Reversing the Gulf’s smartphone slump

The opening months of the year are always some of the most exciting when it comes to the smartphone market and 2017 has been no exception.

In a relatively short space of time a selection of the world’s top manufacturers have revealed their latest contenders in a race that is becoming ever more fierce.

Global smartphone sales increased just 5 per cent last year, to 1.5 billion units following a 14.4 per cent increase the previous year, according to Gartner, leaving manufacturers scrambling for market share amid slowing growth.

In the Gulf region conditions were even tougher, with overall smartphone sales shrinking 23 per cent, according to consultancy IDC.

Given these numbers, it is no surprise that several manufacturers were aiming to hit the ground running at the end of February, particularly given the poor performance of market leader Samsung following the Note 7 debacle.

The South Korean giant’s global recall, following instances of devices overheating and catching fire, saw it lose its usual top spot in terms of units sold to Apple in the fourth quarter with 76.78 million devices shipped compared to the latter’s 77 million, according to Gartner.

And its decision to delay the launch of its next flagship the Galaxy S8 by a month to the end of March left some