12 Jan­uary The big hangup: Why the fu­ture is not just your phone

The once-rev­o­lu­tion­ary smart­phone is los­ing its power to amaze — and maybe its sin­gu­lar hold on our lives

Business Standard - - FRONT PAGE -

Steve Jobs took to a stage a dozen years ago this week to in­tro­duce a rev­o­lu­tion­ary new prod­uct to the world: the first Ap­ple iPhone.

That ground­break­ing de­vice, and the com­peti­tors that fol­lowed, changed the way peo­ple com­mu­ni­cated, or­dered din­ner and hailed a taxi. The tech­nol­ogy world re­ori­ented around the smart­phone, sup­plant­ing the per­sonal com­puter, MP3 play­ers, the dig­i­tal cam­era and maps. And the mo­bile econ­omy was born.

To­day, it looks like the era of smart­phone supremacy is start­ing to wane. The de­vices aren't go­ing away any time soon, but their grip on the con­sumer is weak­en­ing. A global sales slump and a lack of hit new ad­vance­ments has un­der­lined a painful re­al­ity for the ma­tured in­dus­try: smart­phones don’t look so sin­gu­larly smart any­more.

While once smart­phones were like a cen­tripetal force suck­ing up tools from dozens of de­vices, from flash­lights to cal­cu­la­tors to game con­soles, func­tions are now fly­ing out of phones and onto other prod­ucts with their own em­bed­ded smart con­nec­tions. Wrist­watches can now text emo­jis. Tele­vi­sions can talk and lis­ten. Voice­ac­ti­vated speak­ers can or­der di­a­pers.

The num­ber of “con­nected” de­vices in use that can stream mu­sic, clock mileage or down­load apps has more than dou­bled to 14.2 bil­lion in the past three years, ac­cord­ing to mar­ket re­searcher Gart­ner Inc. The to­tal ex­cludes smart­phones.

What’s shifted most is the smart­phone’s mono­lithic sta­tus as the de­vice that soft­ware com­pa­nies and busi­nesses needed to reach mo­bile users-and for con­sumers to ac­cess their ser­vices. Now the uni­verse has ex­panded to voice apps, car in­fo­tain­ment cen­ters and wear­able de­vices.

“We may even need an­other word for what­ever the smart­phone will be­come be­cause when ‘smart’ is ev­ery­where that term be­comes al­most mean­ing­less,” said Wayne Lam, a prin­ci­pal an­a­lyst at re­search firm IHS Markit .

Like the arc of the per­sonal com­puter, smart­phones-now more a need in the mod­ern world than a lux­u­ri­ous splurge-are en­gaged in a race to­ward the bot­tom. The in­dus­try’s two titans, Ap­ple Inc. and Sam­sung Elec­tron­ics Co. , risk see­ing their high-end phones be­come com­modi­tized, as Chi­nese ri­vals Huawei Tech­nolo­gies Co. and Xiaomi Corp. prove ca­pa­ble of mak­ing sim­i­lar de­vices at lower prices.

Twelve years af­ter the iPhone’s de­but, more than half of the world's pop­u­la­tion owns a smart­phone. While that leaves bil­lions of po­ten­tial first­time buy­ers in coun­tries from In­done­sia to Brazil, they re­side in poorer ar­eas, of­fer­ing lower prof­its. Mean­while, the mar­ket in wealth­ier coun­tries such as the US has be­come sat­u­rated, as the im­prove­ments in the de­vices be­come more in­cre­men­tal and many con­sumers have de­cided they don’t need to get each new up­grade.

As re­cently as 2015, an­nual smart­phone ship­ments grew at a dou­ble-digit clip. Those days are over: The in­dus­try saw its first de­clines at the end of 2017 and re­mained neg­a­tive all last year. A ma­jor driver was China, the world's largest smart­phone mar­ket, where an­nual ship­ments sank 16%, ac­cord­ing to gov­ern­ment data.

