Complex Made Simple

Who is shaking up GCC mobile market?

After suffering three consecutive quarter-on-quarter (Q-o-Q) declines from Q1 2016 to Q3 2016, the GCC mobile phone market ended the year on a positive note according to the latest figures released by International Data Corporation (IDC).

The global technology research and consulting firm’s newly released Quarterly Mobile Phone Tracker shows that the region saw the shipment of 5.98 million units in Q4 2016, up 7.7 per cent on the previous quarter.

Sharp slowdown

When viewed year on year, however, the shipment numbers for fourth quarter do not make good reading, translating into a downturn of -30.5 per cent on the corresponding quarter of 2015.

Taking a look at the year as a whole, the region’s mobile phone market experienced a sharp slowdown in 2016, with total shipments down nearly -25 per cent on the year before.

“While the rate of Q-o-Q growth varied from country to country in Q4 2016, Qatar was the only member of the GCC to post a decline (-2.2 per cent),” says Isaac T. Ngatia, a senior research analyst at IDC Middle East and Africa.

“Saudi Arabia, which had suffered the worst declines in previous quarters, saw a reversal of fortunes in Q4 2016 by posting the region’s highest Q-o-Q increase at 11.9 per cent. The market is beginning to stabilize following the Saudization of the mobile industry and the challenging macroeconomic climate that compounded the effects of its introduction.”

“The UAE, which is the GCC’s second-largest market, also saw a considerable improvement in Q4 2016, with shipments up by about 5 per cent Q-o-Q for the final three months of 2016,” continues Ngatia.

“Q4 is traditionally the best-performing quarter of the year due to spending splurges in line with customary end-of-year and New Year festivities.  As such, only time will tell whether temporary seasonal factors were the main drivers of the market’s turnaround in Q4 2016.”

Samsung vs Apple

IDC’s research shows that Samsung continued to lead the GCC smartphone market in the three month ending on December 31, with almost 35 per cent share.

However, its shipments were down slightly (-0.3 per cent) Q-o-Q. It is worth noting that this does not include the recall of Galaxy Note 7 shipments, which are not recorded in IDC’s report.

Meanwhile, Apple was the market’s biggest gainer in Q4 2016, recording Q-o-Q growth of 20 per cent to secure 23 per cent share of the GCC smartphone market.

“Apple registered a solid quarter, which can be attributed to the success of its iPhone 7 and the gap created in the market by the Samsung Note 7 recall,” says Nabila Popal, a senior research manager at IDC Middle East and Africa.

“While the majority of Note 7 customers opted to stay within the Samsung family, Apple benefited from the fact that there are limited Android alternatives occupying the same price band as the Note 7, experiencing a clear boost in iPhone 7 sales as a result.”

Huawei bucking trend

When viewing 2016 as a whole, the overall GCC smartphone market shrank 23 per cent year on year (Y-o-Y) in unit terms, with the leading vendors Samsung and Apple experiencing declines of 32 per cent and 21 per cent, respectively.

Only Huawei bucked the trend to record a 9 per cent Y-o-Y increase in its shipments.

The introduction of competitive flagship devices, the positioning of models across a variety of price categories, and strong investments in marketing initiatives were among the drivers of Huawei’s impressive growth in what was an extremely tough year for its competitors.

Prices drop

Another noteworthy development was the drop in average sales price of Android devices. Only a quarter of Android smartphone shipments to the GCC in 2016 were of phones priced above $450, a figure that stood at 50 per cent just three years earlier.

With falling prices, the proportion of smartphones with 4G capabilities continues to rise, accounting for 80 per cent of devices shipped in 2016, up from less than half in 2014.

Continuing challenges

Despite the positive Q-o-Q figures for Q4 2016, channels and retailers are still struggling to keep up with the ever-changing mobile landscape.

Consolidation will likely continue at both the market and vendor level, making brand development and engagement key to penetrating the market.

The lesser-known or smaller brands may find it more difficult to penetrate an already saturated market.

All in all, IDC expects the GCC mobile market to see only modest Y-o-Y growth of 3 per cent in 2017, as the market begins its long recovery from the -25 per cent decline seen in 2016.