The global smartphone market has been in the process of maturing in recent years, with unit sales slowing to a crawl in many major regions. Conditions have deteriorated: Market researcher IDC expects global unit volumes to decline by 2.2% this year, worse than its prior forecast of a 1.9% drop. That's presented headwinds for major smartphone makers like Apple (NASDAQ:AAPL).
Growth may return in 2020, driven by 5G adoption and sales in emerging markets. However, there's one subset of the smartphone market that's booming: used handsets.
Older iPhones continue to sell well in the secondary market. Image source: Apple.
Used smartphone volumes to march higher
This week, IDC put out estimates for the used smartphone market, which is expected to see unit volumes jump 17.6% in 2019 to reach 206.7 million units. That includes both used and refurbished devices. Looking further out, used smartphone volumes should grow at a compound annual growth rate (CAGR) of 13.6% through 2023 to hit 332.9 million units.
One contributing factor is the soaring cost of smartphones, with many flagship devices now priced at $1,000 or more. Apple had paved the way with the iPhone X in 2017, and other manufacturers have followed the tech giant upmarket. While prices have been climbing, new iPhones aren't including must-have features that justify the premium, and many consumers are happy with used models that cost less.
|
Region |
2018 Shipments |
2023 Shipments Forecast |
2018-2023 CAGR |
|---|---|---|---|
|
North America |
39 million |
87.2 million |
17.4% |
|
Rest of world |
136.8 million |
245.7 million |
12.4% |
|
Total |
175.8 million |
332.9 million |
13.6% |
Data source: IDC.
"Refurbished and used devices continue to provide cost-effective alternatives to both consumers and businesses that are looking to save money when purchasing a smartphone," IDC research manager Anthony Scarsella said in a statement. "Moreover, the ability for vendors to push more affordable refurbished devices in markets in which they normally would not have a presence is helping these players grow their brand as well as their ecosystem of apps, services, and accessories."
IDC's Will Stofega also adds that trading phones in to upgrade, combined with broader availability of financing plans, will be the two biggest growth drivers of refurbished smartphone volumes in the years ahead.
Apple is doing all of the above
That all echoes what Apple has been doing in recent years. The Mac maker has been incrementally shifting its attention away from new unit sales toward monetizing its installed based through services. The booming secondary market is helping grow Apple's installed base, particularly in emerging markets. The company also recently added a new iPhone financing plan through Apple Card, while making trade-ins easier.
"[Growing the installed base is] a function of the robustness of the secondary market, which we think overwhelmingly hits an incremental customer," CEO Tim Cook noted last year. The chief executive also acknowledged that these are often customers that Apple can't address "in another way."
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January 15, 2020 at 09:00PM
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