The South African smartphone market saw solid growth in 2018, despite a fourth quarter dip both in SA and globally.
According to market research company GfK South Africa, SA unit sales grew by 7.2% year-on-year in 2018 to around 13.5 million and value grew 13.2% to just under R35 billion.
The newly released point of sale tracking data from GfK's Weekly Monitor showed that, in comparison, the unit sale growth for the fourth quarter of the year declined 8.7% to 3.6 million units compared to the fourth quarter of 2017.
GfK found that while the high-end smartphone segment (R6 000 and above) accounted for 9.7% of smartphone unit sales during 2018, it contributed almost 50% in value. Low-end smartphones (R1 499 and below) accounted for 61% of unit sales in 2018, but contributed just 17% to the value of the market.
"South Africa's smartphone market has fragmented into low, mid and high-end segments, with operators focusing for much of 2018 on driving volume sales in the entry-level and lower-end of the market and on average revenue per user and value at the high-end," says Nicolet Pienaar, product manager at GfK South Africa.
"However, the dip in the fourth quarter indicates operators chose to focus on value over unit sales over the Black Friday and Christmas period. Operators reduced or pulled subsidies on entry-level smartphones in the fourth quarter, which caused unit sales to contract," adds Kali Moahloli, commercial head for market insights at GfK South Africa.
"This segment of the market remains price-sensitive rather than feature-driven."
SA's technical consumer goods market overall showed flat growth in the fourth quarter of 2018 compared to the same quarter in 2017. GfK South Africa found the IT sector declined by 9.1% in value year-on-year in the fourth quarter, driven by plummeting media tablet and storage sales.
Global sales stall
According to research and advisory company Gartner, global sales of smartphones stalled in the fourth quarter of 2018, totalling 408.4 million units, which is growth of just 0.1% compared to the fourth quarter of 2017.
"Demand for entry-level and mid-price smartphones remained strong across markets, but demand for high-end smartphones continued to slow in the fourth quarter of 2018," says Anshul Gupta, senior research director at Gartner.
"Slowing incremental innovation at the high end, coupled with price increases, deterred replacement decisions for high-end smartphones. This led to a flat-growth market in the fourth quarter of 2018."
Sales of Apple iPhones hit 64.5 million units in the fourth quarter of 2018 as the company recorded its worst quarterly decline, of 11.8%, since the first quarter of 2016. This double-digit decline was the biggest drop in the quarter among the top five global smartphone vendors.
Apple saw iPhone demand weaken in most regions, except North America and mature Asia/Pacific, and its biggest sales decline came from Greater China. For 2018 as a whole, iPhone sales were down 2.7%, to just over 209 million units.
"Apple has to deal not only with buyers delaying upgrades as they wait for more innovative smartphones, but it also continues to face compelling high-price and mid-price smartphone alternatives from Chinese vendors. Both these challenges limit Apple's unit sales growth prospects," added Gupta.
At the high end, Samsung smartphones such as the Galaxy S9, S9+ and Note 9 also struggled to drive growth in the fourth quarter of 2018. In the mid-tier, Xiaomi and Huawei continued to grab more market share.
As a result, Samsung's smartphone sales declined by 4.4% in the fourth quarter of 2018. Samsung lost market share in Greater China, Western Europe and Latin America, which contributed greatly to an overall 8.2% fall in its smartphone sales in 2018.
"Although Samsung is strengthening its smartphone offering at the mid-tier, it continues to face growing competition from Chinese brands that are expanding into more markets. It also faces difficulty bringing significant innovation to high-end smartphones," Gupta adds.
"Samsung introduced new mid-tier-focused M series smartphones in the first quarter of 2019 to compete with aggressive Chinese manufacturers in emerging markets, and to expand into the online sales channel."
Huawei, meanwhile, achieved the strongest growth of the quarter among the top five vendors, selling over 60 million smartphones in the quarter, which is growth of 37.6%. Huawei also grew throughout 2018, to close the gap with Apple.
"Beyond its strongholds of China and Europe, Huawei continued to increase its investment in Asia/Pacific, Latin America and the Middle East, to drive further growth," says Gupta.
"Huawei also exploited growth opportunities through continued expansion of the Honor series in the second half of 2018, especially in emerging markets, which helped Huawei grow its market share to 13% in 2018."
Gartner says in 2018 as a whole, global sales of smartphones grew 1.2% year-on-year, to 1.6 billion units.
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