Worries that after years of strong sales, the smartphone market may be saturated are weighing down cellphone makers like Samsung and HTC, both of which released discouraging numbers on Friday.
Despite registering a 47 per cent jump in profit and selling a large number of Galaxy S4 smartphones —10 million in the month of May — Samsung saw its stock fall after the South Korean company warned it won't be able to grow sales as quickly as it has in the past. Samsung shares are down 16.75 per cent this year.
HTC, which makes the popular HTC One smartphone, reported its sales for June were down 26 per cent from a year ago, citing increased competition. The Taiwanese company's stock is down 32 per cent this year on the Taiwan Stock Exchange.
Fewer wow features
Companies and analysts are increasingly concerned that sales of high-end smartphones can no longer grow at the rate they have over the past few years.
It has become harder to impress buyers with new features in upgraded models as most smartphones offer similar functions. Fewer wow factors in new smartphones mean people will not upgrade as quickly as they did when the devices were still a novelty, forcing device makers to spend more on splashy advertising and marketing.
With year-to-year improvements seen as marginal, it can be difficult to convince consumers to break a contract early or switch from a phone they're comfortable with.
Meanwhile, emerging market sales are increasingly dominated by lower-cost phones from China’s Huawei and ZTE, as consumers in those markets cannot afford phones costing hundreds of dollars.
Smartphone makers feel the pinch
All five major smartphone makers — Samsung, Apple, HTC, BlackBerry and Nokia — have seen their stocks drop this year, while the S&P 500, a broad index of U.S. companies, is up by nearly 14 per cent.
BlackBerry’s stock has dropped 19.5 per cent on the Nasdaq, as sales of its new BlackBerry Z10 and Q10 failed to meet expectations. It also expects more losses in the future.
Apple, long seen as the leader of the smartphone market, has cut the number of iPhones it intends to make this year from 40 million to 25 million, according to analyst Peter Misek.