Smartphone Splurge in Gulf Cools Down as Economic Struggles Loom

Published February 3rd, 2019 - 05:36 GMT
Shipments reached 365.2 million units in the last three months of 2018. (Shutterstock)
Shipments reached 365.2 million units in the last three months of 2018. (Shutterstock)

It was once a playground for smartphone makers, as the Gulf’s young, tech- savvy consumers splurged on the latest status symbol handset.

But a regional economic downturn, diminished spending power, new taxes and job insecurity have tempered enthusiasm for premium handsets around the region.

Both Samsung and Apple have reported falling profits in the past week. It comes on the heels of a shock revenue warning from Apple last month that roiled global stock markets, as iPhone sales in emerging markets fell short of expectations.

Global smartphone shipments recorded a negative year-over-year growth rate in the fourth quarter of 2018, for a third consecutive quarter, according to IHS Markit.

Shipments reached 365.2 million units in the last three months of 2018 — a decline of 5.7 percent. Over the year, shipments dropped 2.4 percent to 1.41 billion units according to preliminary data.

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Last month Apple warned that a strong dollar, differing timings for the launch of its top-of-the-range iPhones and economic weakness in emerging markets would crimp revenue growth.

While China was the cause of much of the Californian firm’s woes, smartphone sales in the Gulf — for all manufacturers — have also been in retreat. Across all manufacturers, telecom handset sales in the UAE totaled 4.92 billion dirhams ($1.34 billion) in the first nine months of 2018, down 14.6 percent year-on-year, according to data from research firm GfK.

The pace of decline appears to be accelerating, with sales in the third quarter of last year 21.9 percent lower than a year earlier.

A regional downturn, less spending power, new taxes and job insecurity have cooled enthusiasm for premium handsets.

Saudi Arabia suffered a smaller drop, with telecom sales totalling SR 10.43 billion, down 5.7 percent year-on-year. Like in the UAE, sales declines are steepening, with third-quarter revenues 10.6 percent lower versus a year earlier.

Fledgling and more-established Chinese smartphone brands are completely changing the smartphone handset in the Middle East, North Africa and Pakistan (MENAP) region, said Stavros Synodinos, GfK business group manager for telecoms and operators in Dubai.

More than 60 percent of the MENAP smartphone sales are mid-price models of $100-$300, increasing their market share versus 2017, notes GfK, which measures retail sales, rather than shipments. “Mid-Premium phones of $300-500 are the next big thing,” said Synodinos.

Fragile consumer confidence appears to have hurt sales of premium smartphones, but sales of low-cost smartphones from manufacturers such as Huawei’s Honor subsidiary have proved more resilient.

IDC tracks smartphone shipments, rather than sales, and its data differs from that of GFK. Samsung continues to lead the Gulf’s smartphone sector, holding a market share of 31.2 percent of shipments in the third quarter of 2018 despite a 3.0 percent drop in its shipments versus the prior three months, according to IDC.

Huawei (18.7 percent) and Apple (25 percent) complete the top three.

Samsung has been steadily losing market share, albeit as the market has grown. In 2013, its smartphone shipment share was 60 percent, falling to 45 percent in 2015, IDC data shows.

For all brands, IDC research reveals that in the third quarter of 2018 smartphone shipments to the six countries of the Gulf Cooperation Council (GCC) rose 1.1 percent quarter-on-quarter to 4 million handsets, ending five successive quarters of declines.

Cheaper, “feature” phones increased 6.7 pecent over the same period to 1.9 million handsets. That means total phone shipments rose 2.9 percent to 5.9 million handsets, with Saudi Arabia, Qatar and Kuwait mostly driving this growth.

Smartphones’ share of the handset market is declining. In 2015, smartphones accounted for 77 percent of all handsets shipped to the Gulf, according to IDC data. That was down to 68 percent by the third quarter of last year.

Total Saudi phone shipments — including both smartphones and feature phones — were up 8.4 percent quarter-on-quarter, a rise IDC said shows the waning impact of tax increases.

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