a cell phone number that can call and receive text messages, I suggest the site textnow - free to use from your computer.

Paying to have your conversations copied and spied on while big brother tracks your movements seems kinda funny to me.

Sometimes when Im dealing with scammers I use firertc which lets you spoof your caller ID...

I call from  555-867-5309 

Boris Alatovkrap Thu, 04/19/2018 - 02:52 Permalink

So what is become of all this strange emoji?!

🍥 "Fish Cake Spiral Design"

🍢 "Oden Tofu Kabob"

🍘 "Rice Cracker of Seaweed"

🍙 "Rice Ball"

🍶 "Sake Bottle & Cup"

Where is simple "Potato" or "Turnip" or "Bottle of Vodka"?! So much useless Emoji!

Manipuflation Boris Alatovkrap Thu, 04/19/2018 - 04:37 Permalink

An AK emoji would be great.  I do have a snub nose 38 on my desk here though so those are good.  You need more emojis for the Rossiya devushka.  Like in your bathroom drawers and closets.  I look for something tonight and I can't find after taking all apart.  Nothing can be found I need.  She knows where though.  Probably in a different closet now for no reason. 

In reply to by Boris Alatovkrap

Boris Alatovkrap Boris Alatovkrap Thu, 04/19/2018 - 04:25 Permalink

Oh, so we can have aubergine emoji 🍆, that is shape like, how do you call it?! But where is simple potato or turnip?!

Let us not forget 🐲 a.k.a. "Dragon Face"!

Boris is imagine many common use for Dragon Face…

From wife while Boris is at food market "Please pick up some 🍠 and 🐲"

To which Boris is reply, "Market is out of 🍠, but how many 🐲 we are need?"

From wife, "Make sure 🐲 is fresh this time, and, oh yes, please bring home 🍆 in plain paper sack" after which she is place 😉 to remind Boris to be discreet.

In reply to by Boris Alatovkrap

OCnStiggs Thu, 04/19/2018 - 03:21 Permalink

Under Tim's guidance, Apple has a solution to maintain profits: As sales decline, they will simply raise prices more to maintain profits. In the Liberal world of silicon valley, this plan makes perfect sense to all the people rollerskating around Apple Central.

The last couple of units will cost $100 million each but will finally come with a screen saver and headphones.

(The company that comes out with a simple phone that actually works and is not pre-loaded with useless but permanent bloatware will put Apple and Droid out of business. I saw a simple Droid at Costco for $199 that did everything my G7 does.)

Manipuflation Thu, 04/19/2018 - 03:45 Permalink

Has anyone ever noticed that precedence is given to a phone call or text over actually speaking to a person face to face?  That is bullshit.  Perhaps sometimes it is that important but I generally just let the fucking thing ring on silent mode anyway. 

I know that our wireless addiction can be beneficial but don't lose yourself.  Think of this way; if you are rolling on your motorcycle, you are not going to answer.  You need that time away from being connected.  

I guess above all, I really don't like that they are de facto tracking devices. 

TrumanShow Thu, 04/19/2018 - 03:45 Permalink

"one smartphone for every fifth person on the planet"

WTF? There are endless opportunities still left:

Importing all the worlds poor to developed countries, pay them oodles of tax dollars in social security, sell them phones.

Keep sending aid to the poor countries so the 4/5ths continues to grow. Are the phone lobbyists asleep at the wheel?

BlissPoint Thu, 04/19/2018 - 03:59 Permalink

People aren't buying new smartphones as frequently anymore. Three years ago the upgrade rate was 24 months, then basically every carrier phased out the 2-year contract. Now the upgrade rate is 33 months. Next year, it'll be 36 months.