When Apple (NYSE: AAPL) posted its first profit loss in over a decade, one of the main reasons was the decline in iphone sales. It turns out Apple isn’t the only one affected. Smartphone sales are declining around the world and it may get worse before it gets better.
“The smartphone industry will continue to slow down this year,” said Richard Ko, a Taipei-based analyst at KGI Securities Co. “Competition will worsen and prices will likely continue to fall.”
This is good news for consumers who are looking to upgrade their phone, but bad news for investors who have seen a continuous decline in smartphone demand over the past four years.
A Wide Reaching Problem
It’s not just the phone companies themselves that are feeling the crunch, there are also profit declines in the companies that make the parts that go inside of the phone.
Companies like Pegatron Corp., Mineba Co. and Japan Display Inc , all of which make up various parts of iphone and Samsung phones, all saw double digit declines in productivity. It’s the lesser-known companies in the supply chain that generally dictate how the bigger companies fare.
International demand for smartphones declined drastically as smartphone saturation has reached a peak, and the desire to upgrade to newer, more expensive models has gone down.
Predicting the Future
Because international demand for high-end phones is going down, the phone companies are seeing this as an opportunity to introduce mid-range phones that target consumers on a budget.
There are also some countries, namely India, that have yet to adopt high-speed 4G data. A plan is in place in local communities to upgrade the data systems. When they do, it stands to reason that demand for the newer phones will surely follow.
A last-but-not-least thought: The decline isn’t catastrophic, so analysts are looking towards September when Apple releases a new iphone and interest spikes for the holiday season. The market may continue its slide until then, but analysts are hopeful that a rise is in the near future.
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