Central and Eastern Europe smartphone market value gets a boost from consumer preference for 4G models, according to IDC

Prague — In 2017, the value of the smartphone market in Central and Eastern Europe (CEE), Russia, and the CIS increased by 16.6% year on year to $17.51 billion, representing its highest value ever, according to the Worldwide Quarterly Mobile Phone Tracker published by International Data Corporation (IDC). In local currency (euro), the year-on-year growth was 14.4%.

The total number of phones sold in the CEE region fell slightly from 2016, just topping 100 million units, while smartphone shipment volume rose by a modest 2.3%, to reach 76.48 million units.

"Most of the value increase — around one billion dollars — was due to a revival in the Russian market," says Simon Baker, program director for mobile devices in IDC CEMA. "Some of the increase can be accounted for by the appreciation of local currencies against the dollar in recent months, as these currencies are often pegged to the euro."

But in Russia, expenditure on phones in 2017 rose to nearly the same level in dollar terms as it was in 2014, which saw the rouble crash at the end of the year, according to economic data from the Economist Intelligence Unit. The rouble is currently worth less than two thirds of the value it had versus the dollar before the crash in 2014.

"As most consumers switch to fourth-generation devices, they are becoming more discerning and more demanding about features, and are increasingly willing to spend more," says Lubomir Dimitrov, an analyst with IDC CEE. "This is benefitting brands that not only have a reputation for quality, but also for value for money, with the $120-150 and $200-300 price bands growing substantially." This is evident in 2017 sales dynamics across the CEE region, where both entry-level smartphones and high-end Android models performed poorly.

The 4G smartphone market overall is growing steadily across the region, with smartphones making up nearly 79% of the total smartphone market in 2017, compared to less than 60% in 2016. Consumers continue to move to larger screens, with the 5.0-5.5" category now leading the CEE smartphone market in terms of sales, while the 5.5-6.0" segment ranks second.

Samsung’s broad portfolio helped it keep its position as the leading smartphone brand in CEE, but the challenge from Huawei (including its Honor brand) is getting more intense. Samsung has recovered from the drop which followed its peak in 2013, when it accounted for almost half the CEE smartphone market, and its share increased marginally to 35.5% in 2017. Samsung is adapting to the difficulties of consistently finding new ways to innovate in smartphones by offering last year’s Galaxy models at discounted prices. Huawei performed better in 2017 than Samsung, with its share of the total smartphone market rising by almost 6 percentage points, to 14.2%. In a few countries, Huawei is catching up with Samsung; it has, in fact, taken leadership in the Czech Republic and is very close to doing so in Serbia.

Another brand that is rapidly increasing its presence, though only in a few key markets, is Xiaomi. The brand has quickly risen to challenge Huawei for the number two position in Russia's Android market and is also doing well in Poland.

Apple has never had the following in CEE that it has in Western Europe (WE), due to lower income levels. The average sales price (ASP) of a smartphone in WE is almost twice as high as in CEE. Apple has always struggled to capture a share of the CEE smartphone market that exceeds 10%, even with the introduction of cheaper models such as the relatively small-screen iPhone SE. Nevertheless, Apple performs well in value terms, representing 27.7% of market value share in 2017 (up slightly from 2016), despite only claiming 10.5% of the market in unit terms.

IDC expects a modest increase in smartphone sales in CEE in 2018, together with a rise in ASP, although the gains will be less pronounced than in 2017.

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