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LATAM Q2 2023 Smartphone Shipments Fall 15.6% YoY Hurt by Regional Economic Crisis

Entry of Chinese brands stirring up regional market.
Samsung remains regional leader with 36.9% share, followed by Motorola with 21.4% share.
Apple’s growth mainly sustained by the iPhone 11.
One in four smartphones shipped in the region is a 5G smartphone.

Buenos Aires, San Diego, Denver, New Delhi, Hong Kong, Seoul, London, Beijing – August 24, 2023

Smartphoneshipments in Latin America (LATAM) dropped 15.6% YoY but climbed 2.4% QoQ in Q2 2023, according to the latest data fromCounterpoint Research’s Market Monitorservice. The decline was due to the negative impacts of the regional economic crises and weak global smartphone shipments.

Commenting on the market dynamics,Principal Analyst Tina Lusaid, “LATAM’s economic growth in 2023 is actually slightly higher than forecast. However, this recovery has not yet inspired an increase in the rate of smartphone replacement. Lowconsumerdemand continued to affect the region during the quarter. Although most countries in the region are seeing declininginflation, consumer confidence is yet to bounce back, as political turmoil continues to constrain the general economy.”

Research Analyst Andres Silva added,“Seasonal factors such as Mother’s Day and Father’s Day promotions helped the market grow slightly QoQ in Q2 2023, although the market declined YoY. The entry of manyChinesebrands at once is stirring up the market as they aim for growth, pushing other brands to become more aggressive. However, the YoY decline affected all the top sixcountriesin the region.”

Top Smartphone OEMs’ Market Share in Latin America, Q2 2022 vs Q2 2023

Source: Counterpoint Research Q2 2023 Market Monitor
Note: Figures may not add up to 100% due to rounding

Commenting on the ASP performance in the region,Lu added: “There is a slight premiumization trend going on in the region. Compared to last year, LATAM’s total smartphoneASP仅增长4%左右。这是一个一致的trend. Inflation has some influence on it. However, established brands such as Samsung are pushing to increase the ASP in the region with5Gmodels.”

Market Summary

Samsungwas once again the absolute leader in the LATAM market in Q2 2023. However, itsshipmentsand market share declined YoY with weakened performance in most of the countries in the region.
三星一直非常积极地提供额外的discounts during the promotions. But not enough as its shipments were hurt by the Brazilian market and the entry ofChinesebrands.
Since Samsung is focusing more on premium models now, the availability of its models in the lower price bands is becoming restricted. Thus, its overall value dropped -2% YoY.
Motorola’s shipments decreased YoY but its market share increased slightly. It increased the number of models in the entry-segment E series. It also increased its brand awareness with the launch of theMotorolaEdge 40 Pro in May with an aggressive advertising campaign.
Xiaomi lost share slightly during the quarter but remained stable due to the launch of the Redmi Note 12 during the first week of April. This increased its Q2 2023 shipments and sales.Xiaomialso increased its Poco brand shipments in the open channels in the region.
Xiaomi recovered slightly from its position in Mexico. The participation of the grey market in the southern part of the LATAM region continued to grow.
Apple’sshipments and market share both grew YoY in Q2 2023, mainly sustained by the iPhone 11. The4Gsmartphones are still driving Apple’s volume in the region.
OPPOcontinued to be a strong fifth player in the region and ranked third in Mexico. Its volume increased by more than 70% in Q2 2023, while its share more than doubled YoY. Despite the growth, its shipments dropped QoQ.
HONOR did not make it to the list, but its growth in LATAM has been notable.HONORwas the brand with the most aggressive growth during the quarter. However, it still needs to build on its branding.
“Others”, mainly composed of regional brands, continued to decrease YoY. This category was most affected by the entry of low-price-band Chinese brands.

Background

Counterpoint Technology Market Research is a global research firm specializing in products in the technology, media and telecom (TMT) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

Analyst Contacts

Tina Lu

Andres Silva

Peter Richardson

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press@www.arena-ruc.com

Telefónica On Sale

Telefonica’s CEO recently announced its intention to spin-off all its Latin America business, except Brazil. It will focus only on Spain, the UK, Germany – and Brazil. Although it has been a surprise for some, there were warning signals that this may happen.

