By Harry Street

Several days ago, Tim Cook announced the latest generation of the iPhone. Although it was not the usual event, where hundreds of tech-fanatics rush to Apple Park in California, the annual iPhone event still went ahead, but this year entirely online. Described as entering a ‘new era’ with the introduction of 5G, Apple once again promised that this is the ‘best iPhone yet’. Rumours suggest that Apple, now valued at $2 trillion, is expecting sales of their mid-range iPhone 12 model to be around 80 million devices, highlighting just how vast the smartphone industry has become. Yet the question has to be asked: how have Apple, and many other large tech companies, convinced us that we should be spending upwards of $700 each year on an industry which barely existed a decade ago? It’s a phenomenon which has completely restructured modern-day living, with over a third of the world’s population now owning a smartphone.

The turning point for the mobile phone industry was seen at the latter end of 2007, back when Nokia dominated with over 40% market share. However, Steve Jobs shook things up as Apple introduced the first mainstream smartphone to the world. HTC entered the game the following year, presenting the first Android smartphone. This marked the start of a duopolistic market structure with the android operating system rivalling that of Apple’s iPhone. Each year, both would strive to greatly improve the devices and software, giving consumers a greater incentive to switch from cumbersome bricks and flip-phones.

However, what truly drove people’s addiction to their smartphones was not the device itself, but what third party software developers provided through apps. The social media market has sky-rocketed over the past 10 years and is now worth over $50bn in the US alone. New and exciting features are added to Facebook, Twitter and Snapchat every few months to ensure that we spend more of our time using these platforms and, subsequently, rely more on our phones. These features appeal to people’s desire for affirmation and attention, which help to keep the consumer on their device for greater amounts of time. Social media, as well as other large app industries, for example mobile banking, have all led to increased phone usage. The average UK adult now checks their phone every 12 minutes, and 40% reach for their phone within the first 5 minutes of waking up.

Despite the value third-party apps bring to smartphones, a recent struggle between software developers and tech giants has emerged. This has stemmed from Apple’s high rates of commission which they take from developers’ sales from apps. Additionally, they reportedly disadvantage services which rival their own, such as Apple Music and Apple TV. Earlier this year, Epic Games, the creator of the popular game Fortnite, have recently entered a legal battle with the creators of the iPhone, arguing that their 30% commission is extortionate. Similarly, Spotify launched a ‘time to play fair’ campaign last year, claiming that Apple have unjustly ‘rigged’ the music streaming service. This emphasises how, not only have we become so reliant on mobiles, but how powerful the providers of digital platforms have become.

It is probably no surprise that Apple spent $243 million on marketing and advertisements in 2018 alone, and this enormous budget is seen across the global market, as firms compete to get the largest slice of the smartphone-industry pie. Over 50% of the market share is held by the two most iconic brands: Samsung and Apple, who each have a share of 31% and 25%, respectively. We now see ourselves entering a new age of smartphones; one where it is not enough to solely improve the hardware in the devices, but to offer a whole range of devices complementing the original smartphone. With Apple Watch surpassing the sales of all swiss watchmakers in 2019, and Samsung and Huawei introducing their own ranges of smart watches, the tech industry is turning to the tactic of creating an unescapable ecosystem. By increasing our investment, firms are making it costlier to switch allegiance to a rival brand.

How the smartphone industry will develop over the next decade is almost impossible to predict. It is difficult to envisage how these devices could become any smarter or further integrated into our daily lives. We are seeing stronger regulation coming into play, with the EU recently declaring there is a need to ‘penalise the tech giants’. Though this may have some impact on how these firms act, one thing that we can be sure of, is that our digital dependency is not going anywhere anytime soon.

The views expressed in this article are the author’s own and may not reflect the opinions of The St Andrews Economist.