Expected renewal cycles will, however, become a positive momentum for 2024
After record sales during the pandemic, the Telecom market has been struggling with stagnation. But the perspective for 2024 is positive.
In 2023, the global Telecom market declined slightly by 0.5% in terms of revenue, but GfK forecasts modest growth of around 2% for 2024. The reason is that the Smartphone market is heavily influenced by renewal patterns – and the smartphone replacement cycle is getting longer. According to “gfknewron Consumer”, in 2023, 60% of new buyers had smartphones that were older than two years, in 2019 it was only 49%.
The last purchase wave registered in the market was during the Covid pandemic in 2020/2021, when many consumers invested in new phones – and those are now due for exchange.
This change in the market dynamic was already being seen in Q4/2023 when revenue grew by 6% in USD vs the same period the year before. This dynamic has continued for the first weeks in 2024, and market experts expect it to carry on.
This positive outlook is heightened by the fact that the Telecom market is on the forefront of premiumization. Globally, the average price paid by consumers for a new smartphone once again increased in 2023 – up by 34 US dollars to 389 US dollars (+9.6%). This is the result of the continued consumer demand for device premiumization and better functionality. While 5G models already accounted for 75% of revenue in 2022, this figure rose to 81% in 2023. The share of smartphones with more than 512 GB of storage (+ 9 percentage points) and wireless fast charging (+ 5 percentage points) also increased.
Consumers are investing in the performance of their phones and are willing to purchase from higher price tiers because they are stretching the amount of time they keep each phone, before exchanging it. A phone for 900€ used over two years has a different total cost of ownership per annum than if the same phone is used over a longer period. GfK is therefore seeing a landscape of consumers becoming more value-centric, while staying price sensitive at the same time.
Last but not least, 2024 sales will be boosted by the simple need to renew, as older phones potentially run out of support cycles, or the battery performance is lost.
There is also one topic which has the potential to spike a demand for new phones outside of that lifecycle: Generative AI. If applications that incorporate innovative AI are able to add real value or convenience for users, it may drive consumers to upgrade their phone earlier than the usual 3 or 4 years replacement cycle – and may therefore support sustainable revenue gains also in 2025 and beyond.
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