GSMA's biggest changes in the future of devices: 4 discoveries

At CES 2020, a report revealed how influential China and 5G are on the global tech landscape.

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During CES 2020 in Las Vegas, GSMA Intelligence revealed the four components shaping the future of devices. The report discussed the evolution of 5G, smart devices, artificial intelligence (AI), and wearables, as well as the impact of China's longtime tech dominance. 

SEE: CES 2020: The big trends for business (ZDNet)

The second annual Future of Devices report, released on Tuesday at CES, surveyed more than 38,000 consumers in 36 countries and analyzed field work conducted between August and December 2019. Along with exploring trends in tech, the report also explored the status of competing companies in the tech enterprise.

"With the advent of 5G on the horizon and new applications like virtual reality and artificial intelligence (AI), we wanted to ask ourselves how consumers were going to change the way they use devices over the next sort of 10 years," said Tim Hatt, head of research at GSMA. "We released it at CES as a marquee consumer electronics event where these types of subjects are talked about."

4 shifts in the tech market 

The report identified the following four ways the tech market has changed and will continue to evolve. 

1. Smartphones are driven by China and bolstered by 5G

The smartphone reigns as the dominant consumer device, with ownership rates between 85% and 95% across countries. The leader in smartphone manufacturing and consumption, however, is China, which has become the "global epicentre" for smartphones, the report found. 

China's smartphone dominance began five years ago. "Back around 2014, the Chinese operators made a concerted decision to heavily subsidize the upgrade path from 3G to 4G or LTE, and that spurred a wave of smartphone purchases across China, which really bolted it into a position where it began to drive the overall global sector," Hatt said. 

Some 30% of smartphones are sold in China, but sales did take a downtown a couple of years ago, according to the report.

The downturn occurred for a few reasons. "One of them was the law of large numbers: Once you get to a certain level of penetration, it's harder to move up from that, so sales growth begins to taper off," Hatt said.

"Secondly, people were putting off upgrading to a new phone for longer. We call that the replacement cycle. So that drifted out from the two to three and three and a half years per person.

"Thirdly, the Chinese economy itself began to slow down, and that has a ripple effect on how fast consumer incomes rise and therefore what discretionary income is for device purchases," Hatt said.

Smartphone sales in China went back up by the end of 2019 once China's economy stabilized and prices from domestic manufacturers went down, Hatt added. 

China will also play a significant role in the uptake of 5G smartphone connectivity. The report found that the sole release of 5G will not drive an influx of smartphone sales, but China will help with overall 5G adoption. 

Nearly 50% of Chinese consumers said they will get a 5G phone as soon as it is available, the same can't be said for US consumers, however. Only 28% of US consumers said they would upgrade to 5G when it's available, according to the report. 

The reason China is further along is that "they're a tech savvy population. They like new technology and they're ready to embrace it at first opportunity," Hatt said.

"Additionally, China is a country where prices for 5G are going to be much lower than other markets, and that makes it easier for consumers to buy it," Hatt said. "So it's cheaper prices, higher coverage roll out and a huge amount of marketing and promotional efforts that's been put into making them a population [ready for] 5G."

While the US currently lags behind China, Hatt said US will be one of the 5G leaders. "The US will also be an advanced country, just not as far advanced in overall size as China is. But as the share of the population, 5G take up will actually be higher in the US than it is in China," he noted.

2. Fragmentation proliferates the smart home

Smart home device ownership skyrocketed worldwide in 2019, including smart speakers, media and entertainment, and appliances, the report found. 

Smart speakers were the fastest growing category due to falling prices and easy use cases. Entertainment was dominated by smart TVs, and popular smart appliances included connected light bulbs and burglar alarms, though appliances were the most niche category, according to the report. 

However, no one has been able to integrate all three technologies under the same roof. To retain and gain popularity, smart devices need to be able to connect with one another and have more complex use cases, the report found. 

"The main thing that can help for further adoption of speaker is getting the artificial intelligence (AI) in the digital assistant to a better level," Hatt said. "Basically they're still predominantly rudimentary. Like, 'remind me to go shopping' or 'put on Spotify.' What they're really purporting to do in the long term to get to the point where they are assistants. 

"For example, 'I want to take my family on a holiday to Croatia. Our budget is $3,000. Could you give us some hotel ideas?' To get to the mass market level, you need to have that utility that people genuinely feel their lives are being improved as a result of the device. And so for that reason, that's really where the competition battleground is, is in improving the AI algorithms rather than hardware price per se," Hatt said. 

3. We are entering a wearables renaissance

While many have predicted the death of the wearables category for years, the sector is still alive and well, according to the report. 

"A lot of people have predicted the death of a category before, which just hasn't happened. But with the revival of fitness trackers and connected health wearables, especially among millennials in high-income countries like the UK, Germany, France, and the US, people are starting to go and buy these things more," Hatt said. 

"There is also a subsidy component where employers are subsidizing their employees to take on fitness trackers or insurance plans that reward people's fitness and that better track their wearables. It's easier for people to get excited about their health than has been the case in the past," Hatt added. 

4. Tech giants compete for relevance

The report also identified some of the biggest trends with tech giants including Apple, Google, Amazon, Samsung, Microsoft, and Huawei. 

"One is whether the Apple/Samsung duopoly continues in smartphones. Probably, yes," Hatt said. "But that sort of share is being chipped at by Huawei, and I would expect that to be compounded by other Chinese OEMs expanding it to Europe and the Middle East over the next two to three years.

"The reciprocal effect is that Apple is finding it harder to compete effectively in China because prices are falling there, which doesn't suit their business model very well. They're a premium product. Apple is at risk of being squeezed in the smartphone business. And for that reason they have looked to another product line," services such as Apple Music, "to act as a successor or at least a complement to the iPhone. They're just not there yet. 

"Samsung, again, is sort of well-placed as an early launcher but faces the same price competition from the Chinese that I talked about for Apple," Hatt continued. 

"When you talk about Amazon and Google, they're not in the smartphone business because they're web companies, but for the home, they are the two leaders. So expect to see a lot of behind the scenes R&D going on in the AI algorithms," Hatt said. "And there'll be a lot of behind the scenes work to integrate their devices with the rash of home appliance makers like Philips and Siemens that are out there trying to cut through that fragmentation and increase take up faster."

For more, check out CES 2020 roundup: All the business tech news you need to know on TechRepublic.

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