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How close is the UK to smartphone saturation?

In How close to saturation is the smartphone I highlighted that the US is not nearly saturated at 68.8% penetration at the end of March. Since the US is not the highest penetrated, one may wonder whether other “developed” countries are far further along.

There is no data on all the countries in the world on the same resolution as that in the US, but thanks to Charles Arthur, Kantar shared data on the UK and we can have a clear trajectory for that country.

The most recent data for UK was as of February 2014 when penetration was 70%.

Screen Shot 2014-05-08 at 5-8-6.31.48 PM

In February the US figure was 68.2%, so the US is 1.8% behind in penetration. The equivalent picture of the US is below:

Screen Shot 2014-05-08 at 5-8-6.34.23 PM

Not a significant difference. Both markets are in the “late majority” phase of growth and well before the lagging adopters join.

Note that I took a crack at forecasting both the US and the UK penetration given the significant amount of data we have so far. The asymptotic penetration value I chose was 90%. If the pattern holds then there is growth in both markets (and by proxy the developed world) well into 2018.

  • Jared Porter

    In the U.S. there should be a strong upsurge in iPhone sales in the latter portion of the summer due to the expiry of millions of loyal iPhone 5 (not 5S) contracted customers at the big 4 carriers due to generous handset trade-in programs promulgated by Apple, the carriers, and aggressive buyers like Gazelle.com. After these typical two-year contracts mature and there is no longer an early termination fee, an iPhone 5 owner would be rather foolish not to “trade in and trade up”. That is because the cost to upgrade is negligible inasmuch as an old iPhone 5 is worth around $200 which is about the same as the “downpayment” price of a NEW iPhone. Since ones monthly telco bill doesn’t fluctuate nor fall after the contract expires, there is little incentive NOT to upgrade.

    IMO these telco “subsidies” will continue well into the future as the major carriers have to compete against each other. As Mr. Dediu often points out, the iPhone is “hired” by the carriers (including the likes of China Mobile now), to provide a predictable source of dependable monthly revenue streams which they can take to the bank to justify their massive network expansion programs and/or move to growing profitability. Hence, churn is reduced. Doesn’t Apple time their new product rollout cycles accordingly?

    As always, thanks to Asymco for its insightful, original, professional analysis.

    • charly

      The telephone companies could also lower their contract price and seeing that the difference between a 5 and the likely 6 isn’t that great outside of screensize (and is that an advantage?) so i would expect people to take them up on their offer.

      • http://sharonsharalike.com/ Sharon Sharalike

        How do you know what the differences will be?

  • charly

    Growth in smartphone ownership. Not necessary in smartphone sales

    • handleym

      The significance of the difference depends on what you’re interested in. Obviously if your sole concern is iPhone sales, you are right. (Though things are modulated by the two year cycle and the extent to which Apple can maintain compelling reason to upgrade after two years. Opinions differ on this, but I think larger screen and TouchID will be compelling enough to generate massive upgrades at least for this year.)

      However there are other things to be interested in, like the size of the potential market for content/apps, or health accessories, or services (things like Dropcam which act as security systems for your house or baby monitors). For these sorts of services, it’s the size of the total market that’s of interest, more than the rate of growth…

  • http://gravitationalpull.net/wp/ ampressman

    There may be continued growth but isn’t the rate of growth slowing? It’s hard to eyeball the graphs but how many quarters are needed, say, to go from 40% to 50% penetration versus 70% to 80% penetration and then 80% to 90%. And, again, it’s difficult to eyeball, but it appears that the actual rate of increase in penetration in the UK is slipping below the predicted rate, implying even more slowing than your model predicts.

    Would also be interesting to learn about whether phone preferences for later adopters differ from early adopters. Are they more price sensitive? Are they less likely to be on postpaid phone plans that benefit from phone subsidies? While iPhone sales growth has held up well lately in unit volume, revenue growth has been lower for at least the past 6 quarters, sometimes considerably so. In other words, even if unit volume has lots more room for growth, sales growth may not be as healthy.

    • charly

      Are that serious questions or rhetorical ones?

  • charly

    Demographicly the UK is older than the US so their higher penetration rate is even better

  • poke

    What’s the thinking behind the significantly lowered iPhone share compared to your previous charts?

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

      I adjusted saturation of the entire category to 90% given the data on cellphone ownership (to be posted.)

