Verizon Communications Inc has announced a record low last quarter for its upgrade rate on old smartphones. This sends a particularly worrying message to mobile phone suppliers that consumers are keeping a hold of their old phones for longer.
Due to the rapid advancement in software and telecommunication, smartphones quickly reached a point where many say it has peaked. How, each new smartphone model only provides a moderately or slightly improved product. For an item that averages at a US$1,000 (RM4,135) price tag, consumers are becoming more hesitant to purchase new smartphones that they see as ‘not worth the cost’.
“Incremental changes from one model to the next, hasn’t been that great, and it hasn’t been enough of an incentive”, said Verizon chief financial officer Matt Ellis after the company reported fewer-than-expected new customers for the first quarter. Verizon expects replacement rates to remain low for a year.
Apple Inc has also faced sales pressure in major markets for their popular smartphone products. Wells Fargo analyst Aaron Rakers cut his forecast for iPhone shipments to 40.4 million from 44 million for Apple’s second quarter, which ends this month.
This trend of consumer caution began nearly five years ago. Due to a wide range of costly promotions, carriers slowly stopped offering deep discounts on smartphones in exchange for two-year plans. Instead, they marketed instalment payment plans for new phones priced at up to US$1,000 (RM4,135).
Some Apple fans have made it known that they believe the iPhone product reached its design peak with the iPhone 6 in 2014/2015; making upgrading less necessary and appealing. This time period was also Apple’s biggest sales year.
“Our first data point from Verizon is not a positive sign for Apple”, said BTIG LLC analyst, Walt Piecyk. “It’s been more than four years since the iPhone 6 ‘super cycle’, and the replacement cycle continues to lengthen”.