05 Oct 2015

The GCC's mobile connected devices market suffered its worst ever quarter-on-decline in Q2 2015, according to newly released research from International Data Corporation (IDC). The global consulting services firm's latest data shows that the market suffered an 8% decline in shipments during the quarter to total just over 8 million units. The GCC mobile connected devices market comprises shipments of smartphones, tablets, and portable PCs to Saudi Arabia, the UAE, Bahrain, Oman, Qatar, and Kuwait. The market's decline was mainly due to the bleak economic situation, geo-political uncertainties, inventory pileups, and seasonal shifts in demand.

In contrast to the poor performance of the overall market, Oman and Bahrain both experienced healthy quarter-on-quarter growth, spurred by a strong push of smartphone and portable PC shipments by certain vendors. Unfortunately, these markets only account for a combined 9% share of the GCC mobile connected devices space, meaning their positive performances were unable to counterbalance the negative growth seen across the rest of the market.

The larger markets of Saudi Arabia and the UAE dominate the GCC mobile connected devices space with a combined share of more than 75%, but it was these two markets that suffered the region's steepest declines as political and economic concerns, decreased consumer sentiment, and seasonality variables all hit demand. Ongoing political tension in Yemen is proving to be a particular concern as the country borders Saudi Arabia and the current situation poses a threat to the kingdom and the wider region. Falling oil prices are also hampering growth prospects, with governments across the GCC introducing spending cuts. Some GCC countries are considering introducing new tax systems that have the potential to negatively impact the commercial segment and reduce both consumer disposable income and confidence in general.

The GCC smartphone market's performance in Q2 2015 was its worst since IDC began tracking the market in 2013, with shipments down 9% on the previous quarter. Four out of the six GCC countries recorded negative growth in Q2 2015, but it was the poor performance of Saudi Arabia and the UAE that drove this decline in shipments. iOS and Android continue to dominate in terms of smartphone operating systems, with a combined 97% market share.

"That figure will only increase in the coming quarters with news that more vendors – including BlackBerry and Nokia – will be releasing their own Android devices," says Saad Elkhadem, a research analyst at IDC Middle East, Africa, and Turkey. "The impending release of Windows 10 will have a positive, albeit small, impact on Microsoft's share of the smartphone space. It will take time for both consumers and the channel to gain confidence in the new platform, and Microsoft will be reliant on app developers to provide their backing in order to give it a fighting chance of competing with the app offerings available on iOS and Android. Apps are essential for driving a positive user experience on any given platform."

The GCC tablet market bucked the trend in Q2 2015, recording quarter-on-quarter growth of 2% to prevent the overall mobile connected devices market from spiraling to an even worse performance. "Despite the gloomy proclamations surrounding the region this quarter, we are continuing to track considerable movements in the GCC and remain optimistic about the tablet market's performance," says Feras Ibrahim, a research analyst for personal computing at IDC Middle East, Africa, and Turkey. "We expect to see some noteworthy activity in the tablet market, and this won't be limited to the consumer segment. Kuwait will see the delivery of over 70,000 units to the education sector in Q3 2015, while a significant delivery in the aviation sector has already been announced in Bahrain."

Shipments of portable PCs fell 13.2% quarter on quarter in Q2 2015. Consumers are increasingly moving away from portable PCs towards tablets and smartphones, and this trend is inhibiting any type of growth in this space. "There is no question that portable PCs in the GCC are being threatened by other tech products, and shipments will continue to decline throughout the five-year forecast period," says Ibrahim. "More and more end users are adopting tablets, smartphones, and even wearables as their ready-to-go mobile device instead of portable PCs, which is leading to prolonged refreshment cycles and is blocking the growth of portable PCs in the GCC."

According to IDC, the significant downturn experienced by the overall market in Q2 2015 is not indicative of a permanent malaise in the GCC. Instead, it shows that the region's markets have become more sensitive to external macro environments. Indeed, IDC forecasts a rebound in the coming quarters as the markets adjust themselves to the economic factors currently hindering their performance. Positive seasonal trends will also come into play, with the UAE's GITEX Shopper event expected to make a significant contribution to shipments of all technology types in Q3 2015.

The final quarter of the year is also usually a strong period for mobile connected devices, primarily due to the holiday season but also because many new smartphones are launched in Q3 and start gaining traction in Q4. As such, IDC expects the GCC mobile connected devices market to grow 6% in Q3 2015 and another 4% in Q4 2015. Looking at the year as a whole, IDC forecasts the GCC mobile connected devices market to grow 6% year on year to total 34 million units, followed by further growth of 10% in 2016.

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