Smart Growth

What’s happening to demand for smart phones?

Photo: Alexandre Vanier. Source: Pixabay

Once, it seemed like smartphones would reach everywhere and do everything. But even Apple seems to be running out of room to grow. People will buy around 1.4 billion smartphones this year. That’s up less than 1% from 2015, when sales grew by over 10%. And it’s way down from the earlier part of the decade, when sales were growing by almost 50% per year.

Android phones are still growing. The free operating system is being used by several low-cost manufacturers in China and India—the places where smartphones are still growing. But Apple looks like it will post its first sales decline in 2016—over 10%. Apple’s 5-year revenue growth has fallen in the last two years from over 30% to just 10%.

Apple 5-year revenue growth. Quarterly data. Source: Bloomberg, Apple

I wrote yesterday that trees don’t grow straight to heaven. Five years ago it seemed that Apple would never stop growing—that there were four major asset classes: stocks, bonds, cash, and Apple. And the only correct decision to make regarding those shares was to buy them and never sell them. Obviously, that’s not the case anymore.

Apple share price. Source: Bloomberg

But they’ve grown into a new problem: not enough customers. There are only 7 billion people in the world—and not all of them can afford iPhones. Unless phone makers do something radically new, smartphone sales growth will be limited by the growth of the global economy. It’s time to think different.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2017-07-17T12:21:36+00:00 November 30th, 2016|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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