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Smartphones are dead, part IV: The numbers speak for themselves

Smartphones are dead because of a combination of technological advancements and the even more substantial impact of how we as users have evolved in our expectations and usage of these devices. We, in practice, have moved smartphones more to the position of a personal computer than a phone. The smartphone is dead because it has evolved into something else: a mini-tablet PC.

We've moved smartphones more to the position of a personal computer than a phone.

The full breadth of the personal computing landscape is shifting. It is moved by the fluid mobility of our digital experiences. These experiences, by virtue what they are, compel and are compelled by our physical mobility. Tech companies like Microsoft, Apple and Google have attempted to remain in lockstep with this evolution by creating ecosystems of cloud-based computing to manage users' digital experiences. PC and smartphone (mobile-first) manufactures have iterated and evolved products, even switched roles, in attempts to keep up with the diverse demands of a personal computing industry that is in a state of flux.

Throughout this series, I have presented an analysis that the industry is evolving away from an iPhone- and Android-supported smartphone model toward an all-in-one ultra-mobile PC model, backed by Microsoft's Universal Windows Platform and Continuum. In addition to our previous analysis of the firm's market positions and personal computing strategies, recent data from IDC and Strategy Analytics seem to support the analysis thus far presented in this series.

Proof positive

Recent data from Strategy Analytics reflect our previous assertion that the smartphone market is now saturated and virtually anyone who wants a smartphone has one. This has led to the first global decline in smartphone sales ever:

According to the latest research from our Wireless Smartphone Strategies (WSS) services, global smartphone shipments fell 3 percent annually to reach 335 million units in Q1 2016. It is the first time ever in history the global smartphone market has shrunk on an annualized basis.

After nine years of seeking to accommodate users' and developers' demands for more PC-like personal computing through more powerful phones, the personal computing environment is changing. But not all of the big players have the same plan to adapt. In part two of this series we highlighted in broad terms the iterative strategies of Google and Apple as they position their phones as "phones" in the market.

We contrasted that strategy with Microsoft's evolution of the category as Redmond seeks to merge the phone and PC environments in a sharp departure from the industry's status quo. Microsoft's CEO Satya Nadella said it this way:

Just like how with Surface we were able to create a category. Three years ago most people would have said, "What is a two-in-one?" And now even Apple has a two-in-one. And so three years from now, I hope that people will look and say, "Oh wow, that's right, this is a phone that can also be a PC."

PC sales are in decline and the smartphone industry is plateauing.

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Furthermore, as I posited in a previous piece, Surface inspired 2-in-1 PCs are setting the stage for the Surface "phone": a possible ultra-mobile PC with telephony. This goal is being accomplished on two fronts.

Surface knowledge

The first way in which 2-in-1s are preparing the way for a Surface "phone" is that PC manufacturers, which have embraced this Surface-inspired category, have openly acknowledged a shift in computing toward context-sensitive (Windows) PCs. As a matter of fact, IDC reports that this category of tablets has seen a triple-digit increase year over year:

Meanwhile, detachables experienced triple-digit year-over-year growth on shipments of more than 4.9 million units, an all-time high in the first quarter of a calendar year.

Surface Pro 4

Surface Pro 4 (Image credit: Windows Central)

OEMs and users' perspectives are being shaped around Microsoft's idea of mobility.

Second, users are being introduced and acclimated to (on a large scale) Microsoft's Universal Windows Platform and Continuum through Windows 10. This introduction is helping to shape the perspectives of both OEMs and users around Microsoft's idea of the mobility of experiences and how a modern personal computer conforms to those experiences. Furthermore, the IDC expects that this Microsoft-inspired category will only continue to grow in the future:

"Microsoft arguably created the market for detachable tablets with the launch of their Surface line of products," said Jitesh Ubrani, senior research analyst with IDC's Worldwide Quarterly Mobile Device Trackers. "With the PC industry in decline, the detachable market stands to benefit as consumers and enterprises seek to replace their aging PCs with detachables."

