Smart­phone slump

The de­vices hop­ing to re­vive the mar­ket this year

Gulf Business - - FRONT PAGE - By Robert An­der­son

The open­ing months of the year are al­ways some of the most ex­cit­ing when it comes to the smart­phone mar­ket and 2017 has been no ex­cep­tion.

In a rel­a­tively short space of time a se­lec­tion of the world’s top man­u­fac­tur­ers have re­vealed their lat­est con­tenders in a race that is be­com­ing ever more fierce.

Global smart­phone sales in­creased just 5 per cent last year, to 1.5 bil­lion units fol­low­ing a 14.4 per cent in­crease the pre­vi­ous year, ac­cord­ing to Gart­ner, leav­ing man­u­fac­tur­ers scram­bling for mar­ket share amid slow­ing growth.

In the Gulf re­gion con­di­tions were even tougher, with over­all smart­phone sales shrink­ing 23 per cent, ac­cord­ing to con­sul­tancy IDC.

Given these num­bers, it is no sur­prise that sev­eral man­u­fac­tur­ers were aim­ing to hit the ground run­ning at the end of Fe­bru­ary, par­tic­u­larly given the poor per­for­mance of mar­ket leader Sam­sung fol­low­ing the Note 7 de­ba­cle.

The South Korean gi­ant’s global re­call, fol­low­ing in­stances of de­vices over­heat­ing and catch­ing fire, saw it lose its usual top spot in terms of units sold to Ap­ple in the fourth quar­ter with 76.78 mil­lion de­vices shipped compared to the lat­ter’s 77 mil­lion, ac­cord­ing to Gart­ner.

And its de­ci­sion to de­lay the launch

of its next flag­ship the Galaxy S8 by a month to the end of March left some an­a­lysts per­plexed.

“Let’s say it is not to their ad­van­tage if they de­lay this prod­uct, they cer­tainly need that new flag­ship phone to stop the cur­rent down­ward trend,” says Annette Zim­mer­man, re­search di­rec­tor at Gart­ner.

Among the de­vices that will di­rectly com­pete with Sam­sung’s flag­ship are South Korean ri­val LG’s G6, Ja­panese firm Sony’s XZ Pre­mium and Chi­nese man­u­fac­turer Huawei’s P10 and P10 Plus.

All three are seek­ing to bring some­thing dif­fer­ent to the fray other than the usual up­dates to chipsets and in­ter­nal hardware. LG’s of­fer­ing makes bet­ter use of the front space with a larger QHD 5.7-inch screen. Sony is boast­ing what is claimed to be the first 4K HDR dis­play on a smart­phone and su­per slow mo­tion video record­ing and Huawei has fo­cussed on de­sign and photo tak­ing func­tion­al­ity with a dual lens rear cam­era pro­duced in part­ner­ship with Ger­man op­ti­cal firm Le­ica.

Rise of Chi­nese en­trants

That Huawei is even men­tioned along­side ri­vals at the top of the smart­phone mar­ket is some in­di­ca­tion of how things have changed in re­cent years. From launch­ing its first An­droid smart­phone in 2009 the Chi­nese firm has built its global mar­ket share to be­come the third largest man­u­fac­turer be­hind Sam­sung and Ap­ple, with 132.8 mil­lion units sold in 2016, ac­cord­ing to Gart­ner. Huawei and Chi­nese ri­vals Oppo and BBK now com­plete the top five ven­dors glob­ally with mar­ket shares of 8.9 per cent, 5.7 per cent and 4.8 per cent compared to 7.3 per cent, 2.8 per cent and 2.5 per cent in 2015.

And sim­i­lar re­sults are be­ing seen in the Mid­dle East and North Africa re­gion.

“Huawei had pretty sta­ble ship­ments in 2016 over 2015 while TCL (Al­ca­tel), Len­ovo, and Tecno are the run­ner ups hav­ing ex­panded their ship­ments. This is the chal­lenge for Sam­sung: the disaster with the Note 7 left Sam­sung with a gap in the high-end, large screen port­fo­lio and at the same time Chi­nese ven­dors putting pressure on the ven­dor from the mid­dle," says Zim­mer­man.

