Apple fights off rivals for Middle East smart phone market

If today's technology world were a stage, Apple would be a rock star.

If there is one company that everyone wanted a bite of last year, it was Apple. Indeed, if today's technology world were a stage, Apple would be a rock star. Everyone perks up whenever an iPhone is brandished and anything Apple does - or has yet to do - is the subject of endless gossip. Although its co-founder and chief executive Steve Jobs was absent due to medical issues in the first half of the year, his return in June was one of the technology business's most anticipated events of the year.
Admittedly, it is slightly odd to focus on a US company when looking at how the Middle Eastern technology sector has fared. But Apple's leadership position and innovation cycle has significantly influenced the region. For starters, there is no bigger story in the sector than the growth of the smartphone market, as the capabilities of the humble mobile exploded into Web surfing and so much more. Much has already been said about the resiliency of the technology and telecommunications industry during the economic downturn, but anything vaguely related to mobile devices made headlines around the world.
The touch-screen equipped iPhone led the way, followed closely by the BlackBerry from Canada's Research In Motion (RIM), which offered a more conventional keyboard to users with discerning typing tastes. HTC, the Taiwanese device maker, saw its profile rise as it continued to develop a cosy relationship with Google and its Android smartphone operating system. Apple has sold more than 57 million iPhones since it was launched in June 2007 and the device accounts for 18.5 per cent of its revenues.
Globally, Apple is number three in the smartphone market with a 17.8 per cent share, trailing RIM at 20.6 per cent and the market leader Nokia with 39.7 per cent, the technology consultancy Gartner shows. When the iPhone officially arrived in the UAE last February, the foundations of the country's telecoms market began to shake. In October, both Etisalat and du offered the new iPhone 3GS model. Today, the device barely stays on shelves as the telecoms operators attempt to keep up with demand.
The smartphone is a boon to operators, a fact that du and Etisalat happily exploited with pricey mobile data plans and attractive device promotions. Although the economic downturn made everybody think twice about their spending habits, it was tough to ignore the latest mobile application that seemed to inform, educate and amaze. The numbers do not lie. Etisalat has posted Dh7.3 billion (US1.98bn) in profit in the first nine months of the year, while du reported a profit of Dh319.1 million before its royalty payments to Dubai during the same period. Driven primarily by multimedia-rich smartphone devices, mobile data now accounts for about 20 per cent of wireless revenues for UAE operators and the figure is expected to increase in the next few years. Mobile subscriptions surged, rising 15.8 per cent during the 12 months to October, to 10,333,518, according to information provided by the Telecommunications Regulatory Authority (TRA). After more than three years of operation, du commands 32 per cent of the market, gaining an additional 10 percentage points of market share from Etisalat and providing the country with a healthy competitive sector.
"Despite slowdown in growth compared to previous years, the UAE mobile market has still shown a double digit growth and more than one million new mobile connections in the last 12 months alone," says Marc Biosca, the head of the telecoms practice for the management consultancy AT Kearney. But to understand why smartphones are so popular you simply have to use one. Aside from e-mail, the most talked about software application on a mobile device last year was, without a doubt, Twitter.
Although it was officially launched in 2006, the service did not fully hit its stride until this year as Twitter attracted flocks of new users eager to send 140-character "tweets" from events such as protests in Iran to aeroplane water landings. But Twitter can go only so far on a regular computer. The service truly took off once people were able to use it on their mobile phone, creating another layer of communication to a device that already provides voice and text messaging.
In the UAE, about 8,300 people now use Twitter after a ban on the service was lifted by the TRA. This accounts for 40 per cent of its users in the Arab world and has become embraced by local businesses as a key communication tool to customers. The increased demand for more mobile devices is not just a cash cow for companies such as Apple or RIM, but also for the companies that manufacture the microchip processors - the brains of the ingenious little devices.
The microchip industry turned a corner in June after the market leader Intel announced it had entered a strategic partnership with Nokia to tie up each other's technology to develop faster and more efficient chips for mobile devices. The opportunities in the smartphone boom for chip makers were not lost on Abu Dhabi, which took a 19.6 per cent stake in Advanced Micro Devices via its investment company Mubadala Development. The emirate also owns a controlling stake in the customised semiconductor manufacturer Globalfoundries through its Advanced Technology Investment Company (ATIC).
Analysts viewed Globalfoundries' recent acquisition of Singapore's Chartered Semiconductor for S$5.6bn (Dh14.63bn) as a timely investment. Fuelled by the demand for consumer electronics, specifically smartphones and laptop computers, global customised semiconductor revenue is set to grow to $5.6bn this year, an increase of 53.7 per cent from last year's depressed level, Gartner reports. "You now have an opportunity for semiconductors to power billions and billions of smartphones and put them in the hands of consumers. That is a very big opportunity for Globalfoundries," said Ibrahim Ajami, the chief executive of ATIC.
But like all rock stars, the limelight can burn only so long for Apple. The company experienced a downturn during the 1990s when Mr Jobs was no longer involved. Its shares are at an all-time high, rising more than 141 per cent over the past year to above the $200-mark. Mr Jobs, often seen as the creative force behind Apple, and his health issues will continue to linger while further speculation on its rumoured tablet device has expectations running so high that it could end in disappointment.
What exactly the next year will hold for Apple, and by proxy, the rest of the technology industry, is really anybody's guess. But the world will be watching carefully, 140 characters at a time.
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