What happens when smartphones become too good?

The smartphone industry has spent much of its history persuading consumers that the device in their pocket could be substantially better. Cameras improved, screens sharpened,  and mobile networks advanced. Each generation offered another reason to replace the last. Today’s phones present manufacturers with a more complicated proposition. Consumers now keep smartphones for roughly four years, according to global technology market research firm Counterpoint Research, while resale and refurbishment keep devices in circulation longer. Counterpoint found that the global installed base of active smartphones grew 2 percent in 2025 even as replacement cycles approached four years. 

Pressure on new sales is also mounting. International Data Corporation’s August 2026 Worldwide Quarterly Mobile Phone Tracker forecasts that global smartphone shipments will fall 16.7 percent this year to just over 1 billion units, amid higher component costs and weaker demand.

“What technology companies care about is having a critical mass of consumers,” Horace Dediu, a technology analyst and founder of Asymco who studies the mobile industry, told The Beiruter. 

What is the audience? How vibrant is it? Is it growing? Are they spending more? Those are the metrics that matter.

The economics of the smartphone are therefore moving beyond the sale of the next device. Growth now rests as much on the value manufacturers can derive from long-term customer relationships as on how frequently those customers upgrade.

When longevity becomes part of the business

As hardware improvements have become less dramatic and software support periods have lengthened, consumers have fewer reasons to replace functioning phones.

The GSM Association, the global industry organization representing mobile operators, found in its 2025 Rethinking Mobile Phones report that average upgrade cycles had reached around 3.5 years globally, compared with 2.2 years in 2015. New smartphone sales fell 15 percent between 2021 and 2023 while sales of used and refurbished devices rose 15 percent. 

Longevity therefore creates a commercial opportunity alongside the problem it poses to new-device sales, as phones pass between owners, trade-in programs and refurbishers.

“There is a secondary market with users who are also rotating through the phone, the services, subscriptions, et cetera,” Dediu said. 

We used to think of electronics as consumables, as disposables, but actually they’re becoming more and more durable goods. They last beyond the initial owner’s use.

He compares the transition to the automobile market, where manufacturers have long operated alongside a vast economy of used vehicles. The economics are particularly relevant in less wealthy markets, where refurbished premium phones can reach consumers who would not have bought them new, while longer lifespans strengthen incentives for software support, repair and trade-ins.

From selling devices to keeping customers

Once phones remain active for longer, the economics of the industry begin to move away from a simple calculation of annual shipments. A person who does not replace a phone this year may still pay for cloud storage, applications, insurance, entertainment, payments, or other digital services.

Apple offers one of the clearest examples of the transition. Its fiscal 2025 services revenue reached $109.2 billion, up from $96.2 billion a year earlier, encompassing businesses including cloud services, payments, subscriptions and the App Store.

“Services has for a few years already been a growth engine for the company, and investors have of course taken note of this,” Dediu said.

Products are cyclical. Products are seasonal. But services are very steady, and that’s the attraction for investors as well.

The mature smartphone market therefore rewards a different kind of durability. Companies still need compelling hardware, but they can also generate revenue throughout the years between purchases.

AI offers utility rather than a guaranteed supercycle

Artificial intelligence enters this market at an opportune moment because it promises something smartphone manufacturers have struggled to produce through conventional hardware upgrades: a substantially different reason to use the device.

The industry has already exhausted many of the most obvious improvements. Cameras, batteries and processors continue to improve, but each advance competes against devices consumers already regard as adequate. AI potentially changes the proposition by expanding what the phone can do rather than simply improving its specifications. 

“The other way you solve the problem of a mature product is to increase the utility of the product,” Dediu said. 

AI’s commercial value, however, need not rest on millions of consumers immediately discarding functioning phones for AI-enabled replacements. Dediu describes AI as a “horizontal technology,” capable of spreading through photography, search, calendars, email, messaging and writing as it becomes embedded in the operating system itself.

The pace at which those capabilities translate into sales, however, will depend on consumers discovering uses valuable enough to change their behavior.

“AI is a sustaining improvement,” Dediu said. 

It creates a reason for upgrades. It makes things better. There will be higher sales because of AI, but it isn’t going to be a giant explosion.

Rather than betting on an abrupt replacement boom, manufacturers can therefore use AI in two ways. New capabilities can gradually make newer hardware more attractive, while premium AI functions can also become services sold to people who already own compatible devices.

The battle moves to the interface

The rise of AI also changes what smartphone manufacturers need to own. Building a frontier model requires extraordinary spending on chips, data centers and computing infrastructure. But smartphone makers already control something even the most powerful AI developers need: the devices through which billions of consumers encounter their technology.

“People are still visually driven, so the screen factor is super important,” Dediu said.

There’s no better device than a phone. The phone is going to continue to be the primary interface to any number of these technologies.

That position becomes more valuable as AI moves from a destination users visit to a layer embedded across everyday computing. Consumers will care less about which model processes a request than whether their phone can deliver the result.

AI does not need to restore the rapid upgrade cycles that built the smartphone industry to transform its economics. Its greater value could lie in making the phone the primary interface through which consumers encounter the next generation of computing.