Smartphones set for 'watershed' year

Smartphone are set for a "watershed" year during 2013, as device shipments are expected to close in on one billion units.

According to a new forecast from IDC, smartphone shipments are expected to grow 32.7% year over year in 2013 reaching 958.8 million units, up from 722.5 million units last year.

The research firm says this year will mark the first year that smartphone shipments surpass those of feature phones, with smartphones expected to account for 52.2% of all mobile phone shipments worldwide.

This trend will continue for years to come as demand for mobile data and handheld computing spreads across both developed and emerging markets, with emerging markets set to account for 64.8% of all smartphones shipped during 2013, which is up from 43.1% in 2010.

"2013 will mark a watershed year for smartphones," says Ramon Llamas, Research manager, IDC's Mobile Phones program.

Llamas says driving smartphones forward has been a perfect combination of strong demand from end users, greater emphasis by both carriers and vendors, and a deep selection of devices available at multiple price points.

In addition, user behavior has switched from simple voice telephony to data consumption and creation, and the smartphone has become the ideal tool for many users.

"If you look at the number of vendors who support both feature phones and smartphones, many of them have not only successfully transitioned their product portfolios to highlight smartphones, but smartphones have become their primary value proposition going forward.

"In some cases, smartphones have accounted for well over 50% of their quarterly shipment volume.

"Looking ahead, we expect the gulf between smartphones and features phones to grow ever wider."

With the rise in global smartphone shipments, demand has quickly spread from developed markets to emerging markets.

As a result, smartphone average selling prices (ASPs) have declined to US$372 during 2013, down from $407 in 2012 and $443 in 2011.

As this trend continues, IDC predicts smartphone ASPs will drop as low as $309 by 2017 with emerging market demand the main catalyst in this change.

"At a time when the global smartphone market is growing at 33% year over year, average selling prices have plummeted, dropping -8% in 2012 with another -9% expected this year," says Ryan Reith, Program manager, IDC's Mobility Trackers.

"Smartphones have become increasingly common in emerging markets and it is often the first affordable means of computing for these markets.

"These are markets where average personal income is far less than in developed markets, and therefore vendors have been forced to create smartphone computing experiences for the low end of the market."

Reith claims one way in which vendors have managed to keep costs down is by continuing to produce 3G smartphones alongside faster 4G smartphones.

Using older radio components has proven to be an easy cost-cutting measure for handset OEMs in the smartphone space, with 3G-enabled smartphones set to account for 70.9% of all smartphones shipped in 2013, and 50.1% of smartphones shipped in 2017.

Reith believes this is a clear indication that a "good enough" computing experience is suitable for many, especially when it comes to cost trade-offs.

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