Ap­ple ear­lier this month made a rare cut to its quar­terly rev­enue fore­cast, cit­ing slower-than-ex­pected iPhone sales in China. Sam­sung fol­lowed with a warn­ing of its own, telling in­vestors its fourth-quar­ter op­er­at­ing profit would de­cline 29%. The South Korean com­pany feels the smart­phone strain dou­bly, as a hand­set maker and a com­po­nents sup­plier to many ri­vals, in­clud­ing Ap­ple.

Cao Yuqian, a 24-year-old stu­dent in Shang­hai, had long made a habit of buy­ing a new phone ev­ery year-her iPhone 8 Plus is her 10th Ap­ple de­vice.

But this year, she's in no rush to up­grade be­cause leap­ing to the next gen­er­a­tion of iPhones would mean los­ing the phys­i­cal home but­ton on the front of the de­vice. And there's an­other rea­son. "Now it's a bit pricey," Ms. Cao said. Ap­ple Chief Tim Cook this past week stressed that the com­pany's prod­uct pipe­line is strong and touted the suc­cess it has had be­yond the iPhone, sell­ing wear­ables such as its AirPod wire­less head­phones and the Ap­ple Watch.

The pic­ture is dif­fer­ent in In­dia, where fewer than one in four peo­ple own a smart­phone and its user base is grow­ing faster than any other coun­try. But the av­er­age price for a smart­phone there is about $160, or half of what most of the world typ­i­cally spends, IDC says.

In de­vel­oped mar­kets, smart­phone us­age may be reach­ing its up­per lim­its, as some con­sumers pull back amid the tech in­dus­try's ac­knowl­edg­ment their prod­ucts can be ad­dic­tive, spur anx­i­ety, dis­tract driv­ers and cast a pall of si­lence over the din­ner ta­ble.

Ap­ple and Face­book Inc., for in­stance, have cre­ated sys­tems that track users' screen time and no­tify them when they've reached pre­set lim­its.

Brian McEl­haney, 32, an ac­tor, writer and di­rec­tor in New York, be­came so con­cerned with his smart­phone us­age that last year he ditched his iPhone for a $35 flip phone. He only reaches for his de­ac­ti­vated smart­phone at night-on his home Wi-Fi­when he needs to ac­cess so­cial me­dia apps to post work con­tent and says he can go days with­out touch­ing it.

"I went whole hog into this tech­nol­ogy with­out re­ally know­ing what it was go­ing to do to me," Mr. McEl­haney said of smart­phones.

More than a third of con­sumers look at their smart­phones within five min­utes of wak­ing up and about 20% said they check their phone more than 50 times a day, a Deloitte sur­vey of 53,000 peo­ple in coun­tries around the world found.

Amer­i­cans on av­er­age spend two hours and 33 min­utes daily look­ing at their smart­phones in 2019, some 7% more than the prior year, ac­cord­ing to eMar­keter, which said the rate of growth has slowed from pre­vi­ous years. When Mr. Jobs, then Ap­ple's chief ex­ec­u­tive, in­tro­duced the iPhone from a stage at the Mac­world expo in San Fran­cisco in 2007, the crowd burst out clap­ping the first time he showed them how the phone could be un­locked by swip­ing a finger across the screen. When he used his finger to scroll through the mu­sic on the phone, they cheered.

For years af­ter­ward, phone mak­ers would rou­tinely amaze con­sumers with new ad­vance­ments, from selfie cam­eras to wa­ter­proof de­signs to plus-size screens. The early flour­ishes, though, have more than sa­ti­ated a wide swath of con­sumers who aren't lured by wire­less charg­ing or aug­mented re­al­ity.

As ad­vances be­came more in­cre­men­tal, Ap­ple and Sam­sung saw their once-siz­able gaps nar­row with lower-cost Chi­nese ri­vals like Huawei, Xiaomi and BBK Elec­tron­ics Corp.'s Oppo. Chi­nese ven­dors now make the ma­jor­ity of the world's phones-cross­ing that thresh­old for the first time last year, ac­cord­ing to Canalys, a mar­ket re­searcher.