The old switch-a-roo

An interesting phenomenon has begun to occur in this dynamic personal computing landscape. Microsoft's form factor-transcending ideology and ecosystem has had a transformative effect on PC and mobile-first manufacturers. Consider this: HP, a traditional PC maker (that previously had a foray in the smartphone space) has revisited that space with the Windows 10 Mobile powered HP Elite X3 smartphone. On the other side of this spectrum, mobile-first company's such as Huawei and Samsung have brought 2-in-1 PCs to market.

Likely due to eroding margins in regular slates, 1Q16 also saw the introduction of detachable tablets from traditional "mobile first" vendors like Samsung and Huawei.

This repositioning of traditional PC manufactures on Windows-based smartphones and mobile-first companies on Windows based 2-in-1s foreshadows the capability and likely future role of these manufacturers. The ability of these manufactures to adapt their device portfolios from a "PC to mobile" or "mobile to PC" category indicates a capability of manufacturing a device that represents a confluence of both.

Indicates a capability of manufacturing a device that is both a phone and PC.

With an expected category-defining Surface phone in 2017, the industry of users and manufacturing partners are being positioned to be receptive to a device that is likely both a pocket-sized computer, through Continuum, while retaining its capabilities as a phone. The aforementioned PC and mobile-first manufacturers, who have thus far been responsive to their shifting roles and to the evolution of personal computing devices, will be well positioned to emulate such a device.

Meeting in the middle

I believe that the foundation for the all-in-one ultra-mobile PC is being fortified as demand for contextually sensitive devices continues to rise, manufacturers grow more comfortable in their roles providing an evolving category of mobile computers and as competition drives innovation and firms capitalize on their industry position and strengths.

IDC's Research Director Jean Bouchard predicts:

"The introduction of detachables from traditional smartphone vendors is only beginning and pose a real threat to traditional PC manufacturers. Their understanding of the mobile ecosystem and the volume achieved on their smartphone product lines will allow them to aggressively compete for this new computing segment."

The push of traditional smartphone vendors to compete in the detachables PC space while combining their inherent strengths as mobile vendors provides a natural mix of conditions toward the adoption of an ultra-mobile Windows PC once Microsoft introduces an aspirational flagship to emulate.

Jean Bouchard continues:

It is likely that those smartphone vendors will utilize the detachable segment to create new mobile computing end-user experiences if customers are using their detachables in combination with their smartphones."

PC manufacturers such as HP and Acer who have already embraced Microsoft's vision of a Continuum enabled phone are likely committed to the natural evolution of Microsoft's "phone" vision. As such the ideology, form factor and innovations a Surface "phone" demonstrates will likely be fully embraced and competitively exemplified in these, and other PC manufactures possible future ultra-mobile "PCs."

Traditional smartphone vendors building 2-in-1s is a natural mix for ultra-mobile PCs.

That said, I foresee a personal computing landscape where Microsoft's efforts to bring the phone and PC together ultimately cause mobile-first and PC manufactures to compete in the same space. This level of investment from diverse industries converging on Microsoft's platform can bring innovation as companies compete for dominance with converged devices.

Unlike the smartphone space that is founded on the separation of the phone and PC environments, this space is not bound to a dead end of mere device and software iteration. Microsoft's option is an untapped and boundless frontier. A frontier Redmond is committed to pioneering.

Ummm….Continue

Satya Nadella sees Continuum as the foundational component of this future of personal computing. It is key to his vision of putting the power of the PC in the hands of the dual user. This spans the enterprise as well as the consumer space as he expressed in a recent interview with Business Insider:

Take emerging markets. India for sure is a mobile-first country. But I don't think it will be a mobile-only country for all time. An emerging market will have more computing in their lives, not less computing, as there is more GDP and there is more need. As they grow they will also want computers that grow from their phone. What's the most logical thing? I would claim it's a Continuum phone, which means that it can have other forms of input beyond touch.

Clearly Nadella sees Continuum as an industry-defining ecosystem feature that will shape personal computing in the near future. He states "... I'm not trying to be another phone guy with the other person's rules. What is unique about our phones is this Continuum feature. [Continuum lets you take the screen of your Windows phone and connect it to a monitor, keyboard, and mouse, and use it like a computer.] If anything, we will want to continue to build that capability out."

