Introduction
Smartphones have become an indispensable part of US citizens’ lives as portable devices that fulfill traditional phones’ functions while supporting some tasks allocated to personal computers. No longer regarded as luxurious items, these tech products have offered endless information processing opportunities to ordinary consumers, giving rise to one of the country’s thriving markets. The US smartphone market has grown significantly over the years, which is essential to the country’s economy.
The market expansion for smartphones is credited to technological advancements such as longer battery life, improved camera capabilities, and larger screens. Consumers’ expectations do not stop evolving, prompting tech giants to invest in innovation and futuristic features to differentiate themselves. Therefore, the sale of smartphones is an important aspect of the domestic economy.
The purpose of this essay is to thoroughly examine smartphone sales in the US and their economic impact. The key objective concerns the assessment of this process from a microeconomic perspective, namely the formation of supply-demand nuances, profit accumulation, product differentiation, and other parameters that determine the characteristics of the target market. The relevance of the analysis is due to the need to identify the real numbers that sales of smartphones demonstrate to have an idea of the role of this activity in the national economy.
Through a literature review, the main trends in the US smartphone market should be reviewed to determine the growth dynamics of this industry. Mobile phone sales’ influences on the US economy include job creation in retail, repair services, manufacturing, and software design, increases in the economy’s overall outputs, modernization of retail, and prevention of hyperinflation. The effects of smartphone sales are enormous, which is confirmed statistically. Thus, the main question to answer is as follows: Why has this area of activity firmly entered the list of the most stable and financially reliable income items in the national GDP?
Literature Review
Several researchers have studied the smartphone industry’s impact on the US economy. According to Fan and Yang (2020), the total revenue generated from smartphone sales in the US in 2020 was $77.5 billion, and it is expected to reach $82.8 billion by 2023. Numerous career prospects in the tech sector, including software development, hardware manufacturing, and mobile app development, have been made possible by the growing demand for smartphones (Fan & Yang, 2020). Furthermore, it has also contributed significantly to the growth of e-commerce, social media, and mobile advertising.
The overall proportion of smartphone users in the US is constantly increasing, and one of the reasons for this is the concept of brand love, which is closely included in the modern marketing environment. As Christino et al. (2019) note, the continuous expansion of smartphone lines has resulted in a high level of product differentiation. As a result, users have been able to choose the smartphones they are most loyal to, which, in turn, has led to the growth of such global brands as Apple or Samsung (Christino et al., 2019).
The modern sphere of production and sale of smartphones operates steadily in many respects due to the availability of products that have ceased to be associated with luxury goods. Manufacturers have managed to build and conduct more effective and targeted marketing policies, which, according to Busch and McCarthy (2021), can help create value propositions for specific populations. Therefore, the popularization of the use of smartphones through the construction of adequate pricing and targeted marketing steps has made it possible to strengthen this industry significantly with the help of millions of loyal users.
Steady market coverage is a feature that reflects the success of individual smartphone brands and demonstrates customer loyalty. For instance, as Park (2022) argues, the early entry strategy demonstrated by Apple allowed the corporation to achieve a leading position and ensure the growth of its sales, and today, the brand is a flagship. Compared to Apple, Samsung, another major smartphone brand, cannot be characterized by the same market stability. However, this manufacturer emphasizes greater affordability, complemented by innovative solutions, which is a reliable way to maintain high sales (Park, 2022).
In the US market, Apple products are in demand more than Android smartphones. At the same time, according to Rao (2023), the global difference in market coverage between Apple and Samsung does not differ significantly, as shown by the latest estimates (25% and 20%, respectively). Thus, winning the trust of users is associated not only with the aspect of marketing policy but also with the geographical aspect when socio-economic nuances are taken into account, and users’ interests in specific brands are determined.
A 2020 Deloitte report claims that the smartphone market has become a major contributor to the US economy. Based on the study, the sector contributed an estimated $1.4 trillion, or 5.5%, of the nation’s gross domestic product (GDP) in 2019 (Mu & Zhang, 2021). The study also revealed that the sector supports over 4 million employees nationwide, with a total estimated economic value of $475 billion (Mu & Zhang, 2021). The industry’s influence on the economy is projected to grow even more as a result of ongoing technical development and customer demand. The rising adoption rates among consumers are proof that there is a rising need for cell phones.
The US smartphone industry’s activity adds to the popularization of e-commerce in the mobile phone trade, but to a lower degree than that of other global leaders. The US is widely recognized as one of the largest markets for smartphones in terms of size and rate of penetration. The latter is defined as the percentage of potential customers that have been acquired (Park et al., 2019). As of 2017, almost 70% of the country’s population was represented by active smartphone users (Park et al., 2019).
However, in terms of online marketplace utilization, the US is outperformed by India, the U.K., and China, with online deals representing 45%, 39%, and 34% of their total smartphone sales, respectively (Purwanto & Sudargini, 2021). For the US market, digital marketplace use represents only 24% of total mobile phone sales (Purwanto & Sudargini, 2021). As e-commerce is generally more profitable than traditional retail businesses, it is possible that the US market for smartphones needs to realize its full potential for the country’s economy at the moment.
The country’s smartphone market features large corporations with high sales, suggesting stable demand and active job creation in the US retail and device repair sectors. The US market for smartphones consists of at least 18 prominent smartphone manufacturers (Byrne, 2019; Fan & Yang, 2020). The market leaders’ average sales per month range from 0,33 to 1,99 million units, with the U.S.-based Apple Corporation featuring the best result (Fan & Yang, 2020).
