In the same way that is happening in other sectors such as telecommunications, the manufacture of smartphones is an increasingly consolidated market in recent years, with fewer but increasingly larger brands.
In 2017, there were 700 active mobile brands in the world that competed in the market, but in just a few years the panorama in terms of the number of manufacturers has changed radically, as can be seen from the latest research published by the analyst Counterpoint Research.
In 2023, the number of active smartphone brands has been reduced to around 250, which means that 2 out of 3 mobile brands have disappeared in just 6 years.
The analyst estimates that almost 500 mobile manufacturers have closed from 2017 to today, based on data from more than 70 countries.
Although this trend may seem negative to those who staunchly defend the free market, the consolidation of mobile manufacturing around fewer brands does not necessarily have to be negative news for a sector that has experienced profound changes in recent years.
Computer Today has contacted several experts and they have highlighted the positive implications of the trend towards fewer mobile brands.
The decline is due to the fact that there are fewer local manufacturers…
The decrease in the number of mobile manufacturers is mainly due to the disappearance of local brandsthat is, they only operate in a specific country or region.
In 2017, brands considered as local kings. Surely you remember the example of BQ in Spain, which in 2017 still had a significant presence in our country thanks to best-selling models such as the Aquaris series.
But in 2018 BQ was sold to the Vietnamese conglomerate Vingroup, owner of the VSmart brand, which landed with its first terminals in Spain in 2019 but did not have much travel. In 2021 VSmart closed permanently and with it all traces of the most successful mobile brand in history.
The same has happened with other local mobile manufacturers that became very important, as is the case of Micromax in India and Symphony in Bangladeshwhich do still exist but have lost the dominance they had over their markets that they had a few years ago.
These brands suffered especially with the COVID-19 pandemic between 2020 and 2021, as they had difficulties in continuing to access components in the midst of shortages, while in 2022 and 2023 inflation has made it more difficult to continue operating due to costs, as Counterpoint highlights.
As a positive logical consequence, the fact that the disappearance of brands mainly affects local ones means that users around the world have access to a catalog of terminals that are more similar to each other, and not segmented by countries and small brands.
…but today minority brands account for a tiny percentage of sales
The decrease in the number of mobile brands has the positive counterpart that it does not really affect the global market too much, because the local brands that have stopped operating barely reach a few crumbs compared to the total.
“At Canalys we track the 40-50 largest brands in the world. These brands They represent approximately 99.5% of the units on the market and probably 99.8% of the value made from a smartphone,” says Canalys analyst Runar Bjørhovde.
The fact that they only focus on a few markets makes it very difficult for a local brand’s business to be profitable.
“Local brands operating in specific markets may have advantages, such as better knowledge of the local market and a deeper understanding of consumer needs. However, they also face challenges, such as a lack of global brand recognition and limited resources to adapt to the new needs of the international market,” says Verónica Ferrer Moregó, Director of Strategy at Pitaya and professor at EAE Business School.
It is a symptom of market maturity…
The fact that there are fewer mobile phone manufacturers is a symptom that the market is gaining in terms of maturity since it is increasingly established, according to experts.
Firstly, because it means that companies that remain in the market are better prepared for an economy of scale that increasingly gives priority to large companies that are better established in the market over small ones. In many cases these brands have their own factories, compared to the models fabless long time ago.
“There is one essential thing that determines whether a company will be successful in the long term or not: economy of scalethat is, the ability to have sufficient volume and sufficient production to manage those fixed costs over time […]. It could be a big reason why we’ve seen the market maturing,” says Runar Bjørhovde.
Another positive consequence is that the cases in which local brands have been more successful, they have not necessarily disappeared but in many cases the Large global brands such as Samsung or Xiaomi have purchased the facilities of smaller manufacturers to strengthen its global infrastructure.
“As technological innovation skyrockets and brand saturation in the market becomes more competitive, smaller brands may struggle to stand out and compete, leading to acquisitions, buyouts, and industry consolidation. “, agrees Ferrer Moregó.
…and the consumer, who has more knowledge and is more demanding
From 2017 to the present there is another aspect that has changed a lot: the consumer himself.
At that time, users were buying their first or second smartphone in many cases and did not have as much knowledge about the product they were buying or the needs they might later have.
But today we know much more about mobile phones, and that forces mobile manufacturers to invest increasing amounts of money in innovation to keep up with competitors.
“The main driver of consumer purchases is the level of innovation that a product has.. Therefore, once a brand falls behind the pace of innovation in the market, it will be eliminated by natural selection,” explains TrendForce analyst Kevin Ma.
In this way, it is difficult to maintain a business model that was very common a few years ago but is a rarity today: white label mobiles, manufactured by one supplier but under a different signature.
This is the case of telecommunications operators. Vodafone, for example, sold its own white label mobile phones several years ago in Europe, but that no longer exists.
“In Europe and North America, one or two white brands of devices have disappeared in the last 5 or 7 years,” according to Bjørhovde.
2017 was the peak of mobile sales and the market has been in decline since then
The mobile market has changed a lot in the last 6 years also in another aspect: fewer and fewer smartphones are sold.
2017 was the year in which the most mobile phones were sold worldwide in history, reaching 1,566 million units sold.
But since then this figure has been gradually falling, and last year 1.2 billion smartphones were sold, the lowest figure since 2013, according to Counterpoint.
“The reduction in the number of smartphone brands is closely linked to the reduction in market volume. With a decrease in sales and narrower margins, especially for those companies whose competitive advantage lay in offering cheaper prices than their large competitors, they can make it unsustainable for smaller brands to remain in the market,” says Ferrer Moregó.
Therefore, the fact that there are fewer mobile phone manufacturers is a positive consequence of a market that otherwise could not support 700 economically profitable brands.
Mobile phones are used for longer and that benefits large and more reliable brands
A related positive implication of consumers having greater knowledge about the mobile phones they buy is that they use them for longer, and therefore lower sales and focus on fewer brands.
“The decline in market volume since its peak in 2017 is due in part to the increased longevity of device replacement cycles“says the EAE Business School professor in the Big Data and Analytics Master.
Compared to 2017, the current market is more mature and users are betting more on brands with higher quality, more durable devices with more support, so the number of brands is also reduced along with total sales.
“The software and hardware capabilities of smartphones have improved significantly since the industry’s inception, resulting in longer product lifespans,” agrees TrendForce’s Kevin Ma.
European laws will bring even greater concentration
As a positive consequence of the concentration for European consumers, we must also highlight the arrival of new laws in the European Union that seek to extend the support period for smartphones and other electronic products.
Although this law was originally proposed for household appliances, in 2025 manufacturers will have to start guaranteeing products such as mobile phones with 5 years of software updates and 8 years of guaranteed spare parts for European consumers.
“The cost of 2 or 3 more years of software updates is going to make it very difficult for manufacturers of very cheap phones to operate profitably in Europe and have a sustainable business model,” warns the Canalys analyst.
For all of the above, this positive consequence for European consumers runs the risk of increasing concentration in a sector that has already been driven by this trend for some time.
“From Europe’s point of view, the pressure on the market causes it to consolidate more towards a few powers. We are only at the beginning of something that is going to accelerate even more in the coming years“, adds the expert.