How handset manufacturers are trying to keep their customers

In the space of a decade or so, the smartphone has gone from a revolutionary technology to a daily tool that everyone on Earth carries in his pocket. OK, not everyone – but it's not really exaggerated. According to estimates, nearly 80% of the US adult population owns a smartphone (95% has a mobile phone), as do nearly two-thirds of the planet's population.

It is indisputable that the smartphone has become indispensable for most consumers – but their relationship to smartphones is changing. As innovations look like iterations every year – and changes in form and function get smaller and smaller – consumers are less likely to demand, stay awake or sleep on a sidewalk to get the latest and the biggest flagship phone. The era of free premium (or heavily discounted) phone is virtually dead, as phone prices have risen steadily over the past decade.

As a result, consumers are keeping their phones longer: the average life cycle of a smartphone was 25 months to the end of 2017. By the end of 2018, this cycle had risen to 36 months. According to a study by Gartner, the passion for rapid replacement of phones goes hand in hand with a craze for high-end phones on the market.

"Demand for entry-level and mid-priced smartphones has remained strong in all markets, but demand for high-end smartphones has continued to slow in the fourth quarter of 2018," said Anshul Gupta, Senior Director. of research at Gartner, in a press release announcing the results of the research.

Apple has been particularly affected by this decline, given the centrality of the iPhone for its business. The company has stopped formally disclosing sales figures for its iPhone from the fourth quarter of 2018 and, according to estimates, shipments have decreased by 11.8% over the same period.

He added that while gamers often try to explain these costs with terms such as "advanced materials, technology, or manufacturing process," when consumers see phones with the vast majority of these "specialized" features at a fraction of the cost, "the template is lifted.

Is it time for phone manufacturers to declare a new standard and resign themselves to consumers who can be relied on to carry smartphones, but perhaps not the newest and the best? It seems that smartphone manufacturers do not think so.

Become big with new features: the collapsible Samsung

Anything that people will say about the recently released Samsung Galaxy Fold, no one will suggest that it looks like an iPhone.

Designed to work as both a smartphone or a small tablet, the Fold looks like nothing else because, as its name indicates, its screen can be folded in half in the center.

According to Samsung, "Galaxy Fold opens smoothly and naturally, like a book, and closes in a snap, in a satisfying click." Consumers can slip the Galaxy Fold into their pockets for "one-hand calling, texting, etc., and open for endless multitasking and superior display on our largest mobile screen for presentations, magazines digital, movies and RA content. "

This comes as Samsung was hit by declining handset sales, as its fourth-quarter results showed a 10 percent drop in sales compared with the previous year, as well as a sharp decline in revenue. an 11% drop in sales related to mobile activities. The company said the smartphone market was "losing steam," resulting in a seasonal slowdown.

Samsung is hoping its new, very different handset will set a turning point in the market when it arrives in the United States via AT & T and T-Mobile in the second half of 2019. But customers will need significant budgets to to go from the front. : The entry price for the fold is $ 1,980.

A high price – and perhaps a high risk, since high prices are becoming less attractive to customers and that Samsung is not the only company to offer a dual-screen 5G phone. LG and Oppo are doing similar things with lower prices, and Oppo even mimics Samsung's folding option.

How Huawei stole the groove of Apple and Samsung

According to recent data from Gartner, Chinese smartphone maker Huawei is starting to take a significant share of the Samsung and Apple market share in the country, thanks to the power of phones with many features that are (relatively) good market.

Huawei's share of the smartphone market climbed to nearly 15% in the three months to December 2018, up four percentage points from the same period a year earlier. It still traps both Apple and Samsung, but hardly: the two brands hold respectively 17 and 16% of the sector.

"Apple has really lost ground in some areas, especially emerging markets such as Greater China," Gartner Research Director CNBS Anshul Gupta told CNBC. "What we are seeing in China, is that the major Chinese players have significantly improved the quality of their smartphones."

And it turns out that Chinese customers like the features and are less married to the brand – as Apple attributes its weak T4 performance to sales in China that had dropped 15% a year. Cook accused customers of keeping their phone longer; Analysts like Gupta attribute this responsibility to customers who jump ship

"If you look at the flagship smartphones of Huawei, Oppo and Vivo, they have features that can be found in the flagship smartphones of Samsung and Apple, but the prices are at the same time quite low."

And while Huawei is often referred to as the low-cost spoiler of the global smartphone race, notable brands such as Google, based in the US, seem to be content to play the game of their book. The latest rumor is that Google will cut the price of the next iteration of the Pixel to further compete with the iPhone XR (currently priced at $ 745).

The Pixel is currently priced at $ 800. But this lower price gives Google a chance to integrate more people into the ecosystem it was creating – and with optimized hardware to use it. And as consumers connect in more places and to more objects, using the phone as a bait for the ecosystem could be the right game.

Capture the connected client

Consumers want innovative products, but they are looking for innovations that make their phones more usable.

"The question for many customers is less about the phone itself, but more about the applications it connects to, the clarity of the photos, the number of functions it can run simultaneously. they ask who did it.

That's why Apple, faced with the need to move from a company primarily focused on the iPhone, reorganizes its leadership priorities in revenue generation from its services and other technology offerings. Services are expected to exceed $ 50 billion by Apple's 2020 fiscal year and account for more than 60 percent of the company's total revenue growth over the next five years.

"Technology is evolving and they need to continue tweaking their structure to be on the right curve," said Gene Munster, a long-time analyst at Apple and managing partner of venture capital firm Loup Ventures.

It remains to be seen whether these services will be enough to keep the iPhones sticky – when Samsung builds 5G folding phones and Google sets prices for its flagship product, such as Apple's business models to recruit consumers into its ecosystem more robust

But it's clear that everyone has to do something – because for the first time in 10 years, it's not enough to build the latest and most powerful phone technology, or to announce that you'll get it, for customers to arrive.

And even if they do, there is no guarantee that they will be back in the near future – or that they will return loyally in three years for the next and the best year.