GCC Smartphone Shipments Continue Decline but Feature Phones Offer Glimmer of Growth

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The Gulf Cooperation Council (GCC) mobile phone market experienced a decline in shipments in Q2 2018, according to the latest figures announced today by International Data Corporation (IDC). The global technology research and consulting firm's newly released Quarterly Mobile Phone Tracker shows overall shipments to the region fell 9.9% year on year (YoY) and 2.1% quarter on quarter (QoQ) to total 5.8 million units.

The market's poor performance stemmed from a fifth consecutive quarter of decline for the smartphone segment, with shipments of these devices down 3.4% QoQ and 14.3% YoY. Meanwhile, shipments of feature phones saw mild growth of 0.9% QoQ and 1.4% YoY. Many new brands are also focusing on the feature phone space as these devices are reliable volume movers. This attention, combined with existing high demand for these cheap devices, is helping to spur the feature phone segment.

Smartphone shipments to Saudi Arabia were up in Q2 2018, for the first time in four quarters, with QoQ growth of 0.9%. Overall mobile shipments to the Kingdom were up 1.7% over the same period. "This growth primarily stems from the implementation of a new import policy that requires all phones to carry IECEE certification," says Kafil Merchant, a research analyst at IDC. "A consequence of this policy is that there has been a significant reduction in gray shipments to the Kingdom, with a subsequent increase in official shipments to meet demand. However, with the introduction of a dependent tax causing millions of expats to make plans to leave the country, vendors targeting the Saudi market will continue to face a significant challenge."

In the UAE, smartphone shipments were down 10.9% QoQ in Q2 2018, with the country's overall mobile market declining 8.8%. "The UAE market continues to struggle, with speculation rife that Dubai is experiencing a secret recession that no one is openly talking about," says Nabila Popal, a senior research manager at IDC. "This is not only true in the mobile space but across large swathes of the UAE retail sector. Indeed, traditional shops in the heart of old Dubai that used to be the center of trade and commerce are shutting down faster than the temperature is rising." Elsewhere in the GCC, overall mobile shipments were down 2.8% in Qatar, 5.4% in Bahrain, 5.6% in Oman, and 0.5% in Kuwait (all QoQ).

In terms of the smartphone vendor landscape, Samsung maintained its lead in Q2 2018 with 34.2% share. Apple and Huawei followed with respective shares of 24.3% and 16.5%. "Huawei's new product launches have seen it garner significant popularity in the market as users are excited by the vendor's integration of innovative technologies like artificial intelligence (AI) into its smartphones," says Popal. "It is important to note that there is currently still more buzz than substance around AI, but once its use becomes more integrated in consumers' lives, being able to offer such a feature will be a true advantage for any smartphone vendor."

Another interesting development noted by IDC is the QoQ growth enjoyed by a number of second- and third tier smartphone vendors as they steadily penetrate the GCC market. "Global brands like Oppo and Xiaomi have gained significant traction among low-income consumers," says Merchant. "Oppo's market share increased after it employed a relatively unique direct distribution strategy in the UAE that has seen the country become one of the vendor's strongest markets in the GCC. Meanwhile, Xiaomi is performing particularly well in Qatar, capturing 19.0% share of the country's smartphone market in Q2 2018, even outperforming Apple. This comes on the back of some very successful strategic marketing efforts undertaken in conjunction with the vendor's official distributor Intertec."

Looking ahead, IDC expects 2018 to be a very tough year for the industry, with overall mobile phone shipments to the GCC forecast to decline 12.9% YoY for the year as a whole. Given the prevailing market challenges, it will take some time for the market to adjust and for consumer behavior to stabilize.

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a subsidiary of IDG, the world's leading technology media, research, and events company.