Troubled Smartphone Market May Hurt Apple Badly

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A new IDC study shows that smartphone sales will be flat this year. That means Apple Inc. (NASDAQ: AAPL) will release the iPhone 7 into a stagnate market.

According to IDC:

Worldwide smartphone shipments are expected to reach 1.46 billion units with a year-over-year growth rate of 1.6% in 2016 according to the latest forecast from the International Data Corporation (IDC) Worldwide Quarterly Mobile Phone Tracker. Although growth remains positive, it is down significantly from the 10.4% growth in 2015. Much of the slowdown is attributed to the decline expected in developed regions in 2016, while emerging markets continue with positive growth. Developed markets as a whole (United States, Canada, Japan, and Western Europe) are expected to see a compound annual growth rate (CAGR) of -0.2%, while emerging markets (Asia/Pacific excluding Japan, Central and Eastern Europe, Middle East and Africa, and Latin America) will experience a CAGR of 5.4% over the 2015-2020 forecast period.

Jitesh Ubrani, senior research analyst with IDC’s Worldwide Quarterly Mobile Device Trackers, wrote that the problem may be more than just a slow environment:

Growth in the smartphone market is quickly becoming reliant on replacing existing handsets rather than seeking new users. From a technological standpoint, smartphone innovation seems to be in a lull as consumers are becoming increasingly comfortable with “good enough” smartphones.

Going out to 2020, IDC expects Apple’s market share to drop slightly.

Worldwide Smartphone Shipments by OS, Market Share, and Annual Growth (shipments in millions)
Platform 2016 Shipment Volume* 2016 Market Share* 2016 YoY Growth* 2020 Shipment Volume* 2020 Market Share* 2020 YoY Growth* 5 Year CAGR*
Android 1,246.2 85.3% 6.7% 1,507.1 85.7% 4.4% 5.2%
iOS 203.8 13.9% -12.0% 249.2 14.2% 3.4% 1.5%
Windows Phone 7.2 0.5% -75.2% 1.7 0.1% -23.2% -43.4%
Others 3.9 0.3% -56.5% 0.8 0.0% -3.9% -38.7%
Total 1,461.2 100.0% 1.6% 1,758.8 100.0% 4.2% 4.1%
Source: IDC Worldwide Quarterly Mobile Phone Tracker, September 1, 2016