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Smartphone sales in 2019 will total 1.5 billion units — a 2.5% decline from 2018. In North America, sales are down 4.4 percent, overall.

Does this mean we have fallen out of love with our smartphones?

Not quite. In 2019, for the first time, we will spend more time on our phones than watching TV. But before buying a new smartphone, many consumers are still waiting for more transformative technology and experiences, which is leading to declining sales and putting more pressure on device manufacturers than ever before.

The problem of increased buyer power

As barriers to entry lower and an increasing number of device manufacturers enter the playing field, the marketplace is becoming more commoditized and competitive. Established smartphone market players are losing share to newer entrants, with Chinese players redefining the capabilities of the mid-market. Today, three of the top five smartphone manufacturers worldwide are Chinese companies.

With more options to choose from, consumers no longer feel they must spend a lot on a high-end phone that is only incrementally better than a much more affordable device. Likewise, with the lifetime of a high-end smartphone expected to continue increasing, consumers do not need to upgrade as frequently as they once did.

So with consumers purchasing less and expecting more, what can we expect to see manufactures doing to innovate their products and ultimately drive sales?

It’s possible that foldable designs will define a new device category that offers enhanced content consumption experiences. Users’ appetite for phones with larger displays, which allow them to more easily consume media, is increasing. Yet, these devices will remain expensive for the medium-term, and they have yet to prove themselves at a premium level.

One area that is expected to drive replacement sales starting next year is 5G. We are still at the beginning of 5G service rollout, and it will take time for carriers to increase coverage beyond major cities and build high-impact, convenient, everyday use cases that convince users of the benefits of 5G. During 2020, increased availability and more affordable 5G phones will begin to help drive sales.

Smartphones as part of a larger intelligent ecosystem

In the coming years, smartphone innovation will come in the form of high integration of software, services, and hardware as device manufacturers strive to differentiate themselves as ecosystem owners rather than just technology leaders.

Taking advantage of machine learning and AI, premium smartphones will use sensors and IoT to create novel user experiences in intelligent “ecosystems” that go beyond the smartphone or any single device. For example, a smartphone would work within a larger set of collaborating “smart things” such as smart locks, virtual personal assistants, and other intelligent devices and technologies in our homes, offices, and vehicles.

Technology providers that successfully create connected experiences across a mesh of devices, from mobile to auto to home, will answer consumer expectations for integrated “smart experiences” and foster deeper and highly valuable brand relationships. As a strategy, this may be the best way to get around the boom-bust cycle of device upgrades and build user loyalty. That’s because when consumers own multiple products and build and invest in valuable experiences within a single manufacturer’s device family, it becomes more difficult for them to switch to another ecosystem.

Emerging technologies open doors for innovation

Modeling and predicting an individual’s smartphone usage based on contexts such as their mobile activity, behaviors, location, or social information will be a strategic aim for most manufacturers. Devices can learn users’ habits, needs, and behaviors to predict their demands, helping users decrease their cognitive load and lead a better life. Within the next three years our personal devices will know more about our emotional state than our own family knows.

As businesses leverage more sensor data to create intelligent and personalized mobile experiences, smartphones will increasingly combine biometrics, machine learning, and edge AI technologies, such as computer vision and voice analysis, to deliver personalization. AI holds the power to extract a significant amount of information from our voice or facial expressions. Although just emerging, this technology holds the potential to detect emotion, and in some cases even monitor our health and wellbeing – creating many potential use cases and benefits. In coming years, personalization will become a key battleground for device manufacturers.

However, increased personalization will require vendors to make investments in security capabilities that demonstrate their commitment to user privacy. Players will be challenged to understand the nuanced views of consumers around privacy and personal data, identifying the different levels of users’ sensitivity around which they can build meaningful personalization.

In coming years, our devices will become more empathic — that is, better able to understand our needs. Smartphone makers will need to put the user first in every strategy. As smartphones become even more prevalent in our lives, they will need to offer new value based on context to remain the primary touchpoint in a mesh of intelligent machines.

Roberta Cozza is a Senior Director Analyst at Gartner’s Tech Product Manager team within the Technology and Service Providers (TSP) research unit. 

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