In this market update for the mobile industry, INN looks at Q1 2019 trends that are setting the tone for the space this year.
2018 could be defined as the finest year for mobiles, and the first quarter of 2019 saw the industry build on momentum from the previous year.
Thanks to these devices, consumers spent more time on their handhelds and downloaded and spent more money on apps than ever before, making last year stellar for the mobile industry all around.
On that note, here the Investing News Network takes a look back on the first quarter of 2019 to see how the mobile industry evolved and what things we can look forward to for the rest of the year.
Mobile market update: New devices emerge
Foldable devices, 5G and advancements in mobile photography were some of the highlights of the first quarter, with companies either teasing or launching devices that offer at least one of these capabilities.
In February, Samsung (LSE:SMSN,KRX:005930) set the pace of the industry with the launch of four devices. This included its flagship Galaxy S10+ with a model that supports 5G. 5G services are projected to offer higher data speeds and have the capacity to handle devices that make up the internet of things.
The South Korean major also launched the Galaxy Fold device, which offers most of the capabilities of the S10+ but with a display that can be folded inwards. Popular features of the S10+ like reverse wireless charging, the three camera setup in the rear and the latest processor from Qualcomm (NASDAQ:QCOM) are all included in the Galaxy Fold.
In a report published in February, Counterpoint Research states that the Galaxy Fold is similar to first generation capacitive touch devices. Just as first generation touch devices like the Blackberry (TSX:BB,NYSE:BB) Storm and Motorola Droid had issues like poor touch response, the first generation foldables may have their own teething phase. For instance, the initial batch of Galaxy Folds seems to suffer from display issues.
“It is the future, but early versions will be clunky and compromised,” the firm said. “The device appears to be severely ‘girthy’ and compromised. The US$1,980 price tag secures its place as a niche device.”
In the last week of February, several other companies followed Samsung in launching devices. Sony (OTC Pink:SNEJF,TSE:6758), Nokia, LG (LSE:LGLD,KRX:066570), Xiaomi (OTC Pink:XIACF,HKEX:1810) and TCL (SZSE:000100), through its Alcatel brand, released devices at the Mobile World Congress. Like Samsung, these companies focused on features like better photography and 5G for their devices.
However, it remains to be seen whether these mobile phones can lift the declining shipments of smartphones across the globe. Despite the growth in emerging markets like India, smartphone shipments declined 4 percent in 2018 compared to 2017 levels.
While Samsung was first overall, with a 19 percent market share in terms of shipments in 2018, Huawei was tied with Apple (NASDAQ:AAPL) for second, each with a 14 percent share. Xiaomi and Oppo held the third and fourth spots with market shares of 8 percent each, and Vivo completed the top five list with a market share of 7 percent.
Notably, Chinese brands Huawei, Oppo, Vivo and Xiaomi were some of the few that witnessed an upward curve in terms of shipments. Apple saw its shipments decline by 4 percent in 2018.
Mobile market update: App stores on a high
App Annie highlights in its April report that consumer spending surpassed US$22 billion on apps in the first quarter of 2019, making it a fruitful quarter for the app industry. It also marks a 20 percent jump year-over-year.
Further, consumers downloaded over 30 billion apps across platforms in the first quarter of 2019, a 10 percent year-over-year increase.
Specifically, downloads on Google’s (NASDAQ:GOOGL) Play Store had a 10 percent spike on a year-over-year basis, with emerging markets a contributing factor to the increase.
India, Indonesia and Brazil were said to be the largest contributors to Google Play’s growth in downloads. In terms of specific app categories, auto and vehicles apps, followed by entertainment apps, were downloaded the most.
While Google Play downloads were just above 20 billion, downloads on Apple’s App Store were just shy of the 10 billion mark in Q1. Brazil was said to be the largest contributor to Apple’s download growth.
App Annie explains that the overall contributors to the spike in app downloads across the Play Store and App Store were the entertainment and games categories.
Crucially, mobile gaming is projected to hit 60 percent market share in terms of consumer spending this year across PC and handheld devices. The firm highlights that the entry of Apple and Google into the mobile gaming market was to capture this lucrative piece of revenue.
“The bottom line: it’s all about services and content, and the tech giants are making mobile the centerpiece of their growth strategies,” the firm said.
Further, the Match Group’s (NASDAQ:MTCH) Tinder took the crown for the global quarterly spend on a non-gaming app.
Mobile market update: 5G and foldables to take center stage
While we now have devices that are capable of handling 5G networks, cellular operators only began launching these services in April.
Verizon (NYSE:VZ) kicked off the commercial availability of 5G services when it pushed out the network to the citizens of Chicago and Minneapolis. The company plans to make the service available in more than 30 cities across the US in 2019.
Counterpoint states that carriers in the US had to roll out this service for marketing purposes. “While there can only be one winner, ultimately it is all about public perception, Even if carriers are concerned about the return on investment on the massive costs of a 5G upgrade, they cannot afford to lose the marketing battle.”
In Canada, the federal government completed the auction for the prized 600 MHz spectrum, which is capable of delivering 5G services. It fetched the government C$3.47 billion. Notable winners include Telus (TSX:T,NYSE:TU) and Rogers Communications (TSX:RCI.A,NYSE:RCI). Rogers, in particular, emerged as a major force from the auction, having secured the spectrum across the country.
Meanwhile, the commercial availability of foldable phones, especially the Galaxy Fold, also began in April. The device has reportedly sold out in the US.
In a report, Gartner notes that the mobile phone shipments will fall in 2019 by 0.5 percent on a year-over-year basis compared to 2018. The firm believes that 1.8 billion mobiles will be shipped in 2019. However, it projects that the industry will see a shipment increase of 1.2 percent in 2020.
“Users have reached a threshold for new technology and applications, which means that, unless new models provide significant new utility, efficiency or experiences, users don’t want or need to upgrade,” Roberta Cozza, research director at Gartner, said in the release.
Further, the firm suggests that the foldable phones will have a market share of 5 percent by 2023 as it predicts that 30 million units will be shipped.
“We expect that users will use a foldable phone as they do their regular smartphone, picking it up hundreds of times a day, unfolding it sporadically and typing on its plastic screen, which may scratch quickly depending on the way it folds,” Cozza said. “Through the next five years, we expect foldable phones to remain a niche product due to several manufacturing challenges.”
Mobile market update: Investor takeaway
The stage for future technologies like 5G and foldable devices was certainly set in the first quarter of 2019, and the mobile industry is heading into an exciting phase of growth. This comes thanks to new form factors, technologies and services that give investors and consumers plenty to look forward to.
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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.