      • Christian Peel

        You changed not only the max (now 90% instead of your previous 100%), but now the iPhone only goes to 63% rather than 90% as in the following chart. Was the Twitter image just there to test the idea?
        https://twitter.com/asymco/status/453990774183854083/photo/1

        I’m more comfortable with 63%, I’m just interested to know your rationale for the lowered numbers.

  • rupertstubbs

    Your chart seems to show Apple following a very clean curve to eventually end up with about 63% of the market.

    Android, meanwhile, having expanded hugely while Blackberry and Microsoft dwindle, is therefore constrained by Apple’s predicted growth so that it can no longer increase share from where it is now (ie. about 38% share).

    Does this seem realistic?

    • obarthelemy

      Not really. Curve-fitting is junk science, especially for competitors within a mostly-undifferentiated market. Holds up for whole markets if you don’t mess up potential, but that’s it.
      If that curve were true, Apple could stop releasing new phones today, and still reach 60% 2 years on ?

      • forecast

        Is your view of everything so childish? Forecasting can be valuable even though it’s obviously not a guarantee, and it’s not clever to point that out when it’s already well-understood. I suppose you’ve never checked a weather forecast either, though.

      • obarthelemy

        You do realize weather forecasts do have some other variable than “time” as input ?

      • forecast

        “If the weather forecast is true, a meteor could hit earth tomorrow and it would still be fine & sunny.”

      • http://www.noisetech-software.com/Home.html Steven Noyes

        So the expansion of the universe that Hubble showed with curve fitting was junk science?

      • obarthelemy

        If he only was fitting curves to stuff, Hubble wouldn’t have been much of a scientist. There’s a function to fit any time series… with a bit of rounding a sexy, smooth-looking one.
        Curve-fitting is the crudest form of modeling (well, repeating last period’s values, maybe just de-seasonnalizing on the way are arguably 1 and 2 steps down from that, but still…).
        What makes a model valid is common sense, repeatability and accuracy. For an aggregate like total phones/smartphones penetration, not much is required indeed. To generalize that to Apple’s market share is ridiculous. Cherry -picking the US and the UK (next: Japan ?) while studiously ignoring all markets that don’t literally fit the curve doesn’t make the “model” valid.

      • Walt French

        Curve-fitting can be junk science—this recent Vox article is both funny and a serious reminder that 99% correlations can prove exactly nothing:
        http://www.vox.com/2014/5/13/5710874/the-best-illustration-youll-see-that-correlation-doesnt-equal

        But when you actually think through what the formula includes—and importantly, does not include—a model such as the adoption curve can be very helpful in seeing the relative impact of different influences on smartphone adoption.

        Horace has very clearly spelled out that the overall penetration curve tops out, by assumption, around 90%. I and others have described a mechanism (simplified: people see; people do perception –>adoption) for why the logistics curve is good for analyzing market penetration; there’s strong intuitive appeal. And while the dynamics of the smartphone market are changing, they seem to me to be stable enough (Apple’s steadily-high satisfaction, price and competitive positioning) that adoption curves can be useful as a ceteris paribus (all other things equal) baseline for what to expect in the near future.

  • blacks329

    I don’t see why the same 50% inflection point wouldn’t be true for Apple. That’s a rather generous curve in favour of Apple, with no reasoning for it. Any explanation?

    • Walt French

      Horace is simply showing the standardized curves that best fit the data. However, there’s no reason to assume Apple has to have a constant market share.

      Many casual observers and Android advocates paint a picture of Apple as starting at 100% market share of an emergent category, doomed to be marginalized to a 5% share over time. That model fits the data very poorly, however, and with surveys showing Apple with superior brand loyalty and satisfaction, it *could* well be that the share keeps rising, as you notice.

      We’re in a very different environment from when Android was a junky knock-off of the iPhone, and Verizon badly needed to prevent AT&T from taking share because Verizon had nothing in the smartphone category so helped fashion the Droid brand, with a package of tethering and “more flexibility,” both of which are basically gone now.

      • blacks329

        While I do think that Apple has a stickiness to it that will allow it to increase market share over time. I can’t see it increasing to these predicted levels. The curve suggests that the number of people in the US who currently have smartphones (Android+iPhone+others) will be the number of people in the US who will have an iPhone within 6 years! I don’t see how thats possible, as it basically requires every new entrant to a smartphone getting an iPhone and 1 out of every 4 current non-iPhone users, becoming an iPhone user.

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

      The explanations have been made several times on this site. Briefly, the iPhone has followed a logistic curve in the US since inception. This cannot be said for any other platform. Hence projecting a logistic curve (and knowing its root causality) seems a sensible idea.