Upgrade downturn: why are people holding on to their old phones?

Even Apple's rivals will be hoping the latest release can provide a shot in the arm for the industry. Photograph: Yui Mok/PA

It is less than a fortnight until the launch of the new iPhone, but shoppers outside Apple's flagship London store express no enthusiasm at the thought of queuing up for it.

A common refrain among phone owners outside the shop is to point to their handset and state: "I'll probably wait till it breaks." The new iPhone makes its debut on 12 September and is rumoured to have a number of new features for an Apple device, including doing away with the home button on the front of the handset, but there is a perception among mobile phone owners that the pace of technological evolution has slowed.

Phone replacement has slumped in the UK since 2013, when consumers bought a new one every 20 months. According to retailer Dixons Carphone, people now buy a new handset every 29 months.

Speaking outside the Apple store on Regent Street, Leon Allard, 31, said: "These days, especially with the iPhone, there is not a lot of difference between the phones coming out." He added that price was also a "big thing" when considering upgrades, with the next iPhone expected to cost at least £800 in the UK.

At a nearby Carphone Warehouse branch, there was little urgency for an upgrade. Tinu Thomas, 29, said he had owned a Motorola phone for nearly four years and would probably hold on to it for another year. "I would like to say I'm a gadget freak," he said. "I love technology but I don't see the value in upgrading. I use my phone for Facebook, WhatsApp and voice calls and I'm still able to do all of that with my almost four-year-old phone."

Apple, and even its rivals, will be hoping that the latest iPhone kickstarts a slowing handset market. The smartphone market's wild years have passed; the days of 50% annual sales growth, seen between 2009 and 2013, have given way to sluggish 2.5% growth in 2016, and will be just 1.7% this year, according to a new forecast from the research company IDC.

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In the UK, consumers seem in no rush to buy new handsets. Last month Dixons Carphone blamed people's tendency to hang on to phones for longer as it warned that full-year profits could be 20% lower than expected, citing higher prices due to Brexit and "more incremental" changes to phone technology.

The reasons for buying a smartphone can be split into two camps. In the first instance, consumers are persuaded to buy new handsets through adverts that extol the handset's camera, waterproofing, screen size, software or promised battery life. Otherwise, phones are bought for more prosaic reasons: the old one kept crashing; the battery kept dying; or that crack in the screen finally became too annoying.

The problem for the world's smartphone makers is that the second set of reasons has become far more compelling than the first. People are waiting longer before upgrading – and phone makers are getting anxious.

Even the much-anticipated launch of Apple's next iPhone is not expected to set the mobile world alight, though it may encourage many Apple users to upgrade at higher prices than ever before.

"People have a phone – they understand what they need from it and what they use it for," says Francisco Jeronimo, a research director at the tech consultancy IDC. "They aren't rushing to stores. When people replace their phone, then they will compare features and choose what is important.

"From our research, it seems that until people can get 5G [the next generation of superfast mobile connectivity, not expected before 2020] there isn't anything that will make them rush out to upgrade."

Although the global smartphone market is bigger than ever, and is at nearly 1.5bn handsets, many developed markets are in retreat, with sales shrinking year-on-year. The US, China, Japan and the UK – four of the world's largest markets – have all seen slowdowns or flat growth in the past year.

The static market could squeeze out some smaller phone makers. The pioneers are already wilting: the once-dominant BlackBerry has stopped making phones; HTC, maker of the first Android handset, may be up for sale; and the mobile division of South Korea's LG has lost $1.8bn (£1.4bn) over eight profitless quarters. Sony makes a profit, but only after retreating almost entirely to Japan, its home market.

Meanwhile China's Huawei and BBK Electronics – which owns the fast-rising OPPO, vivo and OnePlus phone brands – have quietly become the third and fourth biggest phone makers in the world. They might be profitable, but they don't publish figures. "A lot of people are pushing handsets in volume, but pushing profitable volumes is tough," says Ben Wood, analyst at the consultancy CCS Insight. Phone makers' survival now depends on keeping customers loyal and enticing them to buy higher-priced, profitable models.

The once-ubiquitous BlackBerry has now been all but confined to history. Photograph: Sarah Lee for the Guardian

The chief executive of Dixons Carphone, Seb James, expressed hope last month that the phone market would recover eventually. That might be a way off. IDC predicts compound growth of just 3.3% globally over the next five years. Although emerging markets are far from saturated, they struggle with the costs of data, handsets and building data-capable networks, not to mention sickly economies. South America and Africa, once thought of as the next big opportunities, are seeing slow to no growth.

So what happened? Analysts say that mobile phone companies used all the technological tricks they had – cameras, touch-screens – and now every improvement seems incremental, even if it has taken years of painstaking research. "There's a single dominant design dating back to January 2007 [the first iPhone's full touchscreen], and 10 years later everyone's iterating around the same look and feel," says Wood at CCS.

In those 10 years, only one feature really drove upgrades, says Carolina Milanesi of the US-based research group Creative Strategies. "Bigger screens have been the largest driver of sales, and churn [swapping between the iPhone and other brands]. The megapixel [camera] race helped for a while, and now dual cameras [phones with two lenses, which improve focus] are doing the same. I think the rest of the features – waterproofing and so on – have not mattered as much."

Can anything grab our attention enough to drive upgrades? IDC's Jeronimo suggests that augmented reality, which overlays images and data as you view the scene through your screen, could help: it's coming to iPhones in a software release this month, and Google has just released similar software for top-end Android phones. "It will open up a completely new world of experience," he says. "It'll be like moving the keyboard to the touchscreen."

Back at the Apple store on London's Regent Street, Olivia Winter, 24, remains unconvinced. "I'm not interested in getting an up-to-date phone. I need a phone to do calls, texts and photos but I wouldn't be exclaiming 'oh my god' if I saw someone with an iPhone 4."

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