Manufacturers could face a difficult 2012 due to a declining demand for smartphones and an increasing appetite for Sim-only contracts.
With the industry in its final week of pre-Christmas trading, industry figures are suggesting it will continue to be relatively well-protected from the recession but could experience a downturn in 2012. Strategy Analytics’ analyst Neil Mawston said: ‘It has been battling declining demand for some time. Everyone knew the Christmas period was going to be weak and it certainly has been weak for mobile.’
Ofcom figures suggest the recent smartphone boom could be short-lived. Ownership is at its highest level, with 46% of Britons owning a smart device. However, only 3% of customers without a smartphone said they intended to buy one over the next year. Forty percent said they were certain they would not buy a smartphone.
Anecdotal evidence from stores already suggests a slow down, with prepay sales down 50% in one region, according to sources.
CCS Insight MD Shaun Collins said he thought manufacturers could come under pressure in 2012. ‘People will choose not to upgrade handsets and will get a better value for money Sim-only deal.’ Such deals are proving increasingly popular. Ofcom said one in five new contracts in Q1 2011 were Sim-only deals.
Mawston said: ‘Consumers are reluctant to spend and so they are delaying new purchases. At the same time, the smartphone boom is peaking and slowing down with more than half of postpaid customers upgraded to smartphones in the UK. The market is almost taking a pause as consumers wait for the next big thing – for the new 4G devices.’
One senior manufacturing source said he believed there would be a slowdown in the first half of 2011 because of the wider economic turmoil. He said: ‘There are around eight vendors bringing great phones to the market at the moment but that’s too many for the UK.’
He predicted that two or three frontrunners would eventually emerge, with the remaining manufacturers competing for Sim-only deals. The source said retail would be affected but suggested the likes of Phones 4u and Carphone Warehouse would bounce back from mid-2012 as they adapt their businesses.
He added: ‘The revenue model will have to change and I think there will be more collaboration between retailers and networks or they will maybe look at different revenue streams to make it work.’