Nadella's ambition is bold. Where this quest to merge the smartphone and PC will ultimately lead is a question only time can answer. But one thing is certain, Microsoft's answer to mobility is far beyond the smartphone.

Wrap Up

Smartphones are dead. They have evolved into mini-tablets. And the saturated iteration-focused smartphone market has spoken. There is little further that model, which keeps the phone and PC separate, can take smartphones.

Conversely, we are just at the beginning stages of Microsoft's Continuum powered "phones" that make a phone a PC. This is while we also stand at a junction in the personal computing landscape where PC and mobile-first firms are converging upon the same space.

How Microsoft builds out, as Nadella says, the capability of Continuum will determine how the future is shaped for Microsoft as they attempt to capitalize on this industry shift toward the company's strengths.

A great start, of course, would be a Surface "phone" (ultra-mobile PC), which as the Surface did for 2-in-1s, demonstrates the synergy of hardware and software, setting a high bar for OEM partners to emulate. Contrary to popular belief, lightening can in fact strike twice.

Jason L Ward is a columnist at Windows Central. He provides unique big picture analysis of the complex world of Microsoft. Jason takes the small clues and gives you an insightful big picture perspective through storytelling that you won't find *anywhere* else. Seriously, this dude thinks outside the box. Follow him on Twitter at @JLTechWord. He's doing the "write" thing!