The hand­set in­dus­try is hope­ful the forth­com­ing nextgen­er­a­tion 5G net­works, which could be 100 times faster in speed, will un­lock new uses for the smart­phone and en­tice peo­ple to up­grade en masse. Some of those planned changes in­clude bet­ter sync­ing with cars, kitchen ap­pli­ances and home elec­tron­ics.

"I don't think we've hit peak util­ity for the smart­phone. I think it con­tin­ues to grow in im­por­tance in our lives," said John Fos­ter, CEO of Aiqudo, a plat­form that cre­ates voiceen­abled com­mands for mo­bile apps. While the ear­li­est 5G-com­pat­i­ble smart­phones are ex­pected to be re­leased to U.S. con­sumers early this year, car­ri­ers are still in the process of up­grad­ing their net­works. There will likely be pock­ets of ser­vice in the U.S. in 2019, but wide­spread net­work build­out and adop­tion by con­sumers and busi­nesses is likely to take years.

Smart-home de­vices from speak­ers to home as­sis­tants to con­nected re­frig­er­a­tors of­fer the abil­ity to re­lay the weather or guide con­sumers through recipes, tasks that un­til re­cently had fallen to smart­phones.

Michael Woods, a 32-year-old fed­eral gov­ern­ment at­tor­ney in Wash­ing­ton, D.C., said his New Year's res­o­lu­tion is to re­duce his screen time, some­thing his two Ama­zon Echos and Google Home hub help him with. "Not be­cause I want to get rid of my phone, but just be­cause I want to be more present," he said.

The breadth of con­nected gad­gets has made it harder to un­plug. But the more nascent ad­di­tions tug on peo­ple's at­ten­tion dif­fer­ently than smart­phones, a po­ten­tial al­lure for peo­ple ir­ri­tated by the flurry of no­ti­fi­ca­tions from their phones, said Kai Lukoff, a Univer­sity of Wash­ing­ton re­searcher study­ing prob­lem­atic smart­phone use. "With a smart speaker, it only re­sponds to re­quests I make of it," Mr. Lukoff said.

A grow­ing num­ber of chil­dren have smart­phones and new younger users con­trib­uted to Ver­i­zon Com­mu­ni­ca­tions Inc.'s larger-than-ex­pected sub­scriber growth in the fourth quar­ter, the car­rier said last week. But those de­vices are no longer the only av­enue to pri­vate so­cial in­ter­ac­tion for chil­dren and tweens, many of whom now en­joy their own tablets and gam­ing sys­tems com­plete with head­sets that al­low them to talk reg­u­larly with friends with­out a phone.

De­vice mak­ers will have to prove that they can emerge from what some con­sumers see as years of mar­ginal im­prove­ments in cam­era, bat­tery and se­cu­rity func­tion­al­ity.

Rick Berkowitz, a 65-year-old in St. Louis, uses his new iPhone XR to mon­i­tor stocks, cast yoga videos onto his TV and Face­Time his grand­chil­dren. But the fea­tures, other than un­lock­ing his de­vice with fa­cial recog­ni­tion, leave him unim­pressed. "I per­son­ally be­lieve that all these phones have pretty much reached their zenith just like the PCs did," said Mr. Berkowitz, who runs his own hedge fund. The chal­lenge tech com­pa­nies, wire­less car­ri­ers and de­vice mak­ers now face is birthing the next so­ci­ety-shift­ing tech­nol­ogy. "What's not go­ing to go away: the need to have a de­vice that's con­stantly with you, to re­mote con­trol your life. At the mo­ment, we call that the smart­phone," said Jaede Tan, a re­gional di­rec­tor at App An­nie, which tracks smart­phone be­hav­ior. "Does it be­come smaller, sit on your wrist, a chip in the back of your mouth? Maybe. The con­cept needs to re­main con­stant."

Source: The Wall Street Jour­nal

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