There is no innovation more emblematic of the early 21st century than the smartphone. Putting a handheld computer combined with a video camera, permanently connected to the Internet, in the pockets of billions of people has profoundly changed society. But smartphones have already passed their peak, and will be increasingly commoditised in the next decade.
The launch last week of the Samsung Galaxy S8 is a case in point. The Korean giant has sold more than a quarter of a billion Galaxy devices since 2010. Only the mighty Apple iPhone has been more successful. And yet Samsung’s newest device is not much different from the previous version.
The only real differentiator with the Galaxy S8 is the edge-to-edge screen. There’s no doubt that it is a strikingly attractive phone, or that the new screen adds to its desirability. But the S8 brings little innovation to the market. Sure, it has a facial recognition feature that unlocks your phone when you look at it. And yes, it has a personal assistant, called Bixby. But neither of these are new ideas — even for Samsung.
Samsung isn’t the only one struggling to differentiate its new devices. Apple’s last two iPhone versions have been largely identical. The innovations Apple has introduced in the past two years — including the much-hyped “3D touch” — are incremental at best.
We also see this trend in hardware specifications. Processing power has been creeping steadily upwards, as has RAM, but there have been no substantial leaps in the last two to three years. The most significant increases have come in storage — top-end phones now offer up to 256GB of capacity — but that has more to do with falling component prices due to economies of scale rather than innovation.
The fact that this lack of innovation hasn’t affected sales shows us two things: firstly, most customers don’t really care about new features, and secondly, we’ve reached the natural plateau that governs every technology known to man.
If you ask most ordinary users about the processor or the RAM in their device, they will neither know nor care. It’s equivalent to asking them what brand of spark plugs they have in their car, or whether they prefer one brand of lightbulb over another. Most customers use a tiny fraction of the features offered by their smartphone, and they are perfectly happy with that state of affairs.
This convergence of customer expectations usually coincides with a technology reaching maturity, and with a rapid slowdown in changes to that technology. Every innovation known to man, from fire to the internal combustion engine to the semiconductor, is subject to this natural law. The only thing that differs is how long it takes to reach this plateau.
The plateau might sound like a good thing for device makers. When technologies are well understood they are cheaper to produce and have stable and reliable markets. But both Samsung and Apple know that this plateau also means that low-cost competitors can begin to close the innovation gap and to eat into their profits.
Take Huawei, for example. Five years ago, this Chinese cellular equipment giant was largely unknown outside of the telecommunications industry. Its latest handset, the P10, is roughly comparable with the iPhone 7 and the Galaxy S7. It’s attractive, functional and powerful. It lacks some of the sex appeal of the big-name brands, but it’s 40% cheaper than either of them. In five years, Huawei’s devices will be every bit as polished as the mega brands.
Once smartphone technology is largely commoditised, Samsung and Apple will struggle to maintain their super profit margins. This is why both companies are spending record amounts on research and development, seeking to maintain the gap between themselves and upstarts like Huawei.
More than 40% of people on the planet already own a smartphone. That percentage will rise to above 60% by the middle of the next decade. By that time, smartphones will have finished their evolution into functional appliances. Apple and Samsung will probably become the Mercedes and BMW of the smartphone market — substantial players in the luxury segment, but not dominant in the industry as a whole.
There’s one clear winner in this titanic battle: the ordinary customer. Smartphones will keep getting cheaper and more ubiquitous, giving even the world’s poorest people the benefits of instant communication and (nearly) limitless access to information.
We may be bored with our phones, but the technology they contain will change the lives of another two billion people in the next 10 years. We should welcome that. — (c) 2017 NewsCentral Media