244 Comments
  • Thanks again for reading folks. Naturally no data stands alone. The information from these two data sources combined with the trends that we have been observing are painting an increasingly clearer picture that the "iteration-focused" smartphone model has peaked and reach a dead end. In a saturated market an iterative, bigger, shiner device will not suffice. The market needs something revolutionary, something that answers the needs of the increasingly mobile and powerful personal computing. I contend that though it is met with a great deal of opposition and an uphill battle Microsoft offers the solution the industry needs. I may or may not work, but the company has a plan. What are your thoughts Let's Talk! He that answereth a matter before he heareth it, it is folly and shame to him.
  • In MS we trust . Well maybe ;)
  • You've written yet another article that does an excellent job of explaining where MS is planning to take phones and PCs. I know people will disagree with you but the decline in the number of people buying new phones is real. Anecdotally, the vast majority of my friends and family are rocking phones that are a year or more older and they are at the point that they only replace them when something breaks.
  • I would argue that it's not a decline but is saturation. Also, the theory that smartphones are dead is incorrect when the premise here is that smartphones will have the addition of working more like a PC when plugged into other devices. Therefore, smartphones will continue as is, albeit with additional functions.
  • This may just be what I'm coming away personally from this article with, but the term "smartphone" really is dead, as telephony is not the primarily use of our mobile devices anymore. "Smartphone" carries the connotation of a device which is a telephone which happens to be able to do other things as well. But, our mobile devices haven't been that way for years now. They are currently personal computing/media consumption devices that also happen to be able to make phone calls. But because people still call them smartphones, they continue to be limited in capability and function until someone, hopefully Microsoft, can bring them to the next level, a true mobile computing experience that doesn't have to adhere to the old tradition of what a "smartphone" should be. When that paradigm shift comes, it's going to be revolutionary no matter who leads it.
  • ""smartphone" really is dead, as telephony is not the primarily use of our mobile devices anymore." I'll have to disagree with the telephone part.  Most people I know have cancelled thier home phones.  Their primary phone is thier "smartphone".  And I agree even more with 2tomtom.  The smartphone isn't dead.  It will add other functions or features to act more like a computer or add additional computer capabilities.    No matter home many times it's attempted to say the smartphone is dead I for one say pfft.  And the notion to call them mini tablets to add credence to ones arguement falls flat for me.  It's an attempt to bolster one's point of veiw to say the smartphone is dead.  The smartphone is getting smarter if anything with the additional features.  And that's a good thing.
  • But how often do you use it as a phone? I think the premise is that we use it more as a companion device to our PC's than as an actual phone. And that line is growing thinner. I can count the amount of phone calls I've made in a week, but I cant begin to count the hours I've used it for consumption of media and shopping and email I use it in a week... I really only use my PC to stream TV and play games some times... I think that's what this series is all about. These devices we hold in our hands and call smartphones wont go away any time soon, rather the purpose in which we use them will increasingly divide us from what they were originally intended for... Making phone calls...
  • That was exactly what I got out of it.
  • "But how often do you use it as a phone?" I'm sorry. I'm not even sure if this is a real question. But I use my phone every day!!! Mornings, afternoons, and evenings. So do all my colleagues. Some of us are professionals and not game seeking children. The ability to be on the go and do business is a must. There's more than texting and seeing scores of favorite teams. But those are some features a smartphone brings to the table. This notion that the phone is not used is simply a fairytale.
  • @Whodaboss I appreciate your anecdotal experience, but studies show that using these devices to make calls is no, for the majority of users, is no longer a primary function. Actually, the study I linked in one of the previous pieces ranks phone calls as number six below activity such a Social Media etc.
    So yes, the ability to make calls is still a part of the device and isn't going anywhere, but as I put forth un the articles, it is the combination of both the technological advancements and how we as users are using these devices that is changing what they are. Allow me a fictional hypothetical to paint a picture. If a person from 1985, maybe even 1995 traveled to 2016 and just took a walk through our parks, Stores, road the buses and subways and planes and even sat in the back of our churches for a few days, he'd see dozens upon dozens of us in all of these venues heads bowed down toward 5"-plus tablet shaped objects dominated by a touch sensitive glass display at which he would observe the dozens upon dozens of us pecking and swiping away nearly oblivious to what's going on around us, not engaging with one another eyes glued to that tablet shaped device held in one hand. That person from 1985 or 1995 would likely NOT conclude, based upon the predominant usage that he observed, that that 5"-plus tablet shaped device that he saw our fingers pecking and swiping away at was a phone. His imagination would likely begin to grasp for some frame if reference to categorize the device do that when he returned to his time he could communicate to "the past" what people in theme "future" spent much of their time in public(and) private absorbed by. If from 1985 he might reference Penny's (from Inspector Gadget) computer book to give some sort of imagery of FUNCTION, to the poor 1985 folks who have no frame of reference for what these touch screen 5" plus tablet shaped devices that we peck and swipe at all day. A phone certainly wouldn't suffice as a comparison even if our wary time traveler witnessed the less frequent call or two. If from 1995, he'd at least have the tablet computers used by the crew of Star Trek the Next Generation to use as a frame if reference to convey what we "future folk" walk around with in our pockets daily. Those 1995 folks, maybe even those of us old enough to have been around then would be convinced by this time travelers description of what he witnessed that by 2016 we would all be walking around with mini-tablet PCs that could make calls.:-)
