Smartphone market growing faster than expected

IDC raised its 2010 smartphone sales growth forecast to 55 percent from 44 percent earlier. Citing booming smartphone demand it also lifted its forecast for overall cellphone market growth to 14.1 percent from 12.6 percent.

via Cellphone market growing faster than expected -IDC | Reuters.

Keep in mind the 55% growth figure when reviewing analyst forecasts for iPhone growth. If their forecast is less than that then it implies market share loss. When I suggested 50% compounded annual growth rate (CAGR) for iPhone going forward 3 years, there was a lot of skepticism but this market is growing faster than most people expected.

I still believe that Apple can grow the iPhone at least as fast as the market.

Here are the quarterly y/y growth rates for iPhone units since sales began:

159% 516% 88% 90% 644% 7% 100% 131% 61%

On a yearly basis:

2007: 3.7 million

2008: 13.7

2009: 25.1

2010 first half: 17.15

2010 (my estimate): 44.4

  • Rob Scott

    What is IDC's forecast accuracy? Is it possible to go back and compare their forecasts to actual units shipped by manufacturer?

    • Niilo

      I think that's part of IDC's value-add in this case.

    • On a vendor level, accuracy can vary quite a bit, but these are overall market stats which are likely to be easier to predict.

      • Rob Scott

        “On a vendor level, accuracy can vary quite a bit”

        That was kinda my point. We cannot read anything form these IDC numbers (especially with that sort of bias against Apple) unless they either tell us how they got to those numbers and/or they prove to us that they generally get these things right at the level of detail.

        It makes no sense for RIM and Nokia (the laggards) to maintain share, and for Apple to reverse so drastically. RIM and Nokia have pulled all the levers: Price, Option count, and Distribution Partners. What are they going to do differently for them to maintain share?
        What is it the Microsoft is going to do for them to realise those gains in share. Their OS has no Copy/Paste, no Multitasking, few Apps, etc. What makes them better than iPhone/iOS 4.1/2 with 6.5 billion downloads, 250K Apps, 11 million songs, TV Shows, and Movies?

        Android, will continue to take share (from other Linux OSes and Win Mo) until at least mid-next year. But the devices that are driving the connections and will be driving connections next year are not anywhere near an iPhone 4. They are comparable to iPhone 3G.

        Someone asked about ASP for Android, here is my take: expect them to drop 40 – 50%. Expect sub USD100.00 Android devices next year. I would go as far and say the bulk of Android devices next year will be sub USD100.00.

  • Niilo

    Do you have any view on what's going to happen to smartphone ASP?

    I would be interested to hear your views.

    Is this strong growth due to Android, Symbian extending their reach down towards the low-end? Also in China there is quite a lot of talk about putting Android, preloaded with a suite of apps on low-cost 2.5G MediaTek platforms.

    • ASP will depend entirely on the value of a particular device. That value will be assessed by operators in terms of how the device will increase ARPU. So ASP is probably strongly correlated to the take-up of data plans. As long as there are a large number of consumers moving from voice-oriented service plans to data-oriented plans, smartphones will remain a high-margin product.

      • Niilo

        Respectfully, I think that's only the demand side of the pricing equation.

        But how about the supply side of this? The competition in 2011 is going to be brutal with Motorola, Samsung, LG, SEMC, HTC and China Inc all flooding the market with Android devices. Plus the computing guys getting in on the act. It's going to be wicked-hard to differentiate inside the Android sub-market.

        I have a Deutsche Bank report from earlier this year that forecasts an 8% drop in smartphone ASP annually over the next five years. My gut feeling is that 8% is conservative.

        It's something I will anyway watch closely.

      • It will be a very interesting dynamic, I agree. It all comes down to the question of when there will come some point of "good enough".

        Looking at a 3G iPhone today, we would find it completely inadequate and would not buy it even if it was deeply discounted. We have become completely convinced that 1GHz and retina display is a necessity. In one or two years, what features or apps or services will we be unable to live without?

        This pace of change makes a large number of products rapidly obsolete and even if they are cheap they are not bought. New products generate unrealized and unexpected user demand.

        The same thing was happening with PCs in the late nineties. There was never enough memory/hard disk space/CPU power. New PCs were obsolete in a matter of months. That's no longer the case. PCs have jumped the shark, they're overserving and pricing is crucial (Mac notwithstanding).

        We are in the same trajectory with the smartphone now. It's still not over the hump.

      • Niilo

        Good points. I hope that innovation from the device vendors is sustained for a few years yet. I fear a future that looks like the PC industry (with Google as M'Soft, Apple as Apple and Nokia as IBM?) will be a relatively dull one.

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