GCC smartphone sales drop in 2017, says IDC

Smartphone market down on macro-economic issues, sales expected to continue to fall this year with impact of VAT

Tags: BahrainIDC Middle East and AfricaKuwaitOmanSaudi ArabiaUnited Arab Emirates
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GCC smartphone sales drop in 2017, says IDC Smartphone sales were down in the GCC in 2017, although the market overall saw growth due to increased feature phone shipments.
By  Mark Sutton Published  March 4, 2018

Sales of smartphones declined in the GCC in 2017, IDC reports, with sales expected to decline further in 2018.

The analyst company said macro-economic issues have affected the key market of Saudi Arabia last year, and the introduction of VAT in the Kingdom and the UAE from the start of this year is likely to further reduce consumer spending in 2018.

According to the company's Quarterly Mobile Phone Tracker, shipments of smartphones were down 2% in Q4 2017, in line with an average decline of 2.7% per quarter for the previous three quarters.

The GCC mobile phone market overall grew by 2.1% quarter-on-quarter in Q4 off the back of strong shipments of feature phones. Shipments totalled 6.6 million units overall.

IDC attributed the slump in smartphone sales to weak performance in Saudi Arabia, Qatar and Oman. Qatar's sales channel was impacted by macro-political factors, said IDC. Saudi Arabia's smartphone market fell 13% year-on-year overall, which IDC attributed to the market coming to terms with the introduction of various new government regulations and a tax on expat families in the Kingdom which has cut consumer spending.

"The Saudi market continues to experience some major macroeconomic challenges," said Kafil Merchant, a research analyst at IDC. "Additionally, the introduction of an expat dependent tax has caused a further tightening of disposable income in the country, with many people now looking to leave the kingdom or having already done so."

The UAE was the region's top-performing market in Q4 2017, with mobile phone shipments to the country increasing 12.3% quarter-on-quarter. Bahrain and Kuwait also saw quarter-on-quarter growth, with shipments up 7.1% and 2.7%, respectively. However, Qatar, Oman, and Saudi Arabia all experienced QoQ declines, with mobile phone shipments down 5.2%, 2.0%, and 0.8%, respectively, in Q4 2017.

Feature phone sales were up 10.6% in Q4, and 11.4% for the rest of 2017. IDC said that Nokia's introduction of numerous new feature-phone series throughout the year has been the major driving force behind the growth of this category.

The vendor landscape for feature phones continues to be dominated by Nokia, with the vendor garnering 87% share of the GCC market in Q4 2017. Samsung continued to lead the smartphone space with 31% share, while Apple followed in second place with 27.1% share - its biggest ever slice of the GCC smartphone market. This also represents the smallest gap between the two giants since 2011. Huawei ranked third with 13.4% share, with various other brands such as OPPO and Xaiomi, also actively trying to make headway in the region. However, beyond the top three it is a very fragmented market and hard for any brand to really differentiate itself enough to capture significant share.

"The final quarter of the year is usually a good one for Apple; however, this time it has been one of its best ever quarters due to the positive consumer response to the iPhone X," says Nabila Popal, senior research manager for mobile phones, AR/VR, and displays at IDC. "Despite its high price, much fanfare greeted the iPhone X's launch in the region, with many consumers eager to purchase the model for its innovative features and the prestige it carries. However, I do not believe this high level of demand will be sustained beyond the initial buzz of excitement that tends to greet the 'latest and greatest' gadget in this region, so Apple's share is unlikely to remain so high over the longer term." 

Looking ahead, IDC expects the overall GCC mobile phone market to decline 6.3% YoY in 2018, as a result of sharp downturns in Saudi Arabia, Qatar, and the UAE caused by the challenging macroeconomic environment. The recent introduction of VAT in Saudi Arabia and the UAE has put a further strain on consumer spending, and it will take some time for the market to adjust to this change and for consumer purchasing behaviour to return to normal.

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