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When will smartphones reach saturation in the US?

Nielsen has already noted that more than half of US consumers have smartphones. comScore’s data seems to point to that threshold being crossed sometime this year.

If that point is crossed then it would mark the smartphone as one of the most rapidly adopted consumer technologies of all time. I plotted the time it took for a set of technologies to reach 50% penetration of US households.

I also showed the time it took for some of the technologies to reach 80% penetration. 

The obvious question is how long will it take for smartphones to reach saturation in the US. Saturation level would be above 80% for individuals but closer to 100% for households. A conservative estimate would be another seven years. An aggressive estimate would be five years. That implies that between 2017 and 2019 smartphones will be the only mobile phones Americans will use. That would be equivalent to a user population of about 300 million.

Note that some like Internet and home computers have not reached 80% penetration in the US.[1] [2] When or whether smartphones will overtake computer penetration in the US is an open question. I believe that, like cellphones have in other markets, smart devices will overtake computer consumption and thus penetration and even bandwidth consumption.

There are significant technical and marketing challenges for reaching the “second half” of the market, but, as in all the other technologies listed above the incentives are in place to overcome these challenges. What’s most remarkable about smartphones is the speed with which obstacles are overcome. For such a complex and inter-dependent technology, the speed of adoption and value creation is unprecedented.

The value network creation rate is also staggering. The App Industry went from inception to billion dollar valuations in a matter of three years. Entirely new business models and experiences are being created almost daily. What used to be a glacial process of innovation diffusion can now be observed in near real-time.

Notes:

  1. The question of when smartphones began penetrating the US is somewhat debatable. I contend it was either 2004 or 2005 when the BlackBerry and Treo brands began to be widely available. Although there were smartphones in production as early as 2001 (or even 1998 if we choose to include the GeOS based Nokia Communicator) their availability to US consumers was very limited.
  2. Source for consumption data: New York Times.

 

  • KirkBurgess

    Another great post.

    I wonder how many smartphones sold are actually used as such? For instance, are carriers offering cheap android models on voice plans with no data?

    The added cost of data plans on top of a voice plan would seem an impediment to crossing the 80% mark, unless smartphones are sold as feature phones without data contracts, or data contracts become much cheaper and are decoupled from requiring a voice contract also.

  • http://antoinerjwright.com Antoine RJ Wright

    Since about 2008 it seems carriers here have rushed smartphones into their stores because of the ARPU aspect. Wouldn’t be surprised if smartphones become 95% of offerings by major carriers by 2017 making such a prediction by you possible. Thinking also that it might be thru smartphones only that the LTE investment is best sold. 2017 would be the best push for such rhetoric.

    • http://www.asymco.com Horace Dediu

      Try visiting a US retailer and measuring the shelf space (as percent of total) allocated to non-smart phones. I tried this at a Wal-Mart last summer and the ratio seemed to be about 20% non-smart.

      • http://antoinerjwright.com Antoine RJ Wright

        Depends on the region, some Walmarts have more smartphones than others (and that’s just their operations). Generally, I’m seeing up to a 70/30 smartphone/feature phone mix. Though, a place like Best Buy is more like 60/40.

        Should be interesting in the coming years. 3G becoming the low-bar, and smartphones the *base* mobile – I wonder if wearables get a chance to be the next “smartphone” since it seems some data/cellular-enabled media tablets already have something like that going for them.

  • http://kaizenity.blogspot.com/ FalKirk

    Some miscellaneous observations, in no particular order:

    1) It’s clear that, as a general rule, technological adoption has accelerated over time. The more recent the invention/innovation, the faster it gets adopted.

    2 One huge exception to the accelerating rate of adoption is the radio. Wow, look how fast the radio went from 0% to 50% and, again, from 50% to 80%. That technology clearly took the nation by storm!

    3) Fascinating that internet and home computers haven’t reached the 80% mark yet. We tech geeks think of these things as essential but clearly the public at large doesn’t.

    4) In relation to number 3, above, I have no idea where computer adoption stands today but I think that the tablet will push computer adoption over the 80% mark very, very soon. The simpler to use, easier to transport, tablet is the computer for the rest of us.

    5) A lot of the listed technologies took as long to go from 50% to 80% as they did to reach the 50% mark (radio, VCR, electric power, air conditioning clothes washer).

