Cellular production fell 28% in 2018. In one year, the manufacture of mobile phones in Argentina fell from 10.8 to 7.8 million units. For this year, prospects worsen: only 7.5 million will be manufactured. In addition, low-end models took the lead and became the best sellers in the market, displacing the mid-range.
The data of the Association of Manufacturers of Appliances of the Argentine Republic (AFARTE) show that, as it happened in the rest of the economic sectors, the fall throughout 2018 was not even: in the first quarter -when it had not yet been produced devaluation or inflationary escalation- production grew 15%, in the second it fell 15%, in the third it fell 46% and in the last one it plunged 48%. The worst month for the industry was September, with a year-on-year loss of 53%.
On the side of consumption, the biggest drop was that of the fourth quarter with a decrease of 29.4%.
Until the third quarter of 2018 the most sold cell phones in Argentina were mid-range phones, which captured 58% of the demand. With the market in retraction, in the fourth quarter the best sellers became the low-end, with 51% of demand, while the average range fell to 45%. The participation of the high range is only 4%.
The reasons for the fall are multiple. On the one hand are the general law: the impact of devaluation and the cut in the purchasing power of consumers, estimated at a loss of 15% by 2018. But to this we must add intrinsic factors of the industry. Worldwide, last year 1,400 million cellulars were sold, 4.1% less than the previous year, according to the International Data Corporation. The global contraction already accumulates five quarters. For the sector, 2018 was the worst year in history.
If the look is fixed only in the last quarter of 2018, the global cellular market shrunk 4.9% in the year-on-year comparison. By inertia, it is estimated that the fall could continue during 2019.
For Argentina, the expectation of Afarte is to produce 7.5 million units. “It’s a conservative and pessimistic projection, I hope we’re wrong, but we estimate that the downturn will deepen.”
Analysts attribute this retraction to “market maturity”. On the one hand, consumption is concentrated in fewer and fewer brands. Globally, 5 companies take almost 70% of sales: Samsung, Huawei, Apple, Xiaomi and Oppo. In Argentina, 80% of the sector is in the hands of four brands: Samsung, Motorola, LG and Huawei.
“The reality is that all the people who are target market cell phones already have their phone. And most have already made an upgrade,” said Federico Hellemeyer, president of Afarte. In addition, “the useful life of mobile phones is being extended, and at the global level the replacement period that until a few years ago was 12 to 18 months, now stretched to 24 to 36 months”. Among other things, this happens because the new cell phone models are no longer as “innovative” as they were in previous years. “Technological advances are no longer so significant, everything you do with a 2018 model you could practically do with 2017,” said Hellemeyer.
Cell phone factories in Tierra del Fuego employ 9,000 people. Faced with the fall in consumption, they made an agreement to maintain jobs at the cost of employees accepting not having wage increases for two years. The agreement is valid until June 2020.
In this context, Nokia again bet on the depressed local market. The brand of Finnish origin was until 2012 the number one manufacturer in the world. After the acquisition by Microsoft was losing relevance at the hands of Samsung. Now the brand returned to Finnish hands, under the umbrella of HMD. It has already started producing locally and next week will present its new models in the country. The landing was scheduled for 2018 but was postponed due to the crisis. They have planned to release 5 models in 2019.