Telefonica has an accumulated debt of USD $42 billion and was recently pressured by large investors, to decrease its exposure in Hispanic Latin America. In the last two years, Latin America’s social-economic environment has been more volatile. This has spooked investors, who now want to reduce their exposure. Telefonica also sold all中美洲业务开始时2019.

Telefonica’s Business in Hispanic Latin America

Telefonica Latin America is currently divided into three subregions: HISPAM Norte, HISPAM Sur, and Brazil. In terms of countries, Hispanic Sur includes Argentina, Chile, Peru, and Uruguay. HISPAM Norte includes Colombia, Ecuador, Venezuela, and Mexico.

Exhibit 1: Share of Telefonica Mobile Connections in Key LATAM Markets

Source: AMX 3^rdQ 2019 Financial results, TEM Ene-Sep 2019 Financial results, IFT, Mintic, Osipitel, Subtel, Enacom

Telefonica had also struggled in countries like Mexico and Colombia to increase share and profitability. Both of these countries’ subscriptions are mostly prepaid.

Early Warning Signals of Telefonica’s intention to quit Hispanic speaking LATAM

In addition to the sale of its Central America businesses, other signals have included:

The CEO promising to do anything to return the company to growth and profitability
Venezuela has a big impact on Hispanic Norte’s overall success. Until 2008, it was the most profitable market in HISPAM Norte. But after less than 10 years it is now a burden, though given the country’s dire political and economic situation, it may prove difficult to find a buyer.
In October 2019, Telefonica Mexico signed an eight-year deal to use AT&T’s last-mile infrastructure. Hence Telefonica does not need to build its own network.Immediately after the agreement, Telefonica Mexico solicited IFT (Mexican regulator) to allow it to return not used spectrum, so it can be released to pay for the unused spectrum. As there is no regulation about the returning spectrum, IFT is analyzing how to implement it.

Securing the 80% of the Business

Spain, UK, Brazil, and Germany accounts for around 80% of Telefonica’s global revenue, while Hispanic LATAM represents just 20% (Exhibit 2). Furthermore, the Hispanic LATAM market contribution to total revenue and EBITA has been declining in the last two years, affected by economic uncertainty and downturns in several main markets.

Exhibit 2: Hispanic Latin America’s weight Over Telefonica’s Total Business Results 2019

Source: TEM Ene-Sep 2019 Financial results

Hispanic LATAM represents almost 40% of Telefonica’s total lines which means the operation consumes a lot of the company’s resources. Telefonica is determined to increase its focus on parts of the business that generate the 80% of the revenue and that are also the most profitable. Telefonica also expects this part of the business to provide most growth opportunities.

Potential Buyers

It will be difficult to sell all seven countries business in a block, unless it is a new player to the region; only a player that is not currently in the region could make it through the antimonopoly regulations. For example, the sales of Telefonica’s business in El Salvador to Claro has not yet been approved. Possible buyers include:

Liberty Latin America: recently bought AT&T Puerto Rico. This operator is financially solid and looking for growth through acquisition but prefers to stay in small countries such as those in Central America and the Caribbean. The only outlier is Chile with VTR.

Millicom: purchased Telefonica’s Costa Rica, Panama, and Nicaragua businesses. These were markets most in line with Millicom’s target market. Similar to Liberty, the Luxembourg-based operator prefers to do business in smaller and less developed countries.

America Movil: is the biggest operator in the region. It is already the dominant player in almost all markets that Telefonica is selling its business (Exhibit 1). It bought the Guatemala and El Salvador businesses from Telefonica at the beginning of the year. And El Salvador’s transaction is still pending regulatory approval. It will be difficult for America Movil to get regulatory approval to buy any of Telefonica’s businesses this time.

