Phone users know when to hold ’em, delay upgrades amid inflation
Analyst says handsets now stay in pockets for 4.2 years on average
Remember the early days of the smartphone revolution when, even after six months, your phone felt outdated? Not anymore. Smartphone replacement cycles are getting longer as discretionary household budgets come under pressure from inflation, with demand for new devices expected to fall for the rest of this year.
Phone makers were already feeling the effects of the AI-driven memory shortage, which has pushed up the cost of the DRAM and NAND flash chips inside every device, making handsets more expensive to build.
Now, inflation linked to events like the Iran war is eating away at the disposable income of buyers around the world, meaning more of them will decide that this isn't the time for a new model, and keep their current handset longer.
Analyst firm Omdia says that, so far this year, the market has confounded expectations, actually growing by a single percentage point in shipments compared to the first quarter last year, to 298.5 million units.
But that was almost certainly due to front-loading, as the vendors accelerated selling their phones into the channel and distribution network ahead of expected memory and component cost increases.
As the macroeconomic headwinds continue to put the squeeze on demand from buyers, a widening gap is forming between channel sell-in and underlying sell-out, Omdia warns. This imbalance could lead to a more pronounced correction in the current second quarter and later in 2026.
What this means is that the sales channels are full of products, but buyers are going to be fewer and choosier. And with the channels overstuffed, new shipments will likely nosedive in the coming months.
And when it comes to replacement cycles, these have already extended considerably worldwide over the last few years, according to Omdia principal analyst Runar Bjørhovde.
"Currently, there are 5.63 billion active smartphones worldwide - a number that will continue to grow over the next years," he told The Register.
"Actual new smartphones in 2025 were 1.25 billion. This reflects an average lifetime of 4.2 years before a device is replaced. In 2020, this number was only 3.6 - and we expect it to move towards 4.7 before the end of the decade," he explained.
So replacement cycles have already lengthened since the heady days when it was typical for some folk to get a new device every year or two, possibly because the price tag for premium devices is now well north of $1,000 and there is increasingly little difference between any of them.
"We particularly expect more price elastic consumers to delay their purchases a bit further as device pricing is pushed up due to the memory situation," Bjørhovde added.
Omdia saw a peak in 2024 and 2025 for a refresh of devices bought in 2021 and 2022.
"The next one will likely come through once the worst of the memory crunch starts to settle towards the end of the decade," Bjørhovde said.
One aspect of the current memory situation is that budget entry-level devices will be very difficult, if not impossible, for vendors to maintain, as The Register has reported previously.
"Selling a device for less than $200 when memory a year ago made up 15 percent of the bill of materials, but has now increased by three to five times, is impossible even if you start to reduce quite a lot of other specs," Bjørhovde explained.
There could be a further knock-on effect as well, as market watchers at IDC previously said that elongated refresh cycles for brand new phones mean fewer second-hand devices will become available for those wanting a budget option. ®