    -------------------------------
    Jason L Ward @JLTechWord
  • Phone calls may not be the primary function people use it for, but people primarily make phone calls from smartphones now.
  • @JLW As a person who was well into sci-fi and gadgets in the 70's & 80's.  From owning an Apple IIE, Atari, Coleco Vision,  Intellivision, etc.  I could easily have envisioned the current day "smartphone".  Heck I even had the opportunity to work with the "bricks" aka Motorala's cell phones.  Those things were huge.  It was only a matter of time when when those large cell phones would be shrunk.  So unlike some of these young folks who were born 2 days ago, I've got a little perspective about such things.  From having an 8 track in our car, to cassettes, etc.  From owning a Sony beta machine, VHS, to the HUGE laser disk.  Remember those?  Hey, nothing surprises me in the world of technology.  I expect great things to be developed.  And I've had the luxary to own many of the devices of yesteryear (of my time) and today.  I always appreciate your write-ups.  I just have a different point of view in how we describe what a "smartphone" is or what's it's major function.  Take away the phone out of the smartphone and you're looking at a glorified PDA.  And that too would bring me back to the glory days of my HP iPAQ.  
  • You may not use it much for phone calls, but it's still it's prime function. You aren't going to bring a mini tablet, because then you can't receive call. Ergo what makes this device important is it's phone ability. If you just need a smart computer, you bring a tablet.
  • No it’s not its prime function at all. The phone functions are no more dominant on the average "smartphone" than email, calendar, address book, music player or any of the dozens of apps that users have on their devices. Jason’s point about the time traveller observing the behaviour of people today is spot on. Most of them are not making calls, they are doing other things that have nothing to do with telecommunications.
  • However, when you do make a phone call you do it on a smartphone exclusively, while all other activities you can do at whichever personal computing device you find closest at the moment. Moreover, the "phone" part has top priority over all other tasks on a smartphone. I think that this still makes amartphones pretty unique among all PC devices now and will in a foreseeable future, that is, until phone calls become really device independent, like universal messaging is starting to.
  • I can use Skype pretty freely now to make phone calls from a tablet, my 2-in-1, laptop, PC, whatever. I can make the same calls and it uses my mobile number as my Caller ID that the other person sees. I can forward my mobile phone number to my "Skype to Go" number, so when people call my "smartphone" I can answer it on my PC or tablet or whatever device I happen to be using at the moment. So, really, it is already possible to make and take calls on all those devices, but people aren't really atuned to doing so yet. Skype calling along with Messaging Everywhere can truly make it easier to use whatever device is convenient for you at the moment for phone calls and texts. This is going to further push the idea that these are "devices" and the idea of "phone" can be whatever you need it to be at the time. Seeing this happening is all part of Microsoft's strategy of making the person the center of computing and telephony, not a particular device, and making all devices work seamlessly together to bring it everything you need to every device you use.
  • I ported my mobile number to GV a couple months ago and use skype exclusively for calling (I use less than 60 mins a month total for both incoming and outgoing!) and outlook handles my sms. If my venue 8 pro had a sim slot I could freely use that as my "smartphone"
  • @toshdellapenna I use 60 minutes in 3 days.  :)  But your venure 8 Pro doesn't have a sim card therefore it's not phone.  That's why a phone is a phone and everything else is something else.
  • First of all, if it was actually cheaper to have a data only plan on a "smartphone" going the prepaid route like I do, your argument would make more sense. If Google Voice had a decent client for Windows I would do just that. I only use phone calls for my business, anything else (friends/family) I use SMS. My business number is just a Google Voice number that forwards to my Icon. Thinking about going with Skype but I don't like the thought of paying another monthly subscription. So yes, technically phone calls are an important part of what the device does, but there is absolutely no reason why my tablet or even desktop PC could not theoretically replace all those functions, barring app availability, etc. as I just discussed.
  • Also, if "the phone is the primary reason for a smartphone", then there is no reason to have a smartphone. Just get yourself a "feature phone" and a small tablet and quit complaining.
  • So what you're saying is that since a Surface 3 has a SIM slot, that makes it a smartphone.
