Smartphone Sales Down in 2013? Many Customers Locked Into Lengthy Contracts, Samsung Predicts Slow Growth

Smartphone sales worldwide rise 36 percent in the fourth quarter of 2012, but that could pose problems for manufacturers this year, as the market becomes more saturated with consumers locked into lengthy contracts with carriers.

"International Data Corp. estimates 219 million smartphones were shipped during the final three months of last year," writes the Christian Science Monitor. "That compares with nearly 161 million in the same 2011 period. Smartphones accounted for about 45 percent of all mobile phone shipments in the fourth quarter, the highest percentage recorded by IDC."

But many of those sales, particularly in the United States, are to customers who received a subsidized phone by signing up for a two-year contract with one of the big mobile carriers: AT&T, Verizon, Sprint or T-Mobile.

Customers can usually get a discount on a new phone once their contract is about to expire, but for many people, that date is nearly two years off. Buying a phone without a subsidy can run hundreds of dollars, as people who have lost or broken a subsidized phone find out.

Some customers prefer to shell out more upfront for an unlocked phone, which can be used on any carrier, as well as on cheaper prepaid services without a contract.

And others purchase a subsidized phone and "jailbreak" it, usually voiding the warranty but allowing them to switch to any carrier. However, that practice has just been made illegal in the U.S., though it might not stay that way for long, if consumer advocates can overturn the new ruling.

Smartphone manufacturer Samsung predicts a poor outlook for smartphone sales in the next few months. "It spooked investors by warning of general uncertainty in the outlook for the consumer electronics market and announced a freeze in capital expenditure," writes The Guardian.

"Samsung's executives noted during a conference call that smartphone sales would probably slow down during the first quarter, with the company expected to replace its flagship Galaxy S3 smartphone before April. Samsung Electronics shares fell 2.5%."