Portable Electronic Devices December 2014
Want more free featured content?
Subscribe to Insights in Brief
People will remember 2014 for three significant developments in portable electronic devices. First, smartphone makers saw the developing world emerge as a rapidly growing market for their devices. Second, in the developed world, wearable computing began to go mainstream. Third, smartphones and, to a lesser degree, tablets moved from competing with other electronic devices such as digital cameras and GPS navigation tools to acting as a remote control and dashboard in users' everyday, offline lives.
Emerging Markets Drive Growth
The center of gravity for smartphones moved firmly to the developing world in 2014, as manufacturers pursued faster-growing markets in Asia, Africa, and Latin America and as sales in Europe and North America stalled. According to Gartner, in 2014, 1.86 billion mobile phones shipped—a modest increase over 2013, when 1.80 billion shipped. Most of the growth came in lower-cost Android smartphones, with more than a billion Android phones shipped to emerging markets. Android Authority forecast that the largest Android-phone market growth was in Central and Latin America, which saw an increase of 68.9% year over year, followed by Africa and the Middle East at 54.2% and Asia at 45.9%. North America's market, in contrast, grew at only 5.6%. The Asian market is also the most diverse in number of significant players: Samsung's market share in Africa and the Middle East exceeded 50% in 2014; in Asia, Lenovo, Xiaomi, Huawei, and others kept Samsung's market share to 16%. (Indeed, the Chinese market is now so large that six of the world's ten best-selling smartphone companies are Chinese, according to a late 2014 Telecoms.com report.)
Analysts saw the appetite for tablets slowing in 2014. IDC estimates that although the worldwide tablet market grew 7.2% in 2014, with 235.7 million tablets shipping, that growth was modest in comparison with 2013's 52.5% increase. Even sales of the Apple iPad were lower in 2014 than in 2013: The number of inexpensive Android tablets increased, and new Windows tablets were released. The year 2014 was also the first in which tablet sales in emerging markets exceeded those in mature markets, accounting for 50.6% of the market; emerging markets also grew by 11.5%, in comparison with 3.1% for mature markets.
Wearables Go Mainstream
Whereas the tablet and smartphone markets are plateauing, the wearables market started to take off. A decade ago, the idea that users would trade their Palm and BlackBerry devices for smartwatches seemed like science fiction. Even three years ago, wearables were still a novelty or toys for early adopters. But according to an IDC forecast, 19 million wearable devices would ship in the United States in 2014—triple the numbers of 2013. Not only are sales rising rapidly, but other developments indicate that wearables are maturing as an industry category.
A number of existing wearable-device companies—including smartwatch-start-up Pebble, smart-health-companies Fitbit and Jawbone, and Samsung and LG—all updated their offerings, rolling out new products with enhanced features and often featuring friendlier, less futuristic designs. In China, smartphone-maker Huawei released its first smartwatch; competitors ZTE and Baidu announced plans to release their own models. Several other companies—from start-ups Cuff and Ringly to technology-giant Intel—announced products that merge wearable computing and jewelry. Google announced Android Wear, a version of the operating system for wearables. Sony's bold but minimalist prototype FES watch, with an epaper screen and band, surfaced in November, with a tentative release date of mid-2015. Last but not least, in September, Apple unveiled its long-awaited Apple Watch, which will ship in 2015.
Other indicators point to the interest in wearables beginning to move beyond early adopters. In the spring of 2014, children's-technology-company VTech released a "smartwatch" consisting of a wrist-worn digital camera and watch. At the same time, Chinese high-tech counterfeiters released a number of fake smartwatches. This release was significant because counterfeiters enjoy grudging admiration for their trend-spotting ability and previously had stayed out of the wearables market. (The fact that they avoided copying Samsung's Galaxy Gear was also a sign that the product would fail.) During 2014, users of crowdfunding site Kickstarter fully funded or oversubscribed to 53 wearable-device projects, from smart rings and gloves to sleep and alertness monitors.
However, the availability of more wearable fitness devices may create confusion among consumers, and overall unit sales would decline slightly. Gartner estimated that worldwide, 70.2 million wearable fitness devices would sell in 2014 and that 2015 would see that figure drop to 68 million. By 2016, it forecast, growth will accelerate thanks to a combination of new products and better data management as more products adopt Apple's HealthKit, Google's Fit, and Samsung's S.A.M.I. (Samsung Architecture Multimodal Interactions).
Smartphones Serve as Life Controllers
Cell phones have long been tools for communication between people, and smartphones developed to give users the internet and electronic data while away from desks and personal computers. Although the smartphone market in North America and Europe shows signs of having matured, with sales growth slowing in comparison with sales in the rest of the world, smartphone usage continues to grow. In November 2014, digital-analytics-firm Flurry estimated that in Q3 2014, Americans for the first time spent more time in interacting with smartphones and tablets (177 minutes) than in watching television (168 minutes). This increase is dramatic since 2012, when Americans spent only 109 minutes a day with digital devices. Nielsen estimated in mid-2014 that users spent an average of 30 hours and 15 minutes a week on smartphones in Q4 2013—a 65% increase over the 18 hours and 18 minutes Nielsen estimates they spent in Q4 2011.
In other words, in the developed world, device makers and app developers now find bigger growth opportunities in focusing on users' time than in focusing on sales. Mobile users also represent an important market for social-media companies such as Facebook and Twitter, because mobile usage offers more detailed behavioral data than PCs do and provides insights into the behavior of a commercially attractive demographic (because the heaviest mobile-app users tend to be young).
It became clear in 2014 that a growing number of companies are designing products and services around the assumption that they will connect to smartphones or be accessible via smartphone app and will connect to personal computers only occasionally (if at all). Smartwatches have moved firmly in the direction of working as "second screens" and simple interfaces for smartphones not as competitors to smartphones. Fitness monitors such as the Fitbit and Jawbone Up by design communicate primarily with a wearer's smartphone (and send data via smartphone to cloud-based services), and smart clothing is on track to operate in similar ways. Car-service Über allows users to sign up for its service via a web browser, but users are to arrange rides via smartphone app. Finally, many smart-home appliances—including the Nest smart thermostat; the Philips Hue lightbulb; smart door locks from Kwikset, Schlage, and Yale; and electrical outlets and switches from D-Link, Belkin, and GE—are paired with apps that allow control to come from a homeowner's smartphone.