Gartner: Smartphone sales weaken in Q3 but expected to pick up in 2020

Midtier devices are driving sales around the globe, and Huawei sales jumped 26%, with the strongest growth among the top five vendors.

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Smartphone sales continued to decline around the world in the third quarter of this year, dropping 0.4% compared to the same period last year, according to Gartner. 

This was the third consecutive quarter of decline for smartphone sales, but the smallest decline of the year, with a 1.7% drop in the second quarter of 2019, and a 2.7% drop in the first quarter of 2019, according to Gartner. 

One of the issues driving the drop in sales is a lack of value in smartphones. Consumers no longer what to buy the least-expensive smartphone, nor the most-expensive smartphone. Instead, they're opting for midtier smartphones that provide better value, according to Anshul Gupta, senior research director at Gartner. 

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A midtier smartphone is defined by Gartner as a phone that retails for on average around $350.

Another factor causing consumers to wait before buying a new phone is that they're waiting for 5G coverage in more countries, Gupta said. 

Anticipated sales in 2020

Sales, which have slowed in 2019, will pick up next year. "We expect 2020 to be a growth year," Gupta said.

However, consumers will still be buying midtier phones into 2020. "Midtier smartphones will remain key to drive growth across market segments worldwide more so in emerging markets due to aspirations to own best possible smartphone," Gupta said.

Tuong Nguyen, senior principal research analyst, agreed that the trend toward midtier phones would continue into 2020. 
"While high-tier phones continue to have the latest and greatest hardware and features, the smartphone market has reached a point where the improvements gained by having the latest high-end device are marginal and oftentimes excessive for the average user," Nguyen said.

"I think of it in terms of having 'too much' and then adding more. Sometimes I think of it in terms of fast-food analogies. You need a burger patty to make a burger. Maybe a double patty would make it better. But beyond that, it's excessive for 'most' people," he added.

To encourage consumers to go back to buying more premium-priced phones, Nguyen said, "these devices will need to offer something that changes the experience substantially. We don't know what that is yet, but we saw a similar shift when people went from non-smart phones to smartphones. It went from a device for mainly voice calls and some text to a mini-computer in your pocket."

Gupta said a "faster pace of innovation and next-gen UX will be pivotal" to get consumers interested in buying premium-tier smartphones again.

What the shift in purchasing decisions means to manufacturers

Brands such as Samsung, Huawei, Xiaomi, OPPO and Vivo have been able to improve their entry-level and midtier portfolios as a result of this shift in purchasing decisions, and Huawei, Samsung and OPPO have grown in the third quarter of 2019 as a result. In comparison, Apple has seen a double-digit decline in sales, in a year-over-year comparison. 

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Image: Gartner

Huawei recorded double-digit sales growth despite the slowing smartphone market, and was the only one of the top-five global smartphone vendors with double-digit growth in smartphone sales in the third quarter of 2019.

Huawei sold 65.8 million smartphones, a 26% increase compared to the same period in 2018. Its performance in China is the key driver of its growth, with 40.5 million of its smartphone sales occurring there. The ban on Huawei to access key US technology is yet to be fully implemented, but the proposed ban brought negativity around the brand in the international market, according to the Gartner release.

"The current situation with the US has also fostered patriotism among Huawei's partners, which are now keener to promote its smartphones in China — a development that makes it difficult for local competitors to compete aggressively against Huawei. Huawei's long investment in subbrands (Honor and Nova), in multichannel operations (online and retail), and in 5G and other technological innovation forms the basis of its success in China," according to the Gartner release.

Black Friday and Cyber Monday sales

Black Friday and Cyber Monday could stimulate smartphone sales and spur consumer demand in the fourth quarter of 2019. Google and Samsung are likely to offer aggressive price promotions for both older and newer devices including the Google Pixel 4 and the Samsung Galaxy Note 10. 

"Competition between mobile phone manufacturers will increasingly focus on more intelligent smartphones," said Roberta Cozza, senior research director at Gartner, in the release.

"These devices will deliver increasingly personalized content and services that draw on users' contexts and preferences," Cozza said. To deliver relevant personalized experiences, manufacturers will need to improve the integration of artificial intelligence (AI) in smartphones and make security capabilities and privacy key aspects of their brands." 

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