Telecom Market to Grow by Around 2% in 2024

The telecom market continues to readjust after the record sales experienced during the pandemic. Thus, the sector’s overall revenue contracted by 0.6% in 2023, but corrections have already been made and it will return to growth this year, for which an increase of around 2% is forecast, according to GfK data.

The consultancy does not expect a major revival of the sector in the long term, which would require groundbreaking innovation to drive the market. However, it warns that some technologies on the horizon could be the catalyst the sector is waiting for.

“We see two big opportunities that could do this if they make it to the mass market: generative AI for smartphones and augmented and virtual reality,” notes Jan Lorbach, GfK’s insights expert in the Telecom sector. “In order for retailers and manufacturers to benefit from this expected increase in demand, they are advised to become early adopters,” he adds.

GfK notes that smartphone behavior continues to improve, but consumers need more practical ways to use their potential. The consultancy explains that smartphones are mainly used for messaging apps such as WhatsApp and WeChat (72% of smartphone users worldwide) or photography (64%).

So the next big step is yet to come, with the widespread deployment of generative AI. “When this AI becomes part of smartphone users’ daily lives, it will drive demand. Analysis of sales and long-term consumer behavior shows that users are willing to pay more for advanced features. However, if innovation is not enough, they will prefer to wait for something really new before buying their next device,” explains GfK.

This translates into longer and longer replacement cycles in the telecom market. According to data collected by gfknewron Consumer, the majority (35%) of new buyers in 2023 had smartphones between two and three years old. This is a first. For example, buyers with devices between one and two years old were in the lead in 2022.

The other technologies with the capacity to energize the market are virtual and augmented reality and the metaverse. “The hype around the metaverse has died down a bit. However, the sector is evolving towards a split between interested and uninterested consumers,” the consultancy details.

Although total sales of metaverse-related devices declined by 2% in 2023, the revenue generated increased by 15%, according to its data. GfK notes that the fact that the users most interested in the metaverse are investing in more advanced augmented, mixed or virtual reality products reflects the trend towards premiumization.

As a result, the revenue share of augmented and mixed reality glasses grew by 30% to $225 million (€209 million) in 2023, up from 4% in 2022.

In addition, the consultancy highlights that the trend differs across regions. While virtual reality glasses were mostly purchased in Western Europe (83% of global revenues), augmented reality devices were mainly purchased in China (98%). And in this country, demand for traditional VR headsets has fallen significantly, with a year-on-year decline in sales of 55%. In the rest of the world, virtual reality continued to grow (+3%).

“The reason for these differences is not only personal preference, but also distribution, as some devices are simply not available in certain local markets,” GfK points out.

Finally, it predicts that the telecommunications industry will experience a big boost if augmented, mixed or virtual reality glasses become an everyday product, rather than a niche product for specialized gaming applications.