Chinese operators: China Mobile is the world’s largest mobile operator. It established an office in Brazil in 2017. This generated attention from many players in the region. But the office is mostly dedicated to supporting enterprise customers. Telefonica’s sales may be attractive as an expansion opportunity, but it doesn’t look likely.

Telefonica’s announcement could also be a way to attract strategic partners and to subsequently launch a local IPO. At present Hispanic LATAM region will report to Telefonica’s CFO, a sign that this business is becoming a financial package.

Telefonica share price increased more than 5% following the announcement suggesting the sale will be accretive in value to investors.

Whatever type of sale is undertaken, Telefonica’s exit will change the Latam telecommunication landscape. We’re not sure it will be a positive change in the short run, but may lead to less concentration and more competition in the long run.

Tapping the Vast Opportunity of Smart Cities in LATAM

In LATAM, governments are the biggest contractor of projects. Between 2013 and 2016, public investment represented around 4% of the region’s total GDP or roughly US$213 billion, according to the World Bank. Nearly 40% of all public investment in the region is a public-private partnership. Building up of urban infrastructure attracted most of these investments. Unfortunately, these projects are often inefficient due to weak planning. As a result, governments are turning to technology with the hope of making their investments work by making projects more efficient.

A few days ago, I had the opportunity to participate in the 2nd edition of the SmartCity Expo in Buenos Aires, Argentina. It was one of the biggestsmart cityevents in Latin America. Companies were promoting their services to the cities, while the cities were showcasing how they have evolved. It was a platform for the meeting of the public sector and the private sector. The key themes that emerged out of the event were – digital transformation, security, mobility, education, sustainable future, inclusiveness, and shared economy.

In the last three to four years, a bulk of the public investment in technology has been for digitalizing all processes. National and capital cities’ governments, especially, have spent a good deal of resources to improve their e-readiness. In Brazil, for example, Congress has approved a US$87 billion budget for 2019 to continue with its digital transformation goal.

E-Government index measures the government use of electronic communications devices such as computers and the Internet to provide public services. Exhibit 1 shows the list of ten most e-ready countries in LATAM.

Exhibit 1: LATAM Top Ten E-Government Development Index (EGDI)

Source: UN E-Government Knowledgebase.

However, even within the top ten countries, cities other than national capitals are far from being e-ready. For example, Colombia has more than 1,200 municipalities, Argentina has 2,300, Brazil has 5,500, and only the top 5% of the cities in these countries have an online appointment system. Many small cities, located wealthy parts of countries, are looking to improve their e-readiness. Nonetheless, even cities that started digitizing their data many years ago need intelligence to sort the data. They also could benefit from the use of blockchain technology to crossover data.

Another focus area at the SmartCity Expo was improving city security. Big cities, such as Buenos Aires, Rio de Janeiro, and Sao Paulo, struggle in this regard. As security is an issue that city dwellers most demand, most governments have been installingcamerasall over the cities. For example, Buenos Aires, had 8,500 security cameras by the end of May 2018, while Rio de Janeiro had 4,200 in 2017. The cameras in Rio de Janeiro have been collecting information since 2003 and generate a few terabytes of data every month. Therefore, authorities in Rio de Janeiro are looking for new cloud services to manage and store this data. The city of Rio also needs AI to identify what is normal and what is an anomaly. In the case of Argentina, the coast guard generates 12,000 records each quarter. This year, it contracted Big Data Analytics services to process the data.

Mobility is another area where all major capital cities in LATAM had invested heavily to transform the physical infrastructure. However, there is still a need for major technology investment. For example, the city of Buenos Aires has 6 million people that commute within the city daily. However, it doesn’t have a platform or any information that would convey all the bus or train schedule. To correct this situation, Buenos Aires is planning to launch an app that would inform commuters about the timings of public transport. Although, in the beginning, the coverage of the app will be limited. At present only six cities in LATAM have this service. With almost 60% smartphone penetration, soon all the other cities will have to provide such a service.

