The fourth quarter's smartphone sales surge is over, at least according to data from technology market research outfit Gartner (NYSE:IT). Following Q4's worldwide shipment tally of 384.6 million units, this year's Q1 count of 378 million shipped smartphones marks a curiously timed contraction. Namely, despite a couple quarters of suppressed demand (and limited availability) for the first half of last year, sales of these mobile devices have already resumed a sales slowdown that first took shape in 2018.

No investor can afford to ignore the implications of the bigger trend. They also can't afford to look past the nuances of how the market's changing from within.

From sizzle to fizzle

Gartner's figures aren't of sales to consumers, for the record. Rather they're estimates of how many smartphones various manufacturers shipped to retail distributors.

Still, this data has served as a close approximation to retail purchases of these manufacturers' smartphones, and on balance, the world needs fewer -- not more -- of these devices in any given year. Notice that the four-quarter average number of shipments continues to slide lower.

The fourth quarter's rebound in smartphone shipments is already cooling off, reflecting muted demand.

Data source: Gartner. Chart by author.

It's also worth noting that Gartner's numbers align with other, similar sources. IDC, for instance, also saw a sizable slowdown in shipments early last year. That was somewhat offset by a fourth-quarter rebound. Gartner's Q1 unit estimate of 378 million shipped units, however, mirrors the 10% shipment decline IDC saw quarter over quarter in Q1.

This tepid demand is underscored by the fact that the advent of 5G wireless connectivity was expected to create firm demand for 5G-capable phones. Despite the availability of several 5G smartphones as of the latter half of last year, consumers aren't yet nibbling in a big way.

Chip shortage? While Gartner acknowledges that's a future possibility, Monday's statement accompanying last quarter's shipment data explains, "The global chip shortage has not yet impacted the smartphone industry as the demand and supply equilibrium is met."

In this vein, Samsung, Xiaomi, and OPPO not only added market share between the fourth quarter of last year and the first quarter of this year but managed to raise their total shipments from one quarter to the next.

With this as the backdrop, the are some big ideas to glean from Gartner's and IDC's first-quarter smartphone shipment data even if they weren't ideas explicitly put into writing by either market research outfit.

Wooden blocks stacked in descending order, from 3 to 1.

Image source: Getty Images.

Three key takeaways

1. The upgrade cycle is still lengthening: This was a challenge even before the coronavirus contagion rattled the world. It may be even more of one now.

Back in 2014, when the smartphone market was still relatively new, consumers used their phones for about 24 months before upgrading or replacing them. As these devices have improved and gotten more expensive, though, owners are keeping them longer. The average age of a smartphone turned in as credit toward a new device now stands at 37 months, according to Hyla Mobile's Q2 2020 review of the North American market, and that number is only going to grow as time marches on.

Sure, the pandemic presented logistical hurdles to obtaining new and better devices. Even when presented with time and opportunity to do so over the course of the past couple of quarters, though, consumers didn't exactly jump at the chance.

2. There's a shift toward value: It's not highlighted in Gartner's or IDC's counts, but it's there all the same: Lower-cost smartphones from names like Vivo, Xiaomi, and OPPO are adding market share.

Part of this progress can be attributed to the fact that phones made by China's Huawei are all but impossible to find, with sales bans in the United States and ally countries still in effect.

That's not the whole story, though. These three organizations are picking up more customers than Huawei appears to have lost. It's also worth noting that Apple (NASDAQ:AAPL) is addressing the lower-end market, too. A new iPhone SE is priced as low as $399 rather than the four-figure sticker price that's been tough for many budget-minded shoppers to swallow.

3. Apple's iOS is losing market share: Finally, while it's not readily evident from Gartner's (or IDC's) smartphone shipment data, growing interest in phones from makers like Vivo and Xiaomi is adding market share for Alphabet's (NASDAQ:GOOGL) (NASDAQ:GOOG) Android mobile operating system. It's coming at the expense of Apple's iOS.

GlobalStats dishes out the data. While the advent of the pandemic was a boon for Apple's smartphones, then-waning market share for Android has since been reversed. As of last month, Android is installed on 72.7% of the world's actively used mobile devices, up from the April 2020 low of 70.7%. Apple's iOS has seen its usage share fall from 28.8% then to 26.5% now.

Apple's iOS started to gain market share in the first half of 2020, but is ceding share to Android as of 2021.

Data source: GlobalStats. Chart by author.

It's still a bit early to call this a full-blown, well-grounded trend. But it's not too early for investors to take note.

Keep it in perspective, but keep it on your radar, too

It's certainly not a reason to sell Apple stock if you own it, nor is it cause to buy shares of Alphabet, or even Samsung. These are details, however, investors of any of these companies need to start thinking about now, as responses should already be in the works. All big trends start out as small ones.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.