Canada’s cellphone market is about to do something no one saw coming, until now.
It’s going to shrink.
Yes, that’s right, we’re talking about the booming, seemingly unstoppable and ever-changing smartphone market.
At least that’s what market analysis firm IDC says in a new forecast, which calls for smartphone sales in Canada to shrink by 7.5 per cent over the next year.
Part of the blame lies with the resource-price collapse that has taken a bite out of Canada’s economy.
IDC downgraded its forecast for the entire Canadian IT sector, to 2.5 per cent growth next year, from an earlier prediction of 3.4 per cent growth, thanks in essence to low oil prices.
"If the economic impact on the sector becomes more acute than currently anticipated, this could act as a significant headwind for wireless incumbents in Canada," Desjardins analyst Maher Yaghi wrote in a client note. He notes that Telus, with the largest presence in oil-rich Western Canada, is likely to feel the most pressure from slumping demand for telecom.
Telecom revenue as a % of Canada's economy
source: tradingeconomics.com
Enough New Phones Already
But that isn’t the whole story. It seems the developed world has had its fill of new phones. With the market “saturated,” as economists call it, there is little room for smartphones to expand, and now the market consists largely of people replacing their old phones.
And according to many analysts, people aren’t replacing their phones as often as they used to.
“The two-year upgrade cycle has been broken and the vast majority of the people who used to buy a phone at the two-year price point are now buying one when it breaks," Recon Analytics analyst Roger Entner told NewsFactor.
"There’s only a slight increase in the number of people who buy a phone every single year. That leads to a lengthening of the upgrade cycle and fewer phones being sold."
That means that even in the U.S. — which is enjoying better economic times than Canada these days — smartphone sales are expected to stagnate.
Entner predicts U.S. sales will end lower this year than last, though only slightly, down about 0.46 per cent.
That’s a worse performance than what IDC forecasts for the world as a whole next year, which is 9.8 per cent growth to a total of 1.43 billion units sold. But that’s the slowest rate yet for smartphones, and the first time global growth dipped below double digits.
As recently as last year, the growth rate was 27.6 per cent.
Hmm. Those days of massive increases in Apple and Samsung shares might be coming to an end.