There’s been a lot of chatter about slowing smartphone sales ever since Apple (NASDAQ:AAPL) missed expectations in its last quarter. To be fair, the chatter started well before that event. But given the market’s love of all things AAPL, the talk has gotten louder this week. Perhaps “dull roar” would be a more apt description.
Let’s take a step back for a second and think about this rationally. How many iPhones does one person need? Well, just one. How often do you need a new one? Maybe every couple of years … tops. Do you need more than one tablet? Not unless you can swipe with your nose. And if you have an iPhone, iPad and a laptop, do you really need any more mobile devices? I don’t think so.
The data is simply showing that market saturation in certain areas, like the U.S., is starting to happen. No surprise there, given the rampant growth in mobile devices over the past few years. In other, less developed economies (China), there is still room to grow. Not just for Apple, but for Samsung and other competitors too.
But getting back to the “next smartphone market trend,” let’s be clear that market saturation in certain geographies doesn’t mean the smartphone market is dead. In some respects, it’s just getting going – investors just need to understand that the play isn’t all about unit sales.
Now that mobile devices have reached a critical mass, the options for how we use them will expand exponentially. And that means ever-increasing amounts of data are streaming around the world.
According to Cisco’s (NASDAQ:CSCO) VNI Mobile Forecast, in 2012 a smartphone generated 35 times more traffic than a traditional feature phone. That was in 2012. In its 2013 VNI Mobile Forecast, Cisco estimates smartphones now generate 50 times more data traffic than a traditional cell phone.
Other devices, like tablets, are not so gentle. They generate 120 times more traffic than a standard feature phone.
Much of this data, around 45% to 50%, is video. Credit Hulu, Netflix (NASDAQ:NFLX) and YouTube for this. And information sources, like Google Maps (NASDAQ:GOOG) and digital media, make up another 15% to 20%.
Fitting into a category of its own is the device-to-device data stream. This is the whole “connectivity” trend that’s become a 2014 buzz word. Expect it to become less fad and more fact as the year moves on.
This category is called by various names; “interconnectivity”, the “mobile internet of things” and “machine to machine” connections, depending on the source. One thing is clear though, and that is that a heck of a lot more mobile devices are going to be talking to each other five years from now than today.
CSCO tries to quantify the growth of this data category in its 2013 VNI forecast. The company’s projections call for a 24-fold increase in machine-to-machine traffic between 2012 and 2017. That’s a growth market, even if their forecasts prove to be wildly optimistic.
This looks like a market trend investors want to have exposure to. That might not ease the pain if you bought Apple last week at $550, but it sure should get you thinking that there’s more to the smartphone market than just unit sales – there are the data-related investment angles too.
There’s a whole world of these devices that are just starting to talk to each other. That’s the next smartphone market trend. And it’s time to become part of the conversation.
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