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Growing rate of smartphones and decreasing prices

The IDC has stated that 1.4 billion smartphones will be shipped in 2015 with a 12.2% annual growth rate. The International Data Corporation (IDC), has stated that global shipments of new smartphones will reach a total of nearly 1.3 billion units in 2014, that is an increase of 26.3% over 2013. The IDC expects 1.4 billion smartphones to be shipped in 2015 for a 12.2% year-over-year growth rate. Slower annual growth continues throughout the forecast with unit shipments approaching 1.9 billion units in 2018, resulting in a 9.8% compound annual growth rate (CAGR) for the 2014-2018 forecast period.

Smartphone revenues reflect a starker picture, as they will be hard hit by the increasingly cutthroat nature of pricing, resulting in a 4.2% CAGR over the same forecast period, the IDC said. TechTrader’s position as a distributor of demo, used and refurbished devices will prove to influence the reuse of higher end smartphones and sustain their lifespan in a market flooding with low end devices.

The impact of new Chinese players in the world market has initiated the race to the bottom when it comes to price. While high-end smartphones are not going anywhere and their market remains stable, there are increasingly better specs in more affordable smartphones. Consumers are no longer forced to choose a top of the range handset to receive decent hardware and experience.

The biggest question now is how much lower can prices go? On a worldwide basis, smartphones are expected to have an average selling price (ASP) of US$297 worldwide in 2014, dropping to US$241 by 2018. Emerging markets like India will see much lower smartphone prices, as ASPs hit US$135 in 2014 and fall to US$102 by 2018.

n contrast, ASPs in mature markets are not expected to change significantly and modestly higher shipment volumes will not drive up overall revenues as each generation of flagship phones shows less and less differentiation from its predecessors. By 2018, Android will control 80% of global smartphones shipped and 61% of revenues, while iOS will control only 13% of volumes and 34% of revenues, the IDC said. As shipment volume slows, we expect greater attention to shift toward value trends, said Ramon Llamas, Research Manager with IDCs Mobile Phones team.

Apples approach with premium pricing ensures a growing portion of overall revenues despite its declining market share. Meanwhile, Androids multi-faceted approach with forked versions and low-cost Android One strategy will produce mixed results, yet it allows deeper penetration into emerging markets. That can lead to additional pressure on its vendor partners, who will need to seek greater differentiation in terms of devices and experiences in the hyper-competitive smartphone market.

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