These are just a few samples of why there is such a hype about smart cities in LATAM. On average, each of these contracts is worth US$1.5 million. As for opportunities, it is clear that “technology is global”. However, technology needs to be supported by a robust business model. And for this the biggest problem for any company are the LATAM governments in most countries, the contract process is often not transparent, always extremely bureaucratic, and many times tainted with corruption. These are the challenges which need resolution if the smart city opportunity in LATAM is to truly flourish.

强大的米acroeconomic Conditions Are Driving Argentina's Smartphone Market Growth

Argentina smartphones sales grew 59% annually in Q3 2017, and 22% compared to the previous quarter. The top 3 brands represent more than 87% of the market, with more than 35 other brands disputing the remaining 8%. Furthermore, the top 5 models alone represent almost 45% of the market.

Argentina is an extremely closed market. Imports of mobile devices are allowed only with special authorization. Less than 3% of all the mobile devices sold between January and September, were imported as imported devices are subject to greater than 110% duties. Most devices are assembled in the Tierra del Fuego region. This confers a high assembly cost, but still less than import duties. The consequence of the high production costs is that Argentinean consumers have to pay, on average, as much as double the price compared to Chile and USA, for similar models.

The current government intends to slowly open the market and decrease taxes on imported mobile devices in moves similar to that of the personal computer category. However, the government has not yet set the timeframe to incentive mobile devices purchasing by allowing imports and lowering the category taxes.

强大的米acroeconomic Conditions Drive Growth – but also of illegal imports.

Despite the high prices, the improving macroeconomic conditions in the country have led to 59% YoY total market growth, and almost 22% QoQ growth. We forecast that Argentina will finish 2017 with approximately 11.5M units sold. This is still around 3 million units below the current total addressable market (TAM). Since 2014 more than 2 million mobile devices enter the country illegally each year. Most of these come from neighboring countries, such as Chile, Paraguay and Uruguay. The government has recently announced that it will implement a mechanism to block mobile devices that were not assembled in the country or were imported illegally into Argentina. This process would be difficult to implement, but the government is signaling that it will try to control organized smugglers selling large quantities of illegally imported mobile devices.

Samsung Leads

三星被银色的绝对领袖ine market. It has refined its production process with assemblers in TdF. And its consistent brand building and marketing execution has given it a strong competitive advantage. Samsung is the only brand that has branded stores in the country, with four stores strategically located around Buenos Aires. It recently opened more points of sale in a smaller kiosk format, dedicated to selling accessories. Samsung also has a sizeable team of trade representatives that are present in almost all provinces.

After being absent for more than five years, Apple has recently re-entered the Argentine market. It currently has less than 1% share. This is because iPhones cost more than twice as much as they do in the US. An unlocked iPhone 7 32GB currently costs around USD$1400 in Argentina. More than half of this cost is taxes and distribution costs. Claro is the only operator offering iPhones, together with a few retailers.

Exhibit 1: Argentina Smartphone Shipments Ranking and Market Share – Q3 2017

Source: Counterpoint Research: Quarterly Market Monitor Q3 2017

Market Summary

Q3 2017 had almost 59% YoY growth and almost 22% QoQ growth.
Smartphone penetration reached 99% of Q3 2017 sales.
LTE devices grew 74% YoY and 23% QoQ.
99% of the market are LTE-enabled devices.
At the end of Q3 2017, there was some inventory building in the channel, as the market was preparing for Mother’s day, which, in Argentina, is in October.
More than one out of every two devices sold in Argentina is a Samsung. Although its sales volume grew more than 26% in Q3 2017 annually, it lost more than 10% in market share compared to Q3 2016.
LG has been Samsung’s biggest competitor. Its share increased only marginally, by 1% YoY, but its sales volume increased more than 71% annually. Its K series smartphones were very competitive, which helped the brand to grow above the market rate. But it is facing tough competition from both Samsung and Motorola.
Motorola grew its smartphone volume by 254% YoY. It more than doubled its volume share reaching 13.9%. The launch of its C series has allowed the brand to compete head to head with Samsung’s lower J series.
Huawei grew its share slightly compared to last year. Huawei has successfully built its brand in Argentina over the last year. However, local assembly requirement, forces it to have a limited portfolio, compared to its offerings Mexico or Colombia; this has been a roadblock for the brand’s growth.
Alcatel also more than doubled its share and volume sales, compared to 3Q16. It has been facing difficulty in getting enough product and has lacked investment in its brand.

