Middle East Mobile Phone Market Suffers Worst Quarter-on-Quarter Decline on Record

Shipments of mobile phones declined 11.7% quarter on quarter in the Middle East in Q1 2016, according to the latest figures released by International Data Corporation (IDC). The market totaled 26.1 million units for the first three months of the year, a significant drop from the 29.49 million units shipped in the previous quarter. The performance was even worse from a year-on-year perspective, with shipments down 12.5% from the 29.78 million units seen in Q1 2015.

"Once a technology that seemed to be in a perpetual boom, mobile phones are no longer immune to weakening consumer sentiment as the gloomy macroeconomic outlook begins to bite," says Nabila Popal, research manager for mobile phones at IDC Middle East, Africa, and Turkey. "The market's decline is being spearheaded by the one-time stalwarts of Turkey, the UAE, and Saudi Arabia, with shipments in these countries down 13.2%, 12.7%, and 10.4%, respectively, in Q1 2016 when compared with the previous quarter. The rest of the GCC countries also saw declines, with the exception of Qatar; although even then, the growth was a very modest 1.3%."

In terms of operating systems, Android's share of the Middle East smartphone market continues to rise, reaching 86.4% in Q1 2016. Apple's iOS shipments, meanwhile, were down 28.8% quarter on quarter for 13% share. From a vendor perspective, Samsung, Apple, and Huawei continue to lead the way in the smartphone segment, with shares of 42.1%, 13.0%, and 8.6%, respectively. Of the top three vendors, only Samsung recorded quarter-on-quarter growth in share and shipments, with the successful launch of its Galaxy S7 flagship spurring a 6.6% increase in units. This compares very favorably to declines over the same period of 28.8% for Apple and 14.5% for Huawei. 

"The challenging economic environment means that consumers are generally reluctant to spend more than is absolutely necessary on their mobile devices," says Saad Elkhadem, a research analyst for mobile phones at IDC Middle East, Africa, and Turkey. "As such, vendors are increasingly pushing their mid-range devices in an attempt to provide consumers with a good balance between value and features. The Samsung J series, which is mostly priced under $200, is a prime example of this new focus, and it is already responsible for a large portion – about a third – of Samsung's Middle East shipments."

IDC points out that this strategy is not a new path to success, as Huawei and Lenovo have long since staked their reputations on devices priced under $300, with these low to mid-range phones accounting for 81% and 94% of their Middle East shipments, respectively, in Q1 2016. Even Apple has recently attempted to enter the mid-range segment once again, this time with the iPhone SE, although the fate of this device remains to be seen. 

"The prevailing sentiment is that 2016 will be a difficult year for smartphone growth due to low oil prices, reduced government spending, and ongoing political instability," adds Ms. Popal. "These factors are all constraining consumer spending across the region, and it is the consumer segment that is the major driving force behind demand for mobile devices. This is being compounded by the lack of major innovation currently taking place in the industry from a consumer perspective, and as such we are seeing vendors and channels brace themselves for a tough year ahead."

IDC expects the Middle East mobile phone market to continue to stutter throughout 2016, with a slight recovery possible by the end of the year due to the holiday season and a number of major launches that are slated for Q4 2016.