    6) On the other hand, once some technologies reached the 50% mark they accelerated their rate of adoption and quickly jumped to the 80% mark (microwave, cellphone, refrigerator, telephone).

    7) Finally, some technologies slowed their rate of adoption considerably after they had reached the 50% mark. (automobile, clothes dryer.) I would never have predicted that the automobile would have taken so long to go from 50% to 80% adoption.

    • poke

      I think apps might be key to pushing computer adoption. Non-internet-enabled PCs weren’t particularly useful for the average consumer. Internet-enabled PCs are presumably constrained by literacy levels (and desire to read), since the web is so text-oriented. Music and video are best served by other devices. It’s apps, I think, that will make personal computing truly mass-market (in the form of the tablet).

      Actually, thinking about it this way nicely illustrates the difference between the PC + web model and the tablet + apps model. Presumably there are people who have bought PCs because they want to be on Facebook. But think of the level of investment they’ve had to make to gain access to that one (web) app compared to buying a smartphone or an iPad and downloading the Facebook app. We (technical users) generally think of the web as easy access, because it’s just typing in a URL, but to a new user there’s a lot to learn about managing a PC, using the web safely, etc, that they simply don’t need to know to use an iPad and the App Store.

    • http://wmilliken.livejournal.com/ Walter Milliken

      In regard to point 2), I think that we need to look at adoption rates with an eye to two other dimensions that aren’t shown on Horace’s charts: cost of the item (probably relative to the average household budget at the time), and infrastructure complexity. I think the rapid adoption of radio happened in part because it was relatively easy to build radio stations that covered large numbers of people, and the radios themselves were not terribly hard to build (many amateurs built them at home in the early days).

      Compare that to automobiles, electric power, and telephones, all of which took large infrastructure build outs to each user.

      I’m not so sure why the slow adoption of stoves, washers, and dryers — possibly the cost factor relative to the prior alternatives simply didn’t make for a compelling value case to many consumers. I know this was the case for air conditioning in the more northern parts of the US, where it was considered a serious luxury for many years. Refrigerators, on the other hand, were gated on the build out of the electric grid, I believe, so their adoption rate might have been even faster if the grid had already been in place.

      • Markymark

        Exactly

    • Sacto_Joe

      What struck me is the cost factor. A radio has become a very inexpensive device, unlike a dish washing machine. What Apple has done is open the door to extremely inexpensive mobile computing devices with useful input capability (touchscreen and voice). Like the radio, I see the mobile computing device extending to significantly more than 50% of U.S consumers.

    • JaneDoe12

      As to #7:  I’m very uninformed about all of this, and I’m wondering if the cost of infrastructure in the near future for the telcos to increase user capacity will make data contracts so expensive that it crimps adoption rates.  I don’t know if this will happen, but I read an article from Tellabs, a network software co., and they think that capex for some mobile operators will exceed revenue beginning in 2013, maybe Q1.  That would be very expensive for customers.

      Tellabs:  Mobile operators profitability challenged within three years, says study.  February 3, 2011.

  • http://twitter.com/jrtowell Jonathan Towell

    Maybe smartphones are the thing that will push Internet saturation beyond 80%?

    Would be interested in KirkBurgess question about data vs voice. Also curious to know what the smartphone saturation level is globally. Is the US leading the way? Is smartphone saturation growing as rapidly in the 3rd world?

    • fiftysixty

      Digging through Tomi Ahonen’s site (Communities Dominate Brands), I found this from last year: http://communities-dominate.blogs.com/brands/2011/12/smartphone-penetration-rates-by-country-we-have-good-data-finally.html

      There is some discrepancy in the data, though: I can’t believe that the US would have jumped from 35% to over 50% in such short time.

      • Darwinphish

        Tomi Ahonen’s 35% is smartphones per capita.  The above numbers are percentage of households.

    • http://www.asymco.com Horace Dediu
  • http://kaizenity.blogspot.com/ FalKirk

    1) Diffusion of innovation theory says that innovation goes through five stages of adopters:  a) Innovators, b) early adopters, c) early majority, d) late majority, and e) laggards. We are clearly entering the late majority stage.

    2) Up until this point, smart phones were competing more with feature phones and dumb phones than they were with other smart phones. This is why so many smart phone manufacturers were able to dramatically increase their real sales numbers even as some of them lost smart phone market share. It wasn’t a contest to see who could eat the biggest piece of the pie. It was an all-you-can-eat buffet, where the goal was to eat as much as you could, as fast as you could.

