Used smartphones take 21% of global sales; Samsung declines as middle market disappears

The smartphone market is continuing to highlight major changes in consumer demand patterns, as the chart confirms;

  • Used smartphones are now 21% of the total market, compared to just 4% in 2014
  • 309m were sold last year, versus 1.1bn new smartphones
  • New sales are in long-term decline and were down 22% from 2015’s 1.55bn peak
  • Used sales are seeing exponential growth, up 450% since 2014

The data is flagging up critically important changes in consumer demand patterns, as the chart shows:

  • Samsung’s issue is that they were the market leader in 2013 with a 32% share
  • But the middle market is now disappearing and they are now down to 20%
  • 60% of the market is now held by low-cost Chinese companies (‘T0p 3’ and Others)

As analysts Canalys note:

“Products in the mid-to-low-end price range are the growth drivers“.

Essentially, Samsung’s core market is disappearing, and it doesn’t have a Value product to compete with Chinese suppliers. So it is losing market share:

“Samsung focused on the mid-to-high-end segment for profitability but lost share in the low-end segment and also its leading position in the global market.”

THE MARKET IS “TRADING DOWN” AS THE COST OF LIVING CRISIS BITES

The issue is that the market is returning to the pre-SuperCycle model. Companies can either compete on Value and price, or on Luxury and “high perceived value”, as the chart suggests.

Unsurprisingly, China is leading in the Value segment:

  • Xiaomi entered the market in 2014 with a 2% share, but has now reached ~14%
  • Low-cost producers such as OPPO, VIVI and Transsion are also all fighting for share
  • And they are building brand-loyalty to compete with the Western majors

Apple is also under threat, particularly in China, as discussed here in the Q3 update. Not only did it have to offer 5% – 8% discounts last month as the New York Times reports.

But its sales still fell 30% in early January. Rising US trade tensions are encouraging Chinese consumers to support local producer Huawei, as Counterpoint report:

“Apple is facing competition from a resurgent Huawei in the premium segment and multiple China OEMs digging into iPhone 13 and 14 volumes.”

CONSUMERS ARE HOLDING ON TO THEIR SMARTPHONES FOR LONGER – AND OTHER PRODUCTS

As Computer Weekly has confirmed, replacement cycles are also changing:

“For smartphones, at least, this will likely translate into lengthier replacement cycles. Rather than upgrading devices every 2 years, most enterprises managing large Apple smartphone fleets will shift to 3 – or perhaps 4-year cycles. Why would they not?

“But this won’t stop at smartphones.”

In other words, smartphone volumes are set to continue falling – at the same time as pricing pressures are increasing – as noted here in August:

“Apple have changed strategy to maintain market share and profits:

  • In the past, they focused on latest model iPhones. But today’s iPhone sites show every model
  • They are now happy for you to choose a cheaper, older, model instead of top-of-the-range
  • So they now offer the SE at €559 alongside the 14 Pro at €1349
  • And iPhones now dominate the second-hand market, with a 49% share”

These changes in demand patterns are not just impacting Apple and the smartphone market.

They are already impacting suppliers to the market. And they are also starting to impact a vast range of other major consumer markets.