UAE electronics market poised for boom time

The study, which is based on a recent Business Monitor International (BMI) report on the UAE consumer electronics market, puts the spotlight on the UAE's geographical position as the country is a major electronics trading hub, re-exporting consumer electronic items to the Gulf, South Asia, the Commonwealth of Independent States (CIS) and Africa. Dubai is a major trading centre for the UAE electronics market accounting for 80% of UAE's total exports and 85% of re-exports.

HE Eng Hamad Buamim, Director General, Dubai Chamber, maintained that the electronics market has seen exponential growth in recent times as he cited the example of the setting up of The Electronics Group which joined the ranks of the large number of business groups, including the Computer Business Group, operating under the auspices of the Chamber.

Buamim stressed that Dubai's organizing of large electronic exhibitions like Gitex not only provides an impetus to the electronics market but reaffirms the Emirate's position as an electronics investment hub in the region as the various Government initiatives promote the UAE as a favourite business destination in the world.

Overview of UAE consumer electronics market:

The report further says that the consumer electronics market in the UAE has been boosted by excellent telecommunications and IT infrastructure. Local market demand has become more important than the re-export trade in recent years. Therefore, the domestic consumer electronic devices market, defined as including computing devices, mobile handsets and video and audio gaming products, was estimated to be valued at approximately $2.9bn in 2008. Figure 1 shows the percentage distribution of UAE domestic consumer electronic spending in 2008. The percentages are divided amongst important categories such as computer hardware, audio visual devices and mobile handsets.

Market outlook:

The UAE domestic consumer electronics market is expected to increase in value to $3.9bn by 2013. It is expected that increased demand will be driven by popularity of 3G mobile handsets, smart-phones, notebooks, big screen LCDs and other new devices. The UAE domestic consumer electronic market demand forecasts are shown in table 1. The first three rows show demand forecasts for the computer, audio video and gaming, and the communications industries. The last row shows demand forecasts for the entire consumer electronic device market.

According to these forecasts, demand appears to be resilient in 2009, despite the global economic slowdown. From 2010, demand is expected to increase strongly for all categories that make up the consumer electronics market. Export demand from the GCC countries and India is expected to help mitigate any adverse impact of a slowdown in the export market of the US.

Shifting trends in export and re-export markets:

Low import duty rates have made the UAE a trading centre for consumer electronic goods. The destinations for exports and re-exports have shifted over the years, with waves of demand for electronic goods from Africa and the CIS states. Initially, most of the trade was with South Asian countries. Later the CIS emerged as a major export destination. More recently, East Africa has emerged as a major destination for UAE consumer electronics exports, which has compensated for a leveling off in demand from the CIS.

The global recession is likely to have an impact on UAE exports of consumer electronics in 2009. However, exports to fast growing markets such as the GCC countries and India could help mitigate the adverse impact of the global downturn on UAE exports of consumer electronic goods.

Fundamental challenges faced by the market:

Challenges faced by the UAE consumer electronics market, include low margins which creates intense competition, the changing structure of retail outlets and competition faced by local manufacturers and assemblers from foreign imports. The retail market has seen a shift towards multi-brand electronic sections in hypermarkets and large specialist electronic stores within giant malls. Also, local computer manufacturers and assembler's continue to face brand competition from large global brands.

Many buyers still prefer the prestige and security of buying a well-known global brand. As a result, the computer market remains dominated by international players with the top five global brands having at least 50% of the market share. The global economic downturn has also created some challenges for demand for electronic goods. Continuation of the global recession could dampen demand for exports and re-exports of UAE consumer electronic goods.

Conclusion and Government initiatives:

Government policies have been a major driver for growth in the market. This is partly because low import duties and direct supplies from manufacturers have contributed in keeping prices in Dubai about 15-20% lower than other markets in the region. Projects such as Dubai Festival City and events such as Dubai Shopping Festival, consumer electronics expo and Gitex Shopper, as well as trade fairs have helped in increasing sales for vendors.

On its part, the Government has also tried to promote foreign investment by encouraging projects such as Dubai Internet City, free trade zones and also measures for telecom liberalization. The UAE government has also promoted the use of computers in schools and is encouraging the development of 'smart cities'. This is expected to increase domestic demand for consumer electronic items, especially computers. Demand for UAE exports and re-exports of consumer electronic goods is expected to remain strong in the future, as the global economy rebounds. Therefore, future prospects for the UAE consumer electronics market are good. More Government initiatives aimed at helping this market are likely to further deepen the local market and also help in increasing exports.