  • Just because people find new uses for a product, it doesn't mean the previous product is dead or that the name for that product is dead.  Unlike Windows Phone.  ;)  There aren't transitional or revolutionary devices to take the place of the smartphone yet.  So of course he got it wrong.   But you can see where he is coming from.  The title "Smartphones are dead, part IV: The numbers speak for themselves" is more jazzy than "Smartphone Use Has Evolved, Last in a Four Part Series."
  • In my opinion, it's the same thing as "Internet Radio". Originally that term aptly described to the layperson what it was, that is, a replacement for radio receivers that instead streamed music digitally. However, "streaming music" would perhaps be a much more fitting term, since no radio waves are actually used. That was my point regarding "smartphone", originally the term helped people to understand what it did, but now, it doesn't accurately describe what these devices really are.
  • It's hard to keep up with the thread when the Windows Central app on my smart phone *cough cough* wont refresh automatically.
  • This is stupid, phone sales are declining because everyone already has a phone. We have so powerful phones today that we can wait many years before needing to buy a new phone.
  • Well since what you said is the point of the article that would make you look...err...help me...
  • Article says "Smartphones are dead, the numbers speak for themselves", sales over a period of time isn't what makes a product dead, it's how many who uses them right now. Everyone uses smartphones, so how are they dead?
  • If you read more than the headline (designed to get clicks, obviously works well) you will realise that the author hasn't actually declared that the whole world has decided to stop using their smartphone...
  • In addition to that, I kind of think it's a bit of a joke to go along with the "the PC is dead" articles that have been around for the past 20 years or so.  Smartphones today are starting to reach the saturation point that PCs reached several years ago.  Neither are dying, they are just growing and both are taking on different forms, converging, etc.
  • @criticizer the answer to your question is quite literally in the first sentence and expounded upon further in the first paragraph.
    Please revisit the piece for you answer.
    Also please note that this is Part 4 in a series. You would not expect to understand the full "story" of the Rocky, Hunger Games, Star Wars or Back to the Future stories if you started watching the series from part 3 of each of those series. You'd have to start from the beginning to get what the story Director/Script Writer is attempting to convey. The same is true here. Though the articles can stand alone to some extent, to get the full view you need to follow the links referencing earlier parts. Thanks for joining the conversation:-) -------------------------------
    Jason L Ward @JLTechWord
  • I would remove the Rocky example about understanding a story :D
  • Smartphone??
    Not everyone has
  • Most people has... Even kids has...
  • Relax bud. Its the headline. Read the article, you'll get the point.
  • *Have* Posted via the Windows Central App for Android
  • There are more smartphones in India than toilets.
  • To be fair, that could be just 100 phones...
  • Oh please, everyone takes their poo to the loo now. Posted via the Windows Central App for Android
  • That's not even close to being true, and you know it.
  • 200 then. Final offer.
  • India is poised to overtake the US soon as the 2nd largest market for smartphones...and you say 100? That's ignorance mate :)
  • I'd say smartphones are in full strength today. Everybody has them. The market, however, is not measured that way. If there is no growth, they say it's declining. The first derivative may be small, but the value is still high.
  • For everyone to gain some perspective look at how fast the disruption cycle in this industry is. Then look at how the last major paradigm shift did in fact happen a decade ago.
  • If MS provide continuum(every 1gb phone) to every w10m users, then it'll make MS more strong...
  • Continuum needs a CPU with two display support.
    SnapDragon 617 is the smallest one.
    Currently the minimum RAM has been a low 3GB (Lumia 950=SD808;Lumia 950XL=SD 810)
    In the summer 2016 (Soon™) arrives the HP Elite X3 with SD 820 & 4GB RAM
    I expect the RAM grow to 8GB in 2017-18 (CPU SD 830?) For the old Phones? - not without a "brain surgery", but I'll do it for you if you pay ...
  • Hopefully the progress will happen quickly.
  • Just a few years... So it's very fast requiring lest than half a million man years of work. 
  • The smartphone is dead because it has evolved into something else: a mini-tablet PC called a smartphone. Jumping some years back in time the message would had been "The smartphone is dead because it has evolved into something else: a mini-tablet PC called iPhone" - and be more correct ;)
    The motorcar (sorry if term is not correct, I wasn't around then) is dead because it has evolved hugely during 130 years and today we call it a car.
    Le roi est mort, vive le roi! Even though the content of these articles gives food for thought, it will take more than one person to rename common things. Smartphones of today look like smartphones, walk and work like smartphones and have been small PCs for years. Making them more PC does not make them not-smartphones :)
  • I've been really enjoying your work so far on this series and it really puts everything in perspective.. Great job sir
  • I now understand where you're coming from and would agree in some ways. Personal portable devices are becoming more and more powerful. More or less a name transition from smartphone to something else. This translates to a future of a compact work device on the go that consumers can easily fit in their pockets. Laptops, tablets, or even towers may become obsolete. The only thing that exist would be just monitors that anyone could hook their "portable computing device" too and do work. And with the cloud on the rise, no need for bulky pcs! Good analysis mr. Ward.