Smartphone growth depends on device upgrade cycles - the time during which a person is locked into a phone contract. However, it appears that many people are not choosing to upgrade their phone so quickly. This could be a problem for the mobile industry.
All the various, interrelated pieces of the mobile ecosystem work very well together if consumers have the latest technology in their hands. But when the upgrade cycle starts to sputter, the main engines for growth begin to fall apart very quickly.
That's what's happening now. In the U.S., the smartphone upgrade cycle has steadily gotten longer over the years, and reached 22 months in 2012, according to Recon Analytics.
Business Insider summarizes the BI Intelligence report, listing reasons why manufacturers want the smartphone upgrade cycle to be as short as possible.
- Smartphone manufacturers rely on upgrades to get their newly launched handsets into consumer hands.
- Carriers rely on new phones that are compatible with their ultra-fast 4G wireless networks in order to encourage high rates of data consumption and boost data revenue.
- Tech companies like Apple, Microsoft, and Google pre-load the latest versions of their mobile operating systems on new smartphone models, and these handsets help push consumer adoption of the new software. This is particularly important for Google's Android platform, which historically has had trouble getting its users to update to new versions.
- Apple is particularly vulnerable to the longer upgrade cycle, since their business model depends on smartphone sales, rather than advertising (Google is less concerned if its users are on older phones).
- App developers, in turn, design software around the newest operating systems and devices, to take full advantage of available technologies. Without shiny new phones loaded with features, consumers tend to fall behind the curve.
- Marketers create rich-media and video ads that won't even load on slow smartphones.
In light of this information, it will be interesting to see if unlocked or off-contract phones begin to gain popularity. While many flagship phones reach as high as $800 unlocked, Google has released very affordable unlocked phones with its Nexus line - specifically the Nexus 4, which is currently priced at $199. Unlocked devices give consumers more flexibility, as they are able to own their devices outright and move them between carriers with relative ease.