“The two-year upgrade cycle is dead,” declares Ting Mobile in new research on consumers’ smartphone upgrade habits. This likely comes as no surprise to mobile network operators, with both AT&T and Verizon reporting record-low device upgrade rates in recent quarters.
Postpaid MVNO Ting Mobile’s survey of more than 3,600 people found that 47% of respondent kept their mobile phone for between three to five years before upgrading — and an even higher percentage, 55%, said they expected to keep their current phone for 3-5 years before upgrading again. Eight percent of respondent kept their phones for more than five years.
David Christopher, president of AT&T Mobility and Entertainment, said on AT&T’s June quarterly call that the company expects low upgrade rates to continue due to handset pricing and continued similarity in features. A survey by Business Insider conducted earlier this year found that one in three U.S. iPhone users reported that they weren’t upgrading their devices due to either cost or a lack of new features.
Those data points are playing out in the larger smartphone market, which has been trending downward for some time. Analyst firm IDC reported that first-quarter 2019 global smartphone shipments were down 6.6%, in the sixth straight quarter of decline — but the U.S. market saw an even steeper slide, down 15% year-over-year in the first quarter. Huawei was the only device manufacturer to report growth in smartphone shipment volume (50% growth, in fact) and market share.
In the U.S., however, “replacement rates continue to slow in one of the world’s largest markets,” IDC said. “Apple iPhone challenges contributed to the exceptionally poor 1Q19 in the U.S., but they were not alone as Samsung, LG, and other top vendors also witnessed declining volumes during the quarter.”
Anthony Scarsella, research manager with IDC’s Worldwide Quarterly Mobile Phone Tracker, said that the U.S. smartphone market decline in the first quarter “can be attributed to the continued slowdown we are witnessing at the high end of the market. Consumers continue to hold on to their phones longer than before as newer higher priced models offer little incentive to shell out top dollar to upgrade. Moreover, the pending arrival of 5G handsets could have consumers waiting until both the networks and devices are ready for prime time in 2020.”
So will 5G goose the smartphone market and provide incentive for consumers to upgrade? That’s the hope.
5G devices certainly have momentum in terms of getting in the market, but how quickly they will be adopted remains to be seen. More than 100 5G devices have been announced so far, with a number of 5G flagship smartphone devices already on the market. T-Mobile US just this week officially opened its 5G device testing lab.
CCS Insights has said that in the face of challenging market conditions, smartphone makers “are pinning their hopes on 5G devices” and that it expects 2020 to be a turning point for the market. The analyst firm has said that it expects shipments of 5G devices “to get off to a slower start than previously anticipated,” but with an “encouraging growth trajectory from 2020 and beyond.”
“History has shown that the introduction of a new ‘G’ always helps to energize demand for new phones, and 5G will be no exception,” said Marina Koytcheva, CCS Insight’s vice president of forecasting.
