Growth in device spending as consumers become ‘less price sensitive’, says Gartner

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Users of PCs, ultramobiles and mobile phones are buying new devices at higher average selling prices (ASPs), resulting in growth in end-user spending in 2017. Gartner Inc. estimates that end-user spending will increase by 2 per cent in 2017, to nearly $600 billion in current US dollars. Spending on mobile phones will represent 67 per cent of that figure (see Table 1).

It estimates that ASPs for computing devices and mobile phones will increase by 2 per cent in 2017 in US dollars, for two main reasons.

First, component price increases are continuing into 2017 (mainly for PCs but also to some extent for phones), which is resulting in more expensive products. Second, users’ interest in value and higher quality phones is increasingly overriding their desire for low prices.

Says Ranjit Atwal, research director at Gartner.

“Across the world, the device market is becoming less price-sensitive. Consumers and businesses are seeking better products that suit their lifestyles, rather than just opting for the cheapest products.”

Table 1

Worldwide End-User Spending by Device Type, 2016-2019 (Millions of Current US Dollars)

Device Type 2016 2017 2018 2019
Traditional PCs (Desk-Based, Ultramobile Premium  and Notebook) 163,906 163,351 166,259 169,192
Mobile Phones 382,859 399,497 408,170 423,558
Ultramobiles (Basic and Utility) 40,436 36,286 35,171 34,411
Total Device Market 587,201 599,134 609,601 627,161
           

Source: Gartner (April 2017)

Meanwhile, end-user spending on mobile phones is on track to reach nearly $400 billion in 2017, an increase of 4.3 per cent from 2016.

“The increased ASP for mobile phones was driven by users across the board,” says Annette Zimmermann, research vice president at Gartner.

“They are replacing their basic phones with better-quality and more feature-rich basic phones, due to improved product portfolios from rising vendors such as Huawei and Oppo.”

In emerging markets, the majority of users are upgrading to better basic phones as the leap to premium phones remains out of reach for most.

Greater availability of basic phones from Chinese vendors such as Oppo, BBK and Huawei increased the basic-phone ASP by 13.5 per cent in 2016 and it is on track to rise by 4 per cent in 2017.

Adds Mrs Zimmermann:

“We expect users to continue to look for higher-value phones this year, which will lead to another rise in ASP. The high-end smartphone ASP will continue to soar, given the announcement of the Samsung Galaxy 8 and the release of the tenth-anniversary Apple iPhone later this year. We expect the premium-phone ASP to increase by 4 per cent in North America in 2017.”

Shipments of PCs, ultramobiles and mobile phones are projected to total 2.3 billion units in 2017 — achieving flat growth from 2016 (see Table 2).

Table 2

Worldwide Device Shipments by Device Type, 2016-2019 (Millions of Units)

Device Type 2016 2017 2018 2019
Traditional PCs (Desk-Based and Notebook) 220 205 196 191
Ultramobiles (Premium) 50 60 72 82
PC Market 270 265 268 273
Ultramobiles (Basic and Utility) 169 161 158 157
Computing Device Market 439 426 426 430
Mobile Phones 1,893 1,910 1,920 1,954
Total Device Market 2,332 2,336 2,346 2,384

Note: The ultramobile (premium) category includes devices such as Microsoft Windows 10 Intel x86 products and the Apple MacBook Air.

The ultramobile (basic and utility) category includes devices such as the Apple iPad and iPad mini, Samsung Galaxy Tab S2, Amazon Fire HD, Lenovo Yoga Tab 3 and Acer Iconia One.

According to Gartner, the PC exodus has reached its peak, but near-term growth of PC sales will be hampered by increasing component costs. Component costs, especially for DRAM, have doubled since June 2016.

As a result, PC providers will increase the prices of PCs toward the end of the year. Gartner expects the overall ASP for PCs to increase by 1.4 per cent in US dollars.

More detailed analysis is available to clients in the reports “Forecast: PCs, Ultramobiles and Mobile Phones, Worldwide, 2015-2021, 1Q17 Update” and “Gartner Market Databook 1Q17 Update.”

 

 

 

Chris Price