Worldwide smartphone shipments declined 0.5 percent in 2017, the first year-over-year (Y-o-Y) decline the market has experienced since the introduction of smartphones. Smartphone companies shipped a total of 1.46 billion devices in 2017 with nearly all of that volume running either the Android or iOS platforms. Looking forward, IDC expects shipment volumes to return to low single-digit growth in 2018 and the overall market to experience a compound annual growth rate (CAGR) of 2.8 percent over the 2017–2022 period with volumes forecast to reach 1.68 billion units in 2022.
Design innovation continues to be a focal point of the industry, yet technology advances are becoming less about tangible hardware aesthetics and more about components and software. This shift makes differentiation a challenge, especially as the entire industry is sprinting toward bigger screens and smaller bezels. 2018 is expected to be the year when phablets outship regular smartphones, essentially ending the race for bigger screens. Big differences in quality and display type still exist, but the average consumer will continue to struggle to understand these differences.
So, what is next? 5G momentum is in full swing and device OEMs, component suppliers, telcos, and services companies are all looking to capitalize this. Commercial 5G smartphones are expected to hit the market in 2019, ramping up to account for roughly 18 percent of worldwide shipments by 2022.
Android. Volumes were essentially flat in 2017, with OEMs shipping a total of 1.24 billion handsets running Google’s OS. After years of vendors customizing Android’s OS to put their UI spin on things, we are finally hitting a point where everyone is pivoting back to stock Android. This is an initiative that Google has been pushing for quite some time as the standardization on software can bring faster updates, minimize consumer confusion, and potentially allow Google to gain back some control of the platform. The biggest change for Android devices in 2017 was that average selling prices (ASPs) grew for the first time since 2010. This is largely due to the low-end players migrating their portfolios upstream toward mid-tier pricing. Consumers have gone along with this trend, although many low-end buyers have grown increasingly frustrated with the poor battery and performance issues experienced on the device after just months of use.
iOS. Coming off of the first Y-o-Y decline in iPhone shipments in 2016, Apple returned to growth in 2017 albeit only 0.2 percent. Apple shipped 215.8 million iPhones in 2017 with 64 percent of those coming from Plus-size iPhones (including the X). The shift to bigger, more expensive devices has allowed Apple to continue to grow its ASPs while simultaneously facing the challenges of growing its shipment volumes. iPhone shipments are expected to grow 3.7 percent to 223.8 million units in 2018 and reach 242.4 million in 2022. Overall iPhone volumes are expected to grow at a 5-year CAGR of 2.4 percent. Apple will continue to experience challenges breaking into some of the remaining high-growth developing markets, but there is no question they are far from being pushed out of the premium market segment.