Middle East and Africa's Q1 smartphone shipments at 7-year low as inflation hits demand

Other factors in play include local currency depreciation and weak consumer sentiment, Counterpoint Research says

Apple's iPhone 14 series helped the company to buck the trend in the first quarter as its shipments to the Middle East and Africa rose 35 per cent. Antonie Robertson / The National

Smartphone shipments in the Middle East and Africa fell to their lowest level in seven years in the first quarter of 2023, as demand was hit by macroeconomic concerns, a new study has shown.

The number of devices shipped in the three months ended March fell 11 per cent annually, the lowest since the first quarter of 2016, Counterpoint Research said in its quarterly industry update.

Among the “prevailing” factors that affected the Middle East and Africa market include high inflation rates, depreciation of local currencies and weak consumer sentiment, it said.

That resulted in smartphone original equipment manufacturers (OEMS) being “stuck in low gear” by inventory corrections, channel efficiency and cost cutting, the report said.

Apple bucked the trend in the first quarter as its shipments to the region rose 35 per cent on the strength of its iPhone 14 series, particularly the top-end Pro models.

The company — which reported last week that it beat market forecasts thanks to healthy sales of its flagship product — was the only top OEM to post growth in the first quarter.

However, its market share in the Middle East and Africa was 7 per cent — up from 5 per cent in the year-ago period, good for fifth place.

Samsung Electronics, the world's biggest mobile phone manufacturer, remained the market share leader on 27 per cent, down from 24 per cent, last year, but recorded a 2 per cent decline in its first-quarter shipments, Counterpoint said.

The South Korean company found strength in the 5G models of its A series, its mid-range segment that “sold well”, the study said.

“The Middle East and Africa smartphone market saw another tough quarter as the macroeconomic environment remained challenging,” Yang Wang, a senior analyst at Hong Kong-based Counterpoint, wrote in the report.

“Difficulties affecting consumer spending towards big-ticket upgrades such as smartphones are now well known, and both consumers and OEMs are adjusting to the new realities with extra caution.”

Consumers have slowed down purchases of mobile devices owing to the effects of inflation and as they increasingly postpone intentions to upgrade their smartphones.

OEMs, meanwhile, are also trying to cope up with inflation, as well as higher interest rates and supply issues that have affected manufacturing and marketing.

Poor consumer demand is likely to remain the main theme for the rest of the year, as consumers postpone upgrades while holding on to their current handsets a little bit longer, Mr Wang said.

“However, expect that the inventory situation will improve gradually by the second half of the year, which will be followed by more ambitious product portfolio revamps and promotional activities by OEMs and distributors,” he said.

“This will coincide with better economic conditions as global interest rates and energy prices stabilise, providing much-needed breathing room for consumers in emerging markets.”

Tecno, a smartphone brand under China-based Transsion Holdings that is the top seller of smartphones in the African continent, was second in market share with 14 per cent.

Its fellow Transsion brand, Infinix, came in third with 9 per cent. However, both brands logged shipment declines in the first quarter, shedding 10 per cent and 6 per cent, respectively.

China's Xiaomi, the world's third-biggest seller of mobile devices, also had a 9 per cent market share, as it posted a 2 per cent drop in shipments.

Difficulties impacting consumer spending towards big-ticket upgrades such as smartphones are now well known, and both consumers and OEMs are adjusting to the new realities with extra caution

Yang Wang,
senior analyst at Counterpoint Research

The impact of currency depreciation and inflation has hurt lower-income households much more than the average, Counterpoint said, and was evident in the 45 per cent annual drop posted by itel, another Transsion brand.

China's Oppo and Vivo “somewhat stabilised” after their product availability situation improved, but both continued to shed market share as distributors remained cautious on the brands’ commitment to the region, the study said.

Mid-range devices from these brands, as well as from Realme and HMD Global's Nokia, remained strong, having achieved above-average market performance.

“The prospect of a V-shaped rebound has dimmed as companies prioritise inventory management, cost controls and streamlined product portfolios,” Mr Wang said.

For the full-year 2022, smartphone shipments in the Middle East and Africa hit a seven-year low as high inflation sapped consumer demand, Counterpoint said in its annual report.

Shipments declined more than 12 per cent to their lowest level since 2015, wiping out a strong start to the year, it said.