Dubai Chamber analysis shows UAE computer product market to grow by 8.47% a year to 2018

The UAE computer product market is forecast to grow at a Compound Annual Growth Rate (CAGR) of about 8.47% until 2018, according to a research note published by Dubai Chamber of Commerce and Industry, based on research by Business Monitor International (BMI) and Euromonitor International. 

According to the research note, the UAE IT market was estimated to value around AED 15.75 billion in 2013, of which hardware sales made up the largest share of 52%, followed by IT services with 30% and then software with 18%. 

The UAE computer product market is important for the UAE economy, with portable computers and laptops making up the dominant share of consumer spending by value in 2013. The widespread use of the internet in homes and offices in the UAE has led to increased demand for computer products. 

According to the Network Readiness Index 2014 of the World Economic Forum’s Information Technology Report 2014, the UAE ranks highly at 4th out 148 countries in firm level technology absorption and about 85% of households have a personal computer. More recently tablet computers have become more popular among consumers as they provide computing power to the user with mobility. 

Demand for computer products in developing countries also continues to grow with growth in population and increased awareness about the benefit of using computers for learning and communication. Due to this growing demand and its strategic geographical position at the cross roads between Asia and Africa, the UAE has become an important trading hub for computers manufactured in Asia to be re-exported to the growing consumer markets of Africa. 

UAE Computer product market overview

According to research by Business Monitor International (BMI), the UAE IT market was estimated to be valued at around AED 15.75 billion in 2013 (figure 1). Of this hardware sales had the largest share at about 52%, followed by IT services at 30% and then software at about 18%. The UAE IT market is forecasted to experience robust Compound Annual Growth Rate (CAGR) of about 8.47% from 2013 to 2018.  

Potential important drivers of future sales growth in domestic and foreign markets include growth in population, incomes and technological innovations, which could increase demand for mobile devices and tablet computers. Also the need to use and upgrade IT services in offices creates continuing demand for new computers. 

According to research by Euromonitor International, the main distribution channel for sales of computers and peripherals in the UAE in 2013 included Electronics and Appliance Specialist Retailers, which accounted for about 41% of sales, followed by hypermarkets which accounted for about 44.6% of sales. Together these two channels make up almost 86% of total sales of computer and peripherals in the UAE. Therefore new and existing computer product businesses in the UAE could target these channels to ensure efficient distribution. 

The UAE is a major re-export hub for computer products, with Africa and South Asia being major markets. Major import sources of HS 8471 Automatic data processing machines etc. in 2013 included China, USA, Netherlands and Singapore while major export destinations for UAE businesses in 2013 included Oman, Tanzania, Uganda, Pakistan and Georgia, according to data from trademap.org.   

Business Opportunities

While the UAE domestic computer market presents business opportunities, there is already high penetration of computer products in the UAE and in the GCC in general. This is shown in table 1, which highlights percentage of people who own an internet enabled computer. In this regard, the results can be divided into three regions. One is the GCC, the other is Sub-Saharan Africa and the third is North Africa. 

GCC countries tend to have the highest rate of people who own internet enabled computers, followed by countries in North Africa and then lastly countries in sub-Saharan Africa. The UAE has one of the highest rates of computer ownership. Given this high adoption of computers and rising purchasing power in the UAE, growth in the UAE market will be mainly driven by technological advances especially new niche products such as tablet computers and sleek ultra-thin notebooks. 

Table 1: Percentage population forecasted to possess an internet enabled computer

Source: Euromonitor International and International Telecommunications Union (ITU). 

The business opportunity in the UAE and the GCC region therefore could be for computer brands to sell newer high-end computer products in the UAE and across the GCC. 

The business opportunities in the MENA region and across sub-Saharan Africa are more about increasing computer ownership amongst people who don’t have a computer yet. In this regard the opportunity could be quite lucrative with countries in North Africa and Sub-Saharan Africa. For example, countries with large and growing economies such as Nigeria and Kenya have potential for substantial computer sales but have single digit ownership of internet enabled computers (table 1). These countries are also home to significant and growing populations with rising purchasing power, creating opportunities for UAE businesses to re-export to and sell computer products economies across Africa and partner with local businesses to sell in the local market. 

Since consumers in these economies have lower purchasing power, the key opportunity is to provide quality but low cost products. Key growth products could include cheaper tablet computers and handheld mobile computing devices which combine technology with mobility. Sourcing lower cost computing devices which can then be sold in these markets could therefore be a lucrative re-export opportunity. 

UAE businesses could also partner with local businesses in these markets to open retail outlets selling these products directly to consumers. Since consumers in these economies generally have low purchasing power with parts of the population not having access to bank accounts, an innovative strategy could be to sell tablet devices on periodic installment payments paid through mobile payment systems. 

Conclusion

Computer products are increasingly becoming useful not only for work in offices, but also a product which can be used for learning and entertainment. With technological advances driving down cost of computer ownership and large populations in developing countries demanding access to these important products the re-export and businesses opportunities in these markets could be massive. UAE businesses can gain competitive advantage in these markets by selling low-cost computer products, by establishing contacts with buyers in these markets and by opening retail outlets to sell computer products directly to consumers. 

Enterprising businesses can also create their own chain of Electronics and Appliance Specialist Retailers. A strong store brand together with product warranties and after sales service would give consumers increased confidence about buying these products. These and other steps could help UAE businesses exploit the potentially lucrative businesses opportunities in providing computer products to the growing economies in Sub-Saharan Africa and the MENA region.