Smartphone Revenues to Increasingly Rely on Software and Services in the Next Decade

The current market surrounding smartphones is one of the most profitable in the world, with current statistics showing a staggering $530 billion in revenue from hardware, apps and services alone. In spite of the fact that this is the case, hardware innovation is reaching a plateau and replacement cycles are starting to increase, which is leading to OEMs branching out into wearable devices and other unique hardware related products.

With all of that having been said and now out of the way, it is important to note that the software and services sector of the smartphone industry is growing much faster than its hardware oriented counterpart. The revenues that this industry brings in from hardware alone have seen a 4% compounded annual growth rate between the years of 2015 and 2021, and service revenues are far outstripping that rate of growth.

On iOS, services and software have seen a healthy 23% increase per year since 2015, and while Android is lagging behind its own software and services revenues have grown by 12% with all things having been considered and taken into account. Android might not be able to rest on its laurels for much longer though because of the fact that this is the sort of thing that could potentially end up widening the gap that already exists.

Android hardware and iOS hardware have gone mostly toe to toe this past decade, but iOS services have seen a tremendous growth rate that really outstrips Android’s revenues from service related categories. Android has a cluttered ecosystem that makes it hard to provide software that will be compatible across all devices, whereas Apple’s singular ecosystem is a much easier one to contend with.

Google might need to simplify things lest it falls behind further in terms of software and service revenues, but that will go against the current decentralized model that allows so many OEMs to adopt Android instead of iOS. This tricky balancing act will need to be optimized because the majority of revenue for the smartphone industry might come from services and software in the future.


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