AT&T and Verizon have revealed that upgrade rates have hit all-time lows for the two carriers, with fewer existing customers upgrading their devices, as noted by Bloomberg.
The downward trend in upgrades isn’t exactly new: upgrade rates have been trending downward for years, but the record lows recorded by the two largest carriers in the US paint a stark picture, both for AT&T and Verizon and hardware manufacturers like Apple and Samsung. It means fewer customers are interested in upgrading their phones, and they are doing so with less frequency than before.
It’s easy to guess why customers are slowing down their upgrades. The last few waves of devices from most major brands have become increasingly iterative and increasingly expensive. Apple adjusted its iPhone sales projections earlier this year to account for lower-than-expected smartphone sales, and the company has, in the past couple of years, begun shifting its strategy more toward software services and subscriptions as a way to keep revenue up in the face of diminished hardware sales. Meanwhile, Apple subsisted on raising the average price of the iPhone and selling customers newer models with four-digit price tags.
The news from carriers confirms that it’s not just Apple, though. The entire industry seems to be struggling across the board, if Verizon and AT&T’s trends are to be believed.
The smartphone industry's problem in one snapshot:— Shira Ovide (@ShiraOvide) April 23, 2019
Share of Verizon contract customers who bought a new smartphone:
1Q 2014: 6.5%
1Q 2015: 6.5%
1Q 2016: 5.8%
1Q 2017: 5.2%
1Q 2018: 5.0%
1Q 2019: 4.4%
This may sound bad, but the increased price and diminished returns from new smartphones is also only a piece of the puzzle. The mobile world is facing another big shift, with 5G on the horizon. That could juice profits for carriers and, because 5G requires special hardware components, spur customers to buy new phones to take full advantage of it. New form factors, like foldable hardware, could also give customers reasons to upgrade, too (assuming the technology actually pans out).