The Global Smartphone Boom Has Peaked, IMF Warns

As it turns out, Apple executives aren't the only ones who should be worried about slowing smartphone sales: The trend has the potential to hammer global economic growth - especially in Asia, where the rise of mobile technology has created increasingly complex supply chains.

The IMF highlights this dangerous trend in its latest World Economic Outlook (albeit buried on page 34 of the report's first chapter). In it, researchers lead with a stunning statistic. In 2017, global smartphone sales reached 1.5 billion units - that's one smartphone for every fifth person on the planet.

IMF

Taken together, smartphone production and sales contributed $3.6 trillion (4.5%) to the global economy in 2017. Across Asia, sales of smartphones and smartphone components are accounting for an increasing share of total exports. Furthermore, they account for one-sixth of the growth in global trade.


In 2017, China exported $128 billion worth of smartphones to the rest of the world, equivalent to 5.7 percent of its total exports. In Korea (the main supplier of smartphone components) semiconductor exports alone accounted for 17.1 percent of total exports. Similarly, components for smartphone production at the peak (October 2017) accounted for more than one-third of exports from Taiwan Province of China, 17.4 percent from Malaysia, and 15.9 percent from Singapore


However, these data mask a troubling trend: Smartphones' rising contribution to global GDP was last year largely driven by higher prices per unit. Looking past this, the number of units sold actually shrunk for the first time ever.


This growth was driven mainly by an increase in value added per unit, rather than units sold, which declined for the first time on record. As a result, the average sale price of an iPhone increased from $618 in 2016 to $798 in 2017, according to Apple Inc. quarterly financial statements. In the five main Asian economies involved in the tech cycle (China, Korea, Malaysia, Singapore, Taiwan Province of China), total exports grew by 6.7 percent in 2017. Even though tech exports accounted for less than 10 percent of total exports in the region, smartphone-related exports contributed about one-third the growth rate of total exports.


That's because, as the IMF explains, demand for smartphones is highly cyclical and dependent on release dates of new phones. This new cycle differs from tech growth cycles of years' past, which were mostly driven by personal computers.


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