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Why Global Smartphone Sales Are About To Decline For the First Time Ever

November 1, 2018, 2:24 PM UTC

Buffeted by higher prices and a lack of new buyers, the global smartphone market will contract in 2018 for the first time ever, according to Counterpoint Research.

After growing annually by an average of 16% from 2012 through 2017, shipments of smartphones will decline about 1% this year, the market research firm forecast, to total about 1.5 billion.

Many factors are contributing to the slowdown, starting with general market saturation of mobile computing devices. A slowing global economy, with rising trade tariffs, also hit demand. And a final key factor may be the rising price of phones, like Apple’s $1,000 iPhone XS, that are prompting owners to wait longer between upgrades, Counterpoint said.

“Many markets have already hit a saturation point for new smartphone demand and are dependent on replacement demand,” Counterpoint research director Tom Kang wrote in the report. “Buying a more expensive device results in extending the length of replacement cycles, especially when your earnings are limited.”

The forecast comes just ahead of Apple’s (AAPL) quarterly earnings report. The company has seen iPhone growth level off, though its revenue has jumped thanks to price hikes and new, more expensive models. Over the past nine months, for example, Apple sold 170.8 million iPhones, less than half a percent more than in the same period a year ago. But revenue from iPhone sales jumped 15% to $129.5 billion.

Apple rivals including Samsung and Google (GOOGL) have also tried raising prices and introducing higher-priced models, so the same trend is evident industry wide, Counterpoint said. Smartphone revenue for 2018 is projected to increase 9% even as sales fall. That’s a stronger growth rate than the 7% seen in 2017 when sales increased 3%.