IDC expects the overall Middle East mobile shipments to continue to struggle throughout 2016, with hopefully a recovery by the end of the year.
The mobile phone market in the GCC reached shipments of 7.7 million units during Q1 2016 according to the latest figures released by International Data Corporation (IDC). This figure marks a -10.3% quarter on quarter decline and an even higher -13.2% year on year decline from Q1 2015.
“The prevailing sentiment is that 2016 will see a slowdown in the growth of mobile phone shipments in the GCC due to various socioeconomic factors such as low oil prices, reduced government spending, and ongoing political instability,” says Nabila Popal, research manager for mobile handsets at IDC Middle East, Africa, and Turkey. “These factors have significantly impacted consumer spending across the region, and it is the consumer segment of the market that is the major driving force behind demand for mobile devices. Reduced consumer spending, combined with lack of true innovation in this industry from the consumer’s perspective, is what is causing the slump. Although there are technological improvements from one flagship launch to another, it really isn’t enough to warrant the consumer to upgrade. Hence, the once short smartphone refresh cycle is increasing as well. As such, we are seeing vendors and channels brace themselves for a tough year ahead.”
The proportion of feature phones in Q1 2016 continues to decline, although the rate of decline has stabilised over the past few quarters, even a slight increase in Q4 2015. There remains to be a consistent demand for feature phones in the region amounting to about 21% of the total mobile phone shipments in Q1 2016.
In the smartphone space, Samsung, Apple, Huawei, mark the top 3 vendors in the region, together accounting for 75% of the smartphone market in the GCC. Samsung commands the top place with 44% enjoying an increase in share over last quarter due to the launch and success of the S7. Apple is in second place with 19% followed by Huawei with 13% share.
In these tough economic times, consumers are looking for better value propositions. In Q1 2016 phones priced less than $300 make up 52% of the smartphone space. In fact, the Samsung J series is already doing really well in the region. Huawei and Lenovo have already proven this formula works, with the gains that they have been able to make in recent quarters with their success in the low to mid-price range segment. Although Huawei is focusing on the high range models recently, sales from which are growing for the brand, the majority of its sales, almost 85%, still come from low to mid-price models under $300 according to IDC’s Q1 2016 Mobile Phone Tracker.
One wonders if this is a short term crisis or a long term jolt for the market. According to Popal, the hope is that it is a short term crisis for the region and things should pick up toward end of 2016 and next year. “But yes overall there is a global slowdown in the smartphone market as globally the market is getting more saturated. However for MEA there is still much room to grow, especially in Africa where the smartphone penetration is still low,” she adds.
So, the question is how the smartphone vendors should tackle the scenario. Customers are getting smarter with their money, so it will take a lot more to get them to ‘refresh’ their existing smartphones, as most phones are almost alike in terms of features now. “Vendors that are focusing on channel penetration and good distribution partners and marketing strategies are going to have the upper hand. Also customisation to the local market is an important factor especially in Africa; be it local languages, or custom applications that are beneficial to the region”, Popal signs off.