The smartphone has been around for a few years now. Long enough for Apple to go two years without releasing a new iPhone, still managing an impressive dominance over the market. But the Internet of Things has taken over. That is, the future is here. The connected world is bigger than the smartphone, having already embraced tablets, phablets, fitbits and the Xbox One. Digital crafters have DIY-ed the Internet, sprouting a hyper-excited wistfulness for tomorrow’s wearable tech. Crowdfunding, 3D printing and Amazon have blown the gadget market wide open, stitching in a sensor and pairing up an app.
So is there room for the smartphone, or will it eventually go the way of the PC? Will our gadget obsession swallow the smartphone in a sea of all-seeing glasses and talking toasters? The rise of the machines is no longer a sci-fi fantasy, but a real experience consumers are waking up to. Machines are talking to each other, and we’re talking to them. We’re learning more about ourselves than ever before, but also facing our fears of what will be done with personalized, compounding data.
Smartphone sales slowing
There’s some evidence to support the decline of the smartphone, as sales slow in mature markets signaling a pattern similar to the PC’s demise. While smartphone sales continue to swell in emerging markets like China, India and South America, the US, much of Europe and Australia have softened on smartphones. A recent report by Raymond James analysts Tavis McCourt and Daniel Toomey, cited in this Barron’s piece, sums up the current global market nicely:
“Smartphone growth in emerging markets was up 64% y/y, substantially higher than the overall global y/y growth rate of 47%. Smartphone market growth in China remained strong, up 101% y/y after growing 110% in 1Q13. Interestingly, 72% of handset sales in China were smartphones in 2Q, levels that North America just breached two quarters ago and Western Europe breached last quarter. China is pulling forward massive smartphone demand into 2013, and based on penetration rates, we can probably expect smartphone growth to slow to 10-20% in China in 2014 (but with higher ASPs as China transitions to LTE), as it will be approaching penetration rates seen in the U.S./Western Europe today. Expect India and Latin America to drive smartphone growth post-2013.”
Web traffic is also shifting to tablets in developed markets, exceeding smartphone web traffic in Adobe’s Digital Index, a victory attributed to higher engagement rates. Their analysis of more than 100 billion visits to more than 1,000 websites across 8 major markets worldwide revealed that for the first time, tablet traffic exceeded smartphone traffic in February 2013 (8 percent and 7 percent of page views, respectively).
World prepped for smartwatches
It also seems buyers are ready for the next big thing, wavering between Google Glass and the smartwatch. While Apple’s double iPhone launch is expected to reinvigorate their sales and hopefully boost their dropping stock prices, the Cupertino device maker didn’t deliver the smartwatch people expected. Apple rivals have preemptively launched their own smartwatches, taunting Apple with a proven market opportunity, as they did with mp3 players.
Samsung, Microsoft and Sony have been testing the smartwatch waters, the Galaxy Gear among the most highly anticipated. It’s an exploratory market for others interested in wearable devices, like the makers of the Pebble Watch, and chip maker Qualcomm. The latter launched Toq, its smartwatch, just last week.
In fact, Qualcomm has a great deal to gain in the broader connected device market, building vital components powering the majority of smartphones, tablets, smartwatches and countless other gadgets. You’ll find Qualcomm’s chips in the spread of manufacturers too, hedging its bets with Apple, Samsung and all the rest. Settling on the smartwatch as a product to include in its portfolio, Qualcomm is sending a message to consumers, investors and even its partners. It’s an increasingly aggressive market too, Qualcomm’s stock up after the board authorized a new $5 billion share-buyback program just ahead of the Toq launch.
Backing the Future
Strengthening the message behind the Internet of Things is a cross-industry cooperative that contributes the gear, software and research needed to make our futuristic dream a success. General Electric, IBM, Cisco, BMW, Facebook and Kickstarter — these are just a few of the organizations enabling the Internet of Things, each giving a piece of a larger puzzle. Connecting together these seemingly disparate developments is the very synergy we’ll need to see a truly useful and integrated smart world. And it’s happening faster than you think.
Autonomous cars are near street-ready, awaiting a road system that can talk back, and enough cars that can talk to each other. Heart monitors are already predicting and preventing cardiac arrest. Traffic lights are being controlled in real-time on a citywide scale. Homes are already being armed with artificial intelligence systems, turning off lights to save power and alerting you of a disturbance while away from the house.
The future has arrived, according to CNBC Fast Money host Melissa Lee. Her latest documentary, titled Rise of the Machines, outlines the growing industry opportunities listed above, demonstrating the unexpected ways in which machines are already taking over our daily processes, from driving to watering the plants. The automation of the consumer seems an inevitable existence that will happen within our lifetime.
Even Lee was surprised by some of the technological advances that have cropped up so quickly.
“If you look at the industrial revolution, it took decades to see the full benefits,” Lee says. “It seems like the Internet of Things is compressing the time in which development can happen. The pace of tech and innovation are so quick. One of the lines from the documentary is ‘the future is now.’ It sounds gimmicky, but it’s the truth. We’re already at a point where appliances can talk to manufacturers and you can talk to your machines.”
The personal data movement is certainly promoting the connected device market, but the gadgets that track our workouts, diets and sleep patterns all need a hub that’s easy for us to access on-demand. The smartphone remains that hub, with an unending stream of apps created especially for its interface. It seems, then, that the rise of connected devices will only sustain the smartphone.
Will wearable tech replace smartphones?
Nevertheless, companies like Qualcomm hope the smartwatch will merely evolve into a wearable device, pointing out the benefits of moving the perks of the smartphone to the wrist. Google Glass offers the same promise, acting as an extension of our physical bodies in more ways a smartphone could ever hope to do.
But should the wearable device ever replace the smartphone, it won’t happen anytime soon. Despite the thrill of shiny new devices that perform a ream of novel features, consumer interest in wearable tech remains low. While 75 percent of American adults are aware of at least one wearable computing device, cost and privacy concerns remain the primary obstacles for adoption. According to a recent study by TNS, 55 percent of respondents “believe that the technology will be too expensive for them, while 31 percent cite privacy as a barrier to adoption. Roughly 1 in 5 also feel they already have too many devices.”
And if the broader connected device market is to learn anything from its smartphone predecessor, the supporting cast still has a great deal of catching up to do. Variants to smartphone operating systems and interfaces comprise just the tip of the iceberg that hinders faster uptake, extending to the lack of security standards and the fact that this is still a very young market. Developer platforms are bridging the gaps, but can only do so much. Apps need to be able to communicate better with each other, consumers need more granular control over their data, and the government needs to reach a balance in regulating and stimulating the business-consumer relationship within its legislative reach.
Open source initiatives are addressing these holes, enlisting a community of interested parties. The result will be an ongoing but hopefully manageable pace of adoption, if consumers can only be educated.
“I hope people will see the potential is for the future, and their future,” Lee shares. “Amazing things are going on around us, making our lives better, and helping us live longer, and I also hope people appreciate that it’s going on. Most don’t realize it’s attainable and is here right now. I also hope people rethink and are aware of the pitfalls. Every great thing has a downside.”