Slump in SA's smartphone sales in Q2

South Africans are buying few smartphones, amid market saturation and a difficult economic climate.

This information has come to light in the newly released point-of-sale tracking data from GfK SA’s Weekly Monitor, which shows smartphone sales dropped 4.9% to just under three million units during the second quarter of 2019.

The report notes that while there was a 4.9% decline in smartphone sales, smartphone revenue climbed 3.9% year-on-year over the same period.

The country’s population has, in recent months, been feeling the effects of the economic slump, with the economy contracting by 3.2% in the first three months of the year.

According to Statistics SA, the 3.2% decline is the biggest quarterly fall in economic activity since the first quarter of 2009, when the economy – under strain from the global financial crisis – tumbled by 6.1%.

Kali Moahloli, head of sales and retail at GfK SA, explains: “We have seen relatively weak performance in the smartphone sector for three consecutive quarters, reflecting both market saturation and a difficult economic climate.

“The increase in the value of the market comes primarily from exchange rate volatility that has resulted in higher prices on devices which have been passed on to consumers, rather than real market growth. We can expect this market to remain slow until exciting new high-end products hit the market or manufacturers are able to reduce retail pricing.”

The market research company’s report also highlights that plummeting revenue from tablets (down 26%), storage (down 18%) and mobile computers (down 6%) all contributed to the poor showing for consumer IT.

However, revenue from the desktop computer and monitor markets went up by 20% and 18%, respectively.

The decline in the country’s smartphone unit sales mirrors global market analysis, with global smartphone sales said to have declined in the second quarter of this year.  

According to market analyst firm Gartner, global sales of smartphones to end-users declined 1.7% in the second quarter of 2019, totalling 368 million units.

“Demand for high-end smartphones has slowed at a greater rate than demand for midrange and low-end smartphones,” says Anshul Gupta, senior research director at Gartner. “To try to boost smartphone replacements, we’ve seen manufacturers bringing premium features such as multi-lens front/back cameras, bezel-less displays and large batteries from their flagship smartphones into lower-priced models.”

Samsung is still the top-selling smartphone brand worldwide, with Chinese manufacturer Huawei coming a close second. Huawei and Samsung exhibited the strongest annual sales increases in the second quarter of 2019 at 16.5% and 3.8%, respectively.

“As a result, they both grew market share in the quarter, which led them to account for more than a third of total smartphone sales globally,” notes Gupta.

Samsung sold over 75 million smartphones in Q2 of 2019 and grew its share by 1.1 percentage points year-over-year, Gartner research shows.

Gupta explains: “Strong demand for Samsung’s new Galaxy A series smartphones and the revamp of its entire entry-level and midrange smartphone range helped this positive performance.

“Demand for Samsung’s flagship Galaxy S10 started to weaken during the quarter, however, indicating that achieving growth in 2019 as a whole will be a challenge.”

Global smartphone sales will remain weak for the rest of the year, forecasts the research and advisory firm.

Last month, Gartner predicted the global mobile phone market will record its worst performance, declining by 3.8%, in 2019.

The decline, according to Gartner, is the result of the trend of lengthening the lifespans of mobile devices, which began in 2018 and will continue through 2019.

The research firm forecasts high-end phone lifespans will increase from 2.6 years to nearly 2.9 years through 2023. In addition, sales of smartphones are expected to decline by 2.5% in 2019, which would be the worst decline to date.

Explaining Apple’s performance, Gartner notes sales of iPhones continued to decline year-over-year, although at a lesser rate compared with the first quarter of 2019.

Apple sold just over 38 million iPhones in the second quarter, a 13.8% decline year-over-year.

“Too few incremental benefits are preventing existing iPhone users from replacing their smartphones,” states Gupta. “Apple has reached an inflection point marked by shifting its business toward services, which represented 21% of the vendor’s total revenue in the first quarter of 2019.”

The Huawei ban announcement, according to Gartner, led to a sharp decline in its smartphone sales in the global market in the second quarter of 2019, although sales did improve slightly on the ban’s deferment.

The Chinese telecoms giant has been caught up in the ongoing trade war between the US and China, which resulted in Huawei and its affiliates being blacklisted.

The US, which put Huawei on an export blacklist citing national security issues, has been rallying its allies to cut Huawei out of planned 5G networks, citing “national security threats” due to the company’s close ties to the Chinese government.

The blacklist has seen companies, including Alphabet’s Google and British chip designer ARM, limit or cease their relationships with the Chinese company.

While its smartphone sales total was weaker globally, strong promotion and brand positioning helped Huawei sell a record number of smartphones in greater China in the quarter, growing 31% in the region, indicates the Gartner report.

Speaking at the “Seeds for the Future” send-off ceremony last week, Huawei SA CEO Spawn Fan acknowledged that 2019 has been a very challenging year for the company.

However, it is grateful to its South African customers for showing it support and trust, said Fan.

“Huawei’s 2019 half-year annual report shows we are still keeping very steady growth, which is 20% more growth than the same time last year. It’s a great achievement, given this tough situation.

“Our belief is that what can’t beat you, will make you stronger. Mr Trump and the US are trying very hard to stop us and we need to keep fighting…we can also forecast that we will get steady growth by year-end.”