Thursday, October 31, 2013

Mobile saturation means innovation will slow



Did someone's foot get stuck on the accelerator? The worldwide smartphone market raced ahead at an astonishing growth rate of 38.8 percent in the third quarter, a number that reflected shipments of 467.9 million units, according to a report released this week by IDC. To put that number in perspective, the population of the United States is just 316.9 million. So you could sell a smartphone to every single person in the U.S., plus one to each of the 142 million people living in Russia, and still have about 8.5 million left over.


That's great news for the five leading smartphone vendors -- Samsung, Apple, Huawei, Lenovo, and LG -- not to mention all the suppliers and developers that live in their ecosystems. Great news for now, that is. But I threw those statistics at you to make a point: The smartphone market could well be approaching saturation. "That rate of growth can't be supported, unless Verizon and AT&T start selling smartphones to extraterrestrials," quipped columnist Carl Weinschenk.


[ InfoWorld's Galen Gruman says trouble's brewing in Android land. | For quick, smart takes on the news you'll be talking about, check out InfoWorld TechBrief -- subscribe today. ]


Indeed, there are already early signs that the market is running out of headroom. In South Korea, home to Samsung and one of the most connected places on Earth, each quarter of this year has seen about 1.35 million new smartphone subscriptions, compared to nearly twice that number a year ago, according to that country's Ministry of Science. And smartphone sales in Australia and New Zealand actually shrank in the second quarter of the year. Meanwhile, profit growth at companies like Apple and LG Electronics is slowing as price competition takes hold.


The mobile industry is hardly on the edge of an abyss, and the sky is not falling. But all this reminds me of the PC market in the 1990s, which also grew at a phenomenal rate. When the PC market approached saturation, profits declined as vendors fought for market share, and innovation slowed to the point where PCs became commodities. We may be headed in that direction yet again.


The long upgrade cycle
There use to be a fairly regular PC upgrade cycle in business: Companies would upgrade their systems every three years or so, and individuals more or less followed suit. That's been changing. Although I don't have hard numbers on that, I suspect the cycle is moving closer to five years.


Maybe systems are somewhat sturdier these days. But more important is the lack of significant innovation. Laptops have gotten lighter and more powerful over the years, but until touchscreens and Windows 8 debuted, you could hardly tell one generation of PC from the other. (Not that Windows "Frankenstein," aka Windows 8, will revive the market; in fact, Windows 8 is hurting the PC market.)


Computer buyers are no dummies. Why spend money on a new PC when the old one does everything you need quite well? PC makers reacted by cutting prices, a fratricidal strategy that resulted in shrinking margins for everybody and the deaths of major companies (remember Gateway?) up and down the supply chain. Now, even Mac sales are declining.


Source: http://www.infoworld.com/d/the-industry-standard/mobile-saturation-means-innovation-will-slow-229874?source=rss_mobile_technology
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