Exhibit 2: Argentina Bestselling Smartphone Rankings – Q3 2017

Source: Counterpoint Research: Quarterly Market Pulse Q3 2017

The top 10 smartphone models represent more than 66% of Q3 2017 sales in Argentina.
Samsung had 5 out of the top 10 models.
Samsung’s Galaxy J2 Prime is the best-selling model as it has enjoyed a special push from operators.
All but one of these models are from the sub-US$200 price bands.
Samsung’s Galaxy J7 is the highest price model from all the top 10. An average sell in price of $161. While J1 mini prime is the least expensive model from the list.
LG has 3 out of the top 10 models. All from the K series.
Motorola has the remaining models. Both of these models prices are intended to compete with Samsung’s lower order J series.
Except for Samsung Galaxy J1 Ace VE and J1 Mini, all the models have screen size above 5”.

Infographic: Q2-2015|Mobile Market Monitor

Our Q2-2015 Market Monitor report has been published. We update one infographic in each quarter to summarize handset and smartphone market activities in a single page.The report tracks now more than75 top vendor shipmentsevery quarter across regions and countries which contribute toalmost 90% of the total global smartphone volumesand much more at country level. The global mobile phone industry shipments grew 5% YoY.Middle East Africawas thefastest growingregion up grew7 timesfaster than global.

Oneof everyfivemobile phone shipped globally is aSamsung.
Huaweibecame the world’sthird largesthandset surpassing Microsoft.
Asus shipmentsgrew5X from a year ago tobecomefastest growing brand ,followed byVivo’s total shipmentsgrew 4X compared to a year ago
Every 3out of4mobile phone shipped on planet is a smartphone.
Excluding Samsung, Apple now generates more smartphone revenues than the all other players combined
Oneintwosmartphones shipped globally now is LTE capable.
US andChina together contributed to two-thirds of the LTE smartphone market
LTESmartphone shipments grew4X in chinaand12x in Indiaannually

Please feel free to reach out to us for press or this research-related questions at:analyst (at) www.arena-ruc.com

Full reports are available for clients at our portal:Report-1;Report-2;Report-3

注:高质量的版本请发送一个email request toinfo(at)www.arena-ruc.comor download from our research portal:

Infographic: Q1-2015| Mobile Market Monitor

Our Q1-2015 Market Monitor report has been published. We update one infographic in each quarter to summarize handset and smartphone market activities in a single page. The report tracks now more than75 top vendor shipmentsevery quarter across regions and countries which contribute tomore than 95% of the total global smartphone volumesand much more at country level.

Global mobile phone shipments reached455 million unitsin Q1 2015, up5% annually. Now3 out of 4 mobile phones shipped globally are smartphones.

USA marketsaw a healthy growth growing23% annuallyback to the 2011 levels.
China smartphone shipmentsgrew a modest4% annuallybut down 12% sequentially depicting the high growth days are coming to an end.
Indiaremained thethird largest smartphonemarket in the world bigger thanFrance+UK+Germany combinedin terms of volumes.
Latin America smartphoneshipmentsgrowing a healthy 26% annually.
Applewas the star performer as it grewfaster than hot brands such as Xiaomi.Samsungsaw its smartphone shipments slide6% annuallybut recovered from the Q4 2014 dip growing 12% sequentially.

Please feel free to reach out to us for press or this research-related questions at:analyst (at) www.arena-ruc.com

Full reports are available for clients at our portal:Report-1;Report-2

P.S. For the high-quality PDF version please send an email request toinfo(at)www.arena-ruc.comor download from our research portal:

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Tapping the Vast Opportunity of Smart Cities in LATAM

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