Huawei is also tak­ing an ever-larger share of the pre­mium mar­ket hav­ing closed the gap glob­ally with Sam­sung in the seg­ment last year to 36 mil­lion units from 50 mil­lion in 2015.

“Huawei’s de­vices have in­creased in pop­u­lar­ity be­cause they are very good prod­ucts (good qual­ity) with good fea­tures for the money. Plus, Huawei has in­vested in im­por­tant part­ner­ships like

Le­ica for the cam­era tech­nol­ogy. They are a se­ri­ous com­peti­tor in the high-end now,” says Zim­mer­man.

This push has also trans­lated into in­creased sales in the Gulf re­gion, where the Chi­nese man­u­fac­turer was one of the few play­ers to defy the sink­ing mar­ket with a 9 per cent year-on-year in­crease in ship­ments in 2016. In comparison mar­ket lead­ers Sam­sung and Ap­ple saw ship­ments dip 32 per cent and 21 per cent re­spec­tively, ac­cord­ing to IDC.

Speak­ing fol­low­ing the global launch of the P10, Huawei Con­sumer Busi­ness Group pres­i­dent for Mid­dle East and Africa Gene Jiao sug­gests the com­pany still has some work to do in cracking the re­gional con­sumer.

“The jour­ney is not that easy, we have to find our po­si­tion. Even the cus­tomer does not know them­selves about their re­quire­ments – we have to dig deeper to find out what they want,” he says.

But he draws con­fi­dence from the com­pany’s grow­ing share of the mar­ket, which he says stands at around 20 per cent in the Mid­dle East and 10 per cent in the UAE.

Nokia makes a re­turn

An­other player seek­ing to make an im­pact in the Mid­dle East is HMD Global. The Fin­nish firm, which launched in May last year with rights to the Nokia brand, has es­tab­lished re­gional of­fices in the UAE ahead of the launch of its new de­vice line-up in the sec­ond quar­ter.

But it is not nec­es­sar­ily the man­u­fac­turer’s smart­phones that are get­ting the most at­ten­tion. At Mo­bile World Congress in Fe­bru­ary it was ar­guably the man­u­fac­turer’s new ver­sion of the clas­sic 3310 fea­ture phone that stole the show.

Pa­trick Mer­can­ton, the com­pany’s Dubai Me­dia City-based global head of mar­ket­ing strat­egy and plan­ning, says it was formed by for­mer Mi­crosoft and Nokia staff, among oth­ers, with an eye on fill­ing a gap in the mar­ket.

“If you look at the mar­ket for smart­phones to­day it is very much a flag­ship­driven tech leader fo­cussed mar­ket, the hu­man fac­tor has gone out of it, no one talks about peo­ple anymore, no one talks about ex­pe­ri­ence,” he says.

“Pos­si­bly two years ago it wasn't the right time but now is def­i­nitely the right time to come back with a dif­fer­ent ap­proach to smart­phones. For in­stance, much more about peo­ple, much more about pro­vid­ing qual­ity to the ma­jor­ity than tech­nol­ogy specs.”

Mer­can­ton says the firm’s new de­vice line-up – with three mid-range smart­phones rang­ing from the $243 Nokia 6 to the $147 Nokia 3 – aims to ad­dress sev­eral pain points in the mar­ket in­clud­ing build qual­ity, pre­loaded apps and com­pli­cated user in­ter­faces. All come with metal frames and prom­ise to in­clude the lat­est ver­sion of Google’s An­droid op­er­at­ing sys­tem with­out cus­tomi­sa­tion.

He be­lieves this ap­proach, with­out the ob­jec­tive of con­trol­ling the ecosys­tem pre­vi­ously pur­sued with the brand at Nokia and Mi­crosoft, will pro­duce re­sults and the com­pany is aim­ing to be a top three player in smart­phones within the next five years.

But in the mean­time the brand’s chal­lenge will be meet­ing the hype of its re-launch with in­ter­est­ing prod­ucts. He hints new ver­sions of other clas­sic mo­bile phone de­signs are also be­ing con­sid­ered, with the 7280 ‘ lip­stick phone’ one po­ten­tial op­tion.

