Are Apple’s results a warning bell for the smartphone industry?

If Apple Inc’s weaker-than-expected quarterly result is anything to go by, the global smartphone industry is a lot more vulnerable to economic shocks these days than during the 2008-2009 financial crisis.

In developed markets, every other person already owns a smartphone. In emerging markets, penetration rates are much lower, but cheaper phones that cost under $100 are squeezing profit margins.


That was not the case during the last recession, when Apple’s iPhone and Google Inc’s Android were still in their infancy. Smartphone demand remained strong even as sales of other electronics declined because consumers felt it was worthwhile to upgrade to a device with so much to more to give — touchscreens, email and full Web browsers.


Without a technology breakthrough such as touchscreen – made popular by the first iPhone in 2007 – people are in far less of a hurry to upgrade their phones this time around, analysts said.


That was evident from Apple’s June quarterly results, which showed a much bigger hit from the European debt crisis than Wall Street expected.

“The economy is having an impact on all electronic goods. Even Apple, which did defy gravity in the last recession, is not escaping now,” said Hudson Square Research analyst Daniel Ernst.


Smartphone users, who typically upgrade their phones every 18 to 24 months, are now holding on for three months longer than usual, according to Gartner analyst Carolina Milanesi.


“The reason to upgrade is less urgent” she said.


PRICE PRESSURE

Overall smartphone shipments rose 32 percent in the second quarter, their slowest pace since 2009′s 16 percent increase, according to Strategy Analytics. The research firm forecast annual smartphone shipment growth would slow to 40 percent in 2012 from 68 percent in 2011 and ease further to 23 percent in 2013.


Analysts say demand from emerging markets will support smartphone shipments even if the global economy takes a turn for the worse, but a growing supply of lower price devices from vendors such as Huawei Technologies Co Ltd and ZTE Corp will pressure prices even if the economy improves.


“We’re forecasting ASPs (average selling prices) to dip in 2013 and accelerate from there on,” said Strategy Analytics analyst Neil Mawston. “If the economy continues to flat line or dip that will accelerate the move to lower cost models.”


The popularity of Apple’s iPhone and Samsung Electronics Co Ltd’s Galaxy S will give these companies some pricing insulation, analysts said.