Will Smartphone Sales… SLOW?

With smartphone sales continually climbing for the last few years and technology developing so quickly in the mobile industry, are handset makers doing too much, too soon? One of the biggest issues with purchasing a new device is, what’s next? While it seems smart to jump on that ‘first generation dual-core monster phone with 4G and a super high res screen and 30 bajillion gigabyte memory’, there is something to be said for the waiting game.

Carriers have realized that their smartphone users don’t sit very long on these expensive devices. Verizon Wireless was the first to dump their 1 year ‘early upgrade’ program and Sprint quickly followed pace. The reason for this is that they rely on the data fees from the phone to pay for the cost of the device. Using Verizon for an example, when you upgrade each year, they are only making $360 off that data package – or just enough to cover the discount on that $500 device that you got for $200. If they stretch that cost out to 22 months, they are making $660 or about double what they need to cover the cost (plus all that data hardware they keep having to upgrade.)

Many in the industry are calling for huge increases in smartphone sales citing that teens and children will start ending up with more and more of them. The problem that this brings out is that they are not taking in to account that parents aren’t going to willingly spend $250 on a phone and accessories for a child that has to last 2 full years before they can get a new one. Plus, the carriers are making it less and less affordable for a family to have data plans across the board. Sprint had undoubtedly the best deal on family data packages at $129.99 for the first two lines and $19.99 for each additional line. This brought your total to about $225 after taxes. Now you need to add another $50 plus tax to that total. Having a smartphone just got much more expensive.

The other issue with terminating the early upgrade feature on the carriers, at least for the manufacturers, is that people will WAIT for something bigger to come out, rather than just using their 1 year upgrade. It’s scary to think that the EVO isn’t even a year old yet, and it’s already out-classed by dual-core phones in the European market.

This isn’t something that will change soon, and you will always have those people that will pay $500 for a new device regardless of how old their ‘old’ one is, but for the future of phones, we definitely see a slowing trend if the carriers don’t make some changes to their upgrade programs to make it affordable again.

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