North America’s smartphone market is facing a significant downturn in 2023, with a projected 12 percent decline in shipments, according to a recent report from Canalys.
This downturn comes as the region experienced its worst quarterly performance in over a decade during Q2 2023, primarily due to macroeconomic challenges, including rising interest rates and persistent inflation, which have resulted in decreased consumer demand.
The second half of 2023 is expected to see a slight uptick in smartphone sales, driven by the launch of new models by vendors in Q3. Notably, the premium smartphone segment, consisting of devices priced at $1,000 or more, is expected to remain resilient. Both smartphone manufacturers and distribution channels are actively investing in this segment, leveraging early trade-in programs and financing options to attract consumers.
In contrast, the low-end smartphone market, encompassing models priced below $200, is expected to continue to struggle, primarily due to declining prepaid demand.
While a modest recovery in smartphone shipments is anticipated for 2024, with a projected increase of 3 percent, it is unlikely that shipments will surpass 150 million units until at least 2027.
Lindsey Upton, an Analyst at Canalys, commented on the challenging market conditions, stating, “The market is highly volatile, as poor economic conditions accelerate key trends in the smartphone industry, such as elongated refresh cycles and declining carrier subsidies, adding to the industry’s sustainability imperatives and the ongoing 5G drive.”
To adapt to these challenges, mobile carriers and smartphone vendors are adopting more targeted strategies to build sustainable business models. Major carriers are optimizing premium plans to incentivize user and device upgrades, boost average revenue per account, and enhance customer loyalty.
For example, Verizon Wireless recently launched the myPlan, which has successfully attracted 70 percent of its customers to the premium option. T-Mobile has also introduced the Go5G Next and Plus plans, offering extended, no-interest payment plans to drive device upgrade and refresh cycles, particularly for premium devices.
Upton further emphasized the importance of the premium segment, saying, “Smartphone vendors are banking on the premium segment to navigate uncertainties.” The average selling price (ASP) of North American smartphones increased to $738 in Q2 2023, up from $663 in Q2 2022. Companies like Apple and Samsung have capitalized on this trend, recording 25 percent and 23 percent growth, respectively, in their premium segment shipments in Q2 2023.
Looking ahead, vendors are expected to take a more cautious approach when targeting the mass-market segment, as recovery is likely to be protracted due to ongoing inflation affecting consumer budgets. Major carriers have shifted their focus from prepaid to postpaid and premium segments.
Additionally, innovative approaches in retailer, carrier, and social media collaborations will be crucial for conveying brand and product messages in this challenging market environment. Sustainability regulations in North America will also play a role, with an emphasis on the right to repair and refurbished devices, potentially reshaping the smartphone business model in the region.
Despite the current hurdles, smartphone manufacturers and carriers are poised to adapt and innovate to meet the evolving demands of consumers in North America.