Remarkably, in terms of total sales, Apple outperforms other foreign manufacturers present in the US market, including the Samsung conglomerate, by at least 160% (Fan & Yang, 2020). Handling such demand requires increases in retail staff, promoting the market’s contributions to new job openings for tech retail employees (Mu & Zhang, 2021). Furthermore, around 50 million smartphone users in the US accidentally break their devices’ screens every year, stimulating the cell phone repair market’s growth (Perzanowski, 2021). Thus, the country’s smartphone market can indirectly support employment.
The current situation with smartphone sales also contributes to preventing excessive inflation or severe drops in citizens’ purchasing power. In the US, the constant quality price index for smartphones saw a 15-20% decrease between 2010 and 2018, making the inflation rate similar to the situation with computers in the 1990s (Byrne, 2019). Moreover, the consumer price index for smartphones in the US faced a 7-point reduction between 2008 and 2018, featuring moderate deflation compared to other markets, such as the U.K., New Zealand, and Finland (Byrne, 2019). Since 2018, the consumer price index for smartphones sold in the US has been falling by around 12% annually (Byrne, 2019). Low inflation can have positive impacts on demand levels among the target population by removing barriers to product consumption.
While taking into account the findings from the sources cited, one may note that various microeconomic aspects are critical to consider when analyzing the smartphone market in the US. Data analysis can help identify the most significant effects and highlight what factors determine the sustainability of the given industry. In addition, the assessment of the competitive aspects and the parameters of supply and demand makes it possible to present the real development prospects that characterize this market sector.
Economic and Empirical Analysis
The demand and supply study of the smartphone market in the United States might reveal essential market insights. The demand for smartphones is influenced by a variety of factors, including customer preferences, income, price, and availability. Manufacturers can count on variable costs since the price of individual components differs, and the whole income is characterized as sales revenue minus component costs. The demand for smartphones is directly impacted by population income levels, with high-income groups often purchasing more expensive smartphones (Makov et al., 2018). Due to the high price elasticity, users can choose products from different manufacturers.
Demand is greatly influenced by price because people are less inclined to buy cell phones if they are too expensive (Makov et al., 2018). However, as sales indicators show, brand power is not a less crucial parameter, and the example of Apple and Samsung shows how individual brands can dominate a highly competitive market. The availability of cell phones is also a significant determinant of demand, with customers generally favoring shopping at retailers who provide a broad selection of devices at reasonable pricing.
Given the oligopolistic nature of the structure of the US smartphone market, namely the dominance of only two brands out of a range, marketing is one of the key driving forces in this business. Suarez-Villa (2023) mentions the incentives applied by Apple marketers to target audiences and notes that product differentiation coupled with brand power is the key to sustainable sales. Therefore, profit maximization through marketing solutions is a consistently effective strategy for retaining high demand.
Despite being supposed to have a decent product lifetime, smartphones are not immune to mechanical damage. Thus, another hypothetical and unique factor that stimulates demand in this specific market refers to cell phones’ imperfect durability combined with many products’ relative affordability (Makov et al., 2018; Perzanowski, 2021). Millions of users in the US destroy the screens of their devices on a regular basis (Perzanowski, 2021).
Long-term cell phone users’ inability to function as social units without smartphones causes them to choose between replacing the device and seeking repair services (Perzanowski, 2021). For manufacturers, raising the marginal cost associated with the extra expenses of producing better-performing components is often an impossible step due to the potential minimization of real profits. Thus, unplanned service and device purchases are common, adding to the already high demand for cell phones.
In a similar manner, cell phone supply is influenced by a variety of factors, including competition, production costs, and technical advancements. Technological developments are essential to the supply of telephones as consumer demands change. This makes it possible for companies to match consumer demand by manufacturing more sophisticated phones. Reliance on outdated production technology to offer consumers nothing more than essential smartphone functions does not create any stable motivation for purchasing.
At the same time, smartphones’ ability to replace computers, professional cameras, or other devices at least partially enables meeting the clientele’s expectations (Varriale et al., 2022). The cost of production and access to raw materials, such as lithium, are significant factors that affect the supply of cell phones (Moreno-Brieva & Merino-Moreno, 2020). The manufacturing cost of a product must be considered in the final selling price. A further factor affecting the availability of cell phones is the fierce competition that exists among technical firms (Khan, 2021). Businesses must continuously develop and provide distinctive features that differentiate their products from those of rivals if they want to compete in the market.
Conclusion
The US economy is greatly impacted by smartphone sales, which generate billions of dollars and millions of jobs. Being just a tiny portion of the US I.T. device industry, the smartphone market has transformed into a significant part of its economy, accounting for one-twentieth of its GDP. On a national level, smartphone sales also have some implications for popularizing e-commerce, which is a highly profitable and resource-effective model of transaction management.
The assessment of such microeconomic aspects as product differentiation, supply-demand nuances, profit accumulation, and other factors has made it possible to identify key trends in the target market. The industry remains resilient and consistently profitable because smartphones have moved from luxury to regular use, and affordability and high differentiation are criteria that drive up demand. Repair services, including screen replacement, are widespread and contribute to creating more jobs, thereby supporting the domestic economy. In a similar manner, the rising demand for mobile phones supports employment in the technology industry by promoting software and hardware development jobs. Due to the continual advancements in technology, it is anticipated that demand for smartphones will skyrocket, further fostering industry growth.
Today, the oligopolistic market structure is evident with two dominant brands, but in the future, this may change. Tech companies need to keep coming up with new ideas and making high-quality products that people can buy if they want to stay ahead of the competition. Activities in the direction of the continuous search for innovation are potentially promising and can help strengthen the position of individual brands in the target market.
References
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