MM Research Institute (MMRI) recently published a couple of reports (1), stating that in Japan in 2013, smartphone shipments decreased by 3.7%. This was due to a combination of the following factors;
- Total mobile phone shipments decrease by 10.2%.
- Smartphone penetration is nearing saturation at roughly 45% of total mobile phone subscriptions.
Smartphone saturation
Observer the following graph from MMRI. This shows the number of subscribers. Blue is for smartphones and pink is for feature phones. The last bar is for Dec. 2013.
You can see how smartphone penetration is saturating. The current smartphone penetration is 44.5% and it looks like it might stop at 50%.
Additional information from the report;
- 52.4% of feature phone owners answered that their next purchase would be a feature phone. Only 34.4% said that their next purchase would be a smartphone.
- Reasons for not purchasing a smartphone include a) pricey data plans, b) no need for the additional features, c) difficulty of use.
- Smartphone users average 6,826 JPY per month whereas feature phone users average 3,746 JPY per month.
In interpreting this data, you have to understand that Japanese feature phones are pretty capable. They can do email (even email to/from PCs), surf mobile web sites (and there are many of these in Japan), play music, watch TV, take photos, play games and make NFC enabled purchases. You can even use LINE, the explosively popular messaging app although features are limited.
Also, virtually all smartphone data plans in Japan are unlimited data. There are some pay-as-you-go schemes but you quickly reach the ceiling after which your plan actually becomes the same as an unlimited data plan. Pre-paid plans are rare.
On the other hand, feature phone typically do not need data plans to access email or watch TV. A cheap voice plan is sufficient. You can subscribe to a data plan if you want to surf the mobile web or do more complex stuff, but I suspect that most of these users are now using smartphones.
Smartphone sales decline
- Total mobile phone sales decreased by 10.2%.
- Smartphone sales decreased by 3.7%
- Apple garnered 32.5% (+9.2 points vs. 2012) mobile phone share, or 43.6% of smartphone share.
- Other vendors are Sharp (14.6% share), Sony (12.6% share), Fujitsu (9.7% share), Kyocera (8.8% share), Samsung (5.9% share)
- Percent of smartphones sold vs. total mobile was 74.1%.
Combining the subscriber base (44.5% on smartphones) to the annual sales (74.1% smartphones), it is clear that feature phone users are clinging on to their old models. This is probably because R&D on feature phones has ceased and no new features are being added. Additionally, carriers are not promoting feature phones.
Implications for countries outside of Japan
What this data means is that around 50% of Japanese mobile phone subscribers do not need the high-end features of smartphones, and would be satisfied with email and voice. They don’t need Facebook or LINE on their phones (although they could if they paid for a data plan). They just need a convenient way to communicate.
Now assuming that we can apply this 50% number to other countries. Since these countries do not have the feature-rich feature phones that the Japanese have enjoyed for more than a decade, we can assume that low-end Android phones on pre-paid plans are being purchased instead.
What I am trying to say is that although U.S. smartphone penetration is now at 64%, which is significantly higher than the Japanese 44.5%, a large proportion of this number probably includes subscribers on cheap pay-as-you-go or pre-paid plans. These subscribers may be using their smartphones in a manner that is similar to Japanese feature phone users, hence including them in smartphone market share is potentially misleading.
In other words, U.S. smartphone penetration may be significantly higher than Japan but the way that people are using mobile phones in general might be much more similar.
Smartphone penetration is not the right metric
Instead of looking at smartphone penetration, I propose that we should be looking at data consumption. We should be looking at what percentage of the subscribers use their smartphones to use services over the Internet thereby consuming lots of data, and what percentage use it only for voice and simple messaging. Instead of looking at the hardware, we should be looking at how people use them. If data consumption data is hard to obtain, we should be using their data-plan (unlimited, postpaid, prepaid) as a proxy.
Similarly, we should be looking at how many iPhone users consumer lots of data and how many Android users consume lots of data.
In other words, at the low-end, Android is not a smartphone platform. It is a platform upon which vendors build a feature phone.
Naofumi Kagami 