“Fea­ture phones are not dead – it's a cat­e­gory ac­tu­ally re­bound­ing po­ten­tially. The ero­sion has stopped and peo­ple are start­ing to see fea­ture phones can be used with smart­phones, or on week­ends.”

Zim­mer­man sug­gests, de­spite the nos­tal­gia with the 3310 in the West, it is emerg­ing mar­kets like the Mid­dle East where the Nokia brand will have the most im­pact be­cause this is where Nokia fea­ture phones are still be­ing sold in “de­cent vol­umes”.

“The Nokia brand is still one of the lead­ing fea­ture phones brands next to Sam­sung and Al­ca­tel. Hence, users in those re­gions are more likely to adopt Nokia-branded smart­phones compared to Western Europe,” she says.

Gart­ner is pre­dict­ing 65 per cent of phones sold in the MENA re­gion

this year will be smart­phones, still leav­ing a size­able, if shrink­ing fea­ture phone mar­ket.

The world’s most se­cure smart­phone

Amid these pre­dic­tions oth­ers are eye­ing their own niche seg­ments of the mar­ket with a spe­cific cus­tomer or client base in mind. Among the most in­trigu­ing is UAE-based cy­ber se­cu­rity firm DarkMat­ter, which re­cently an­nounced its own smart­phone – claimed to be the most se­cure in the world - targeting heads of state, gov­ern­ment en­ti­ties and se­cu­rity con­scious large en­ter­prises

On the face of it, KATIM, which roughly trans­lates from Ara­bic as ‘si­lence’, fea­tures com­pet­i­tive specs in­clud­ing 4GB of RAM, 64GB of stor­age and a 3,800mAh bat­tery. But its unique sell­ing point is its se­cu­rity func­tion­al­ity.

This in­cludes a shield mode switch that se­curely cuts off record­ing func­tions, mul­ti­ple lev­els of tam­per pre­ven­tion, and a self-destruct op­tion in case of pro­hib­ited ac­cess. It also comes with a hard­ened ver­sion of Google’s 7.0 An­droid op­er­at­ing sys­tem and a se­cure app store, with down­loads in­clud­ing a se­cure mes­sag­ing app.

But among the big­gest fea­tures is the in­cluded end-to-end 256-bit en­cryp­tion, which the com­pany says can be con­fig­ured us­ing the cus­tomer’s own chipsets and standards at an ad­di­tional cost.

DarkMat­ter’s CEO Faisal Al Ban­nai says the prod­uct was con­ceived due to the lack of a holis­tic so­lu­tion on the mar­ket cov­er­ing hardware, the app layer and the op­er­at­ing sys­tem, and he ex­pects se­cure com­mu­ni­ca­tions to be­come one of the firm’s key prod­uct pil­lars.

“There is a gap in terms of what the most se­cure cus­tomers want and what is avail­able out there in the mar­ket,” he says. “We’re def­i­nitely putting a stake on the ground say­ing this is the most se­cure comms so­lu­tion on the mar­ket.”

Ini­tial cus­tomers have al­ready been con­firmed for the firm’s ap­pli­ca­tions, which in­clude a se­cure work­flow so­lu­tion, and other prod­ucts will be an­nounced later this year.

“When I talk about trans­parency, many of the so­lu­tions you see on the mar­ket are not very trans­par­ent to the cus­tomer, they are a black box or at best a grey box,” adds Al Ban­nai.

“We are say­ing if you are qual­i­fied to buy our so­lu­tion you could re­view full ca­pa­bil­i­ties on the hardware, there is no black box, you could do full assess­ment and full re­view of the code.”

Pric­ing of the de­vice and wider ecosys­tem was not dis­closed but it is ex­pected to be­come avail­able on the mar­ket in the fourth quar­ter of what is sure to be a com­pet­i­tive year across the re­gional smart­phone mar­ket.

“Global smart­phone sales growth is ex­pected to re­volve around small sin­gle digit growth over the next few years. The Mid­dle East and North Africa will show a bit bet­ter trend of mid-sin­gle digit growth,” says Zim­mer­man.

While IDC is ex­pect­ing the start of a slow re­cov­ery in the Gulf re­gion with growth of just 3 per cent ex­pected in the mo­bile mar­ket in 2017, mak­ing for what is sure to be a com­pet­i­tive pe­riod to come.

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