Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
With smart devices taking the center stage at the first industry event of 2013, CES in Las Vegas, it is a good time for a 2012/2013 review/outlook of the smartphone market in Latin America, focusing on the two countries that are seeing the strongest adoption: Argentina and Chile.
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Whereas Latin America continues to be a mixed picture with feature phones and ultra-low-cost handsets taking the lion’s share of handset sales in 2012, together representing 65% of total sales, Argentina and Chile are now reaching a significant milestone: for the first time in these two countries, smartphone sales are outstripping the sales of other types of handsets.
In Argentina, despite government restrictions on imported goods including ICT products, most of the major handset manufacturers’ initiative to start production in the country has made it possible to keep up with local demand. Argentina’s smartphone sales were, in fact, higher in 2012 than in the other more advanced regional market, Chile, topping 44% of total sales, leaving 27% to mid-level handsets and 29% to ULC phones.
Argentina still lacks the presence of Apple, which does not have a local factory, but this is not stopping the high phone replacement rate, which is driven by smartphone sales. The outlook for 2013 puts Argentina well ahead of other regional markets for smartphone adoption. Smartphone sales are expected to represent more than 53% of total sales, compared with 37% regionally, with the Android operating system reaching more than a 57% share of the smartphone OS market.
In 2012, the widening class gap in the handset world was also evident in Chile. Sales of smartphones and ULC phones reached 35% and 37% of total sales respectively, with the middle-class devices, messaging phones and feature phones, making up 5% and 23%. According to a report from the Ericsson ConsumerLab, almost 50% of mobile users in Chile plan to purchase a smartphone for their next upgrade and 11% plan to purchase a tablet. For 2013, smartphones in the Andean country are set to represent more than 46% of total sales with the Android OS maintaining more than a 45% share of the smartphone OS market.
Compare these figures with those of Brazil in 2012, where the lower-middle device class, feature phones, represented a large 46% of total sales with smartphones at 28%, inline with the Latin American average. One shouldn’t forget, however, that the Brazilian market was negatively affected by the ban on mobile phone sales imposed by regulator Anatel in response to local operators’ failure to meet quality standards. This had a significant impact on device subsidies and consequently, on smartphone sales. Brazil is also expected to have strong smartphone sales growth in 2013. A further boost will come from the smartphone manufacturers’ and distributors’ commitment to fully pass on equipment taxation cuts to consumers, which resulted from new legislation in Brazil.
And now comes the crucial issue of prices. The $100 price point is seen by all major players as the threshold for smartphones to reach the mass market throughout the region. Increased competition brought by the likes of Huawei, ZTE and Alcatel smartphones helped bring the price of many devices closer to that $100 point, although they are definitely not quite there yet. In 2012, the smartphone average selling price was just over $180 in Latin America. For 2013, they should reach the range of $170. This year, with smartphone demand increasing and competition heating up, Argentina is already close to the $160 ASP, and Chile is going even further to the $150 ASP. Other major markets such as Brazil and Mexico are still in the $180 to $190 range.
As the two leading smartphone markets, Argentina and Chile are showing the extent to which price erosion reduces the distance between consumers and smartphones, helping operators develop attractive offers for smartphones and data plans at increasingly affordable prices. As the price of smartphones continues to decline throughout the region, operators will be able to widen their smartphone portfolio further and introduce more affordable devices into the market.
Daniele Tricarico is an analyst for Latin America at Pyramid Research.
