Predicted Smartphone Sales Recovery Still Nowhere in Sight

Despite continued decline in smartphone sales numbers, analysts are predicting recovery in 2024. Are those predictions realistic, or are they based on hype?

According to IDC’s Quarterly Mobile Phone Tracker, 2023 marked a sixth straight year of declining smartphone sales. In January, United States smartphone sales were down 10% YOY over January 2023, falling to nearly half of 2017​’s peak.

According to Ryan Reith, group vice president with IDC’s Worldwide Mobility and Consumer Device Trackers, there are — in addition to continuing global economic challenges — ​“several device categories that compete for a share of wallet [that] are seeing a return to growth, including personal computers. … Ongoing price increases and the improved durability of today’s smartphones supports an already lengthened replacement cycle, which will dampen new shipment growth.”

This fall in sales is consistent with pessimistic outlook from manufacturers of smartphone components. In January, Apple supplier Foxconn warned that they were forecasting a YOY decline in revenue for Q1 of 2024 due to slowing demand for cloud, networking, and computing products — which would make a fourth consecutive quarterly decline in revenue. Manufacturers of other smartphone components are likewise pessimistic, meaning that chipmakers are largely sticking with production cuts for now—which could result in supply issues if smartphone sales do begin to turn around.

However, despite these continued decreases in sales, industry analysts remain bullish about a recovery in smartphone sales in 2024: 

• IDC predicts that smartphone sales will grow by 2.8% YOY this year, with ​“growth in the low single digits through 2028.”
• Morgan Stanley predicts global smartphone shipments to rebound by ​“nearly 4% in 2024 and by 4.4% in 2025.”
• IT analyst firm Canalyst also predicts 4% growth in 2024.

So, what are the reasons behind this contrary optimism?

Analysts predict foldables and ​“next-gen AI smartphones” will be drivers of growth in 2024.

Analyst bullishness is being driven by two things: sales of foldable smartphones and ​“next-gen AI.”

It’s true that foldables as a category are seeing some exciting growth. IDC predicts that sales of foldables will grow 37% to 25 million global units in 2024. However, as we’ve pointed out previously, these numbers are exciting but foldables are still too small a segment to ​“save” the smartphone market. IDC’s projected 25 million in global sales of foldables for 2024 represents only 1.8% of a total predicted 1.2 billion in global smartphone sales.

Similarly, analyst optimism about the immediacy of ​“next-gen AI” smartphones seems likely to be overblown. Google’s Sameer Samat, general manager and vice president of Android, doesn’t see that kind of transformational change happening any time soon. ​“Over time, I think the opportunity is to move to that world where the interface does change,” he said. ​“But I think that will be gradual. And we have to be careful to make sure that the user still feels comfortable and familiar with the overall smartphone experience, because we do depend on it every day.”

It is true that smartphone manufacturers are working to bring AI-supported features to commonly used apps like messaging and image apps. However, something OEMs aren’t eager to mention is that the current state of generative AI is too taxing even for flagship phones. Google has already caught flak for the fact that the Pixel 8​’s touted ​“on-device” AI features will largely be handled by Google servers because of insufficient processing power. And now it seems that the same may be true of Samsung’s Galaxy S24.

So, will we see phones capable of truly onboard generative AI applications in 2024? It certainly doesn’t seem likely.

Moreover, according to a study published by GSMA Intelligence in December 2023, the most important factors driving consumer purchase decisions are practical — the five features rated as most important by American survey respondents were: battery life (important to 89% of respondents), durability (89%), data security (87%), cost (84%), and camera quality (79%). So even if manufacturers were capable of producing a truly ​“next-gen AI” phone in 2024, it would still be unlikely that AI would motivate a significant change in current purchasing behavior.

All of which means wireless retailers looking to stay ahead of trends may want to diversify their product offerings.

In our 2023 Trends in Telecom Retail whitepaper, Wes Filson — director of retail sales and operations at Jump.ca — cited decreased demand as a reason for diversifying. ​“Previously, customers were upgrading once every 18 months. Now it’s at three years; even as high as 40 months. While cellphones will continue to play a huge role in our business, I would encourage businesses to see what other opportunities may be out there.”