    3) The buffet portion of the meal is over. As we move from the early majority to the late majority, we should start to see much more heated competition between the various smart phone manufacturers. Pretty soon, loss of market share will also be synonymous with loss of actual unit sales.

    4) In the war of smart phone v. smart phone, Apple has many tactical advantages. They have the highest user satisfaction ratings and, unsurprisingly, the highest retention numbers. Their ecosystem is “sticky”, while Google’s ecosystem is chaotic.

    5) Switching analogies, smart phone manufacturers have been playing a giant game of Risk with iOS coming from one side of the board and Android coming from the other but neither one sharing a common border. Android has spread far and wide, picking off the hapless armies of dumb phones, feature phones and even invading the territories of RIM, Symbian and Windows Mobile. iOS has spread more slowly but the territory (customers) it takes, it keeps. Only time will tell what will happen when the armies of Android finally turn to meet the army of Apple. But one thing is for sure. Should be fun to watch.

    • Walt French

      “Android has spread far and wide … even invading the territories of RIM, …”

      I’d appreciate amplification of this notion, because it doesn’t make sense to me. 

      BlackBerrys owe their popularity to providing fully-supported, high-quality and highly-secure messaging (with a phone attached), at a time when that was otherwise impossible. A couple of hours of outage made national headlines. 

      How do the stereotypical investment bankers and government officials transition from that, to the least secure and least-supported smartphone OS?

      • http://kaizenity.blogspot.com/ FalKirk

        I was merely generalizing.

        But not all BlackBerry’s were owned by investment bankers and government officials. BlackBerry was also very popular among teens because of BBM.

        My understanding is that many BlackBerry owners own two phones. They still love the emailing prowess of the BlackBerry or the phone is issued to them by their employer. But when it came to web browsing and Apps, BlackBerry is so inadequate that many choose to purchase a separate device rather than live with the BlackBerry’s limitations.

      • Walt French

        Gotcha; thanks. There’s another type of BB user: the data-intensive type I had lunch with, who needs multiple screens on his desk, but when he’s away, can’t cope with much more than a few words or an address, at a time.

      • Secular_Investor

        Yes, I know a number of people who use both an iPhone and Blackberry. They use the latter for emails because they like the push facility plus conventional keyboard, but use the iPhone for most other things including Apps and browsing.

        I too have taken to carrying two devices, an iPhone and a newly acquired Galaxy Note, which I bought for research purposes

        I very mush like the Note’s big screen OLED screen, which I much prefer for browsing.

        However, the Note demonstrates three major problems for Android competing with iPhone.

        1) The OS is not as pleasurable, smooth and intuitive to use as the iPhone. If you are not used to using the iPhone it might seem great, but it really is a shadow of iOS.

        2) Lack of privacy and security. These are huge, killer issues for me. I don’t like the fact that Google, through its control of Android, knows everything I do on the Note. But the other major problem is that Android is so insecure almost wide open to malaware, viruses, trojans etc identity theft and stealing of private data. I dare not put anything private or confidential on the Note, so I just use it for browsing but not to keep my contact phone numbers, email address etc. nor to check any of my bank or brooking accounts and portfolios which I would need to access with passwords. The same applies to my email accounts. Also I dare not download any Apps given the level of piracy and vulnerability to malaware etc. So all I use  the Note for is to browse the internet, visiting only public sites with no passwords and to keep up with the news.

        3) The Note cannot access my huge library of iOS music, movies, TV programs, Podcasts etc.

        I just hope the next iteration of the iPhone will have a much larger screen.

      • JohnDoey

        Answer: they needed a Web browser and apps! They need a pocket computer (2012) not a pager (1990’s.)

        Most RIM users use Windows. They are already totally insecure. Android is the same crap they are used to eating.

      • http://twitter.com/gerrymcgarry Gerry McGarry

        Here in the UK Blackberry’s are very popular with teenagers and young adults who want a “smartphone” but can’t afford an iPhone. They are now moving to Android.

    • Secular_Investor

      Falkirk, as usual you make some good and interesting points.

      In the US, (as well as Western Europe, Japan Korea etc) we are, as you say,entering the late majority stage (somewhere below half way up the S curve).

      But as regards the rest of the world, in some countries such as mainland China we are probably starting to move from the early adopter to early majority stage  (i.e. still on the lower slopes of the S curve, just as it curves upward parabolically. The  iPhone in China has only around 10% penetration.

      But in most of the developing and underdeveloped parts of the world we are probably still in the early adopter stage.

      This means there is still huge headroom for Smartphone growth, and with only single digit market share of the mobile phone market, there are immense growth opportunities of iPhones.

      I love your turn of phrase in point 5: “Android has spread far and wide, picking off the hapless armies of dumb phones, feature phones and even invading the territories of RIM, Symbian and Windows Mobile. iOS has spread more slowly but the territory (customers) it takes, it keeps.”

      So true! 

      Regarding the question you raise: “Only time will tell what will happen when the armies of Android finally turn to meet the army of Apple.” I think we have clear evidence of what will happen in some of the satisfaction and buying intention surveys, in which as many as 47% of Android owners have said they will buy an iPhone next time.

      Not only will it be fun to watch, but very profitable for Apple and its shareholders!

      Watching iPad’s growth will be equally satisfying!

      • Markymark

        Exactly. We are in the ‘early innings’ throughout most of the world.

  • Henry

    Very nice post, as usual. A few comments-

    1. So what is your inference, based on your analysis here, about iPad adoption rate? iPad may soon be as (or more) important to Apple’s prospects as iPhone, and your previous posts suggest tablet adoption is even faster than smartphone adoption. (And for an adoption-rate analysis, my sense is tablets should be considered distinctly from laptops/desktops.)

    2. To deal with the starting point issue (e.g., did smartphone adoption begin in 2001 or 2005), you could use a 5% or 10% adoption point as your starting point (applied to all products in your figure). This would improve the accuracy significantly.

    3. Conceptually, we care about the fraction of the potential market that has adopted. Internet, microwave, dishwasher, etc. are one-per-household products. Smartphones are one-per-person products. So, really, smartphone adoption is much lower that your figure suggests, and the two sets of products don’t seem to me to be directly comparable.

    I imagine there are data limitations to addressing these points, but I thought I’d raise them anyway.

    • http://www.asymco.com Horace Dediu

      1. I believe (as does Tim Cook) that the opportunity for the iPad is even greater than for the iPhone as the iPad share of computers could be higher than the iPhone share of phones. However it’s hard to extrapolate that to the overall market because of the mix of competitors and markets. My guess is that tablet adoption could be comparable or lower than smartphones.
      2. That’s a good idea wrt. accuracy but harder to explain.

      3. My data for smartphones is per user, not per household but I’m not sure that the ratio for households would be much lower. The comScore data for example does not count persons below the age of 13 or business users and only measures “primary” device.
      Accuracy is a concern however the overall impression remains that smartphones are being adopted very rapidly relative to other technologies.

      • Henry

        Points taken. Thanks for the response.

  • David Weintraub

    One of the issues I’ve discovered is how difficult it is to get a phone with no data plan. The vast majority of phones sold by AT&T, Verizon, Sprint, and T-Mobile require a data plan whether you want to use it or not.

    You have a choice between two phones: One a regular “feature” phone and another a “Smart” phone — both are the same price. Maybe both require a data plan, or you’re not really paying attention to that. Why not get a “Smart” phone? My son bought his Android phone for one cent. 

    Imagine how quickly TVs would have been adopted if they were the same price as radios and were backwards compatible (i.e., they all contained radio receivers). Who would get a radio when they could get a TV. The same thing is going on with smart phones. For the price of a “feature” phone, you can get a new Android phone.

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  • JohnDoey

    Smartphone is a meaningless word.

  • http://www.facebook.com/james.scariati James Scariati

    This is really great way to visualize the data. In addition to seeing overall adoption, the ratio of the width of the blue to orange bars also tells you how quickly adoption accelerated once crossing into the majority (51%+). For instance, once cellphones hit 50% adoption, they quickly accelerated to 80% in just a few years.

    Speaking of which, I’m curious: I assume by “cellphone” you really mean “feature phone,” since “smartphone” is a separate item? Or are you including smartphones in the overall cellphone adoption rate, and then also splitting them out separately just to emphasize the point?

    • http://www.asymco.com Horace Dediu

      Smartphone is a subset of Cellphone. Cellphone adoption is overall mobile phone adoption since the early 90s. Smartphones can be seen as a new technology that depends on a preceding technology. This is the same as appliances that depended on the adoption of electric power.

  • Secular_Investor

    Secular Investor

    Firstly, we need to think more clearly about what is meant by saturation. It should be emphasised that the the chart shows penetration levels per household, but homes routinely have different numbers of the different types apparatus and devices shown.

    For example, while there may be only one stove, refrigerator, clothes washer,  clothes dryer, microwave, electric power, air conditioning, and probably just one telephone (but often with various extensions for more handsets) internet connection etc. So reaching household penetration of 80% with these one per household items, nears saturation.

    There are other items where there may be two or more items, for example colour TVs, radios, home computers, VCRs. automobiles etc. So reaching 80% of households with just one of these devices mary still not be reaching saturation levels because households will accumulate two, three or even more of certain of these items.

    Saturation levels for Cellphones and Smartphones would probably be better measured on a per capita rather than per household basis, because these are a personal rather than household items. According to Answer(dot)com there were 114.8 million households in the US and the total population in 2011 according to Wikipedia was 310.5 million, so the population per household was around 2.7.  So one per household (100% penetration) equates to only 37% penetration on a per capita basis.

    So what would be a reasonable saturation level for smartphones per head. I believe in fact it will be significantly more than 80%, probably more that 90%. This is because a smartphone is a unique device because it replaces so many diverse items and devices that people use either on a daily, or on a regular or occasional basis. For example: cellphone, SMS messenger, calendar, address and phone No. book, note book, internet browser, MP3 player, radio, email device, SatNav device, maps device, still camera, video camera, photo viewer, TV and video viewer, calculator, recorder, flashlight, compass, sketchbook. book reader, magazine reader etc. etc – I’m sure every reader can add several more uses/devices.

    If one adds up the cost of all the above devices/items/functions, a Smartphone transpires to be an extraordinarily cost effective device, to say nothing of its convenience. You would need a wheelbarrow to carry all it replaces of that around with you!

    This makes a Smartphone possibly the most attractive personal device ever made and so a penetration of up to 90% plus is not unreasonable. Only technophobes, the very old and confused and very young will probably not own a smartphone.

    The second major thing to bear in mind affecting saturation, is that there is exceptional redundancy in Smartphones. The technology is in its infancy and makers will keep coming up with new must have features, which means a very high turnover rate even when reaching 80% to 90% per capita levels. The more affluent will buy a new model almost every year, the less affluent at the end of each 2 year contract cycle. 

    Unlike most other smartphones the iPhone retains its value and will pass on, firstly within families, or traded in and passed to less affluent buyers looking for a bargain. Apple has a huge advantage here because, unlike Android, all iOS devices from the 3GS onwards can be updated to the latest version (except for Siri only available of the latest models from 4S onwards. When the second hand iPhone market reaches saturation level, they will be shipped by the container load to developing and under developed countries. All of this will significantly increase the number of iOS devices in the walled garden eco-system.

    So what is true saturation levels for Smartphones? And are saturation levels different for iPhones than for Androids and other smartphones? 

    I look forward to Horace tackling the above questions and coming up with great charts to enlighten us all.

    • Markymark

      Excellent analysis.

  • Babajuma

    You are missing what should be pretty similar in adoption rates in the US. DVD’s where one of the fastest adopted technologies that i can think of. But i would be interested in the numbers if you have them.

    • http://www.asymco.com Horace Dediu

      I would also be interested in DVD data.

  • http://twitter.com/handleym99 Maynard Handley

    One thing that may swing things in favor of faster saturation:
    My local mall has a new kiosk that opened, I think about three months ago, that is a “swap shop” for smartphones — they buy and sell old smartphones. Point is — they are providing smart phones to the poorer segments of society at a low price, which is possible because the high end is churning over its smartphones so fast. I have to admit I’m not sure of how the telco service plays into this. One possibility is that these devices are being bought as, essentially, iPod touches — as small computers + media players. Another is that the kiosk has some sort of deal with the prepaid vendors, and so essentially this is a way for the prepaid user to get a smartphone at a low price. I should actually ask next time I’m at the mall.

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  • Michael Cote

    Horace – US consumers were able to walk into any AT&T or T-Mobile retail store in late 2002 and buy a Blackberry device. The total stores represented by these two carrier exceeded 2800 corporate owned stores with potentially 8000+ additional dealer locations. 

    I think pricing/subsidy rather than availability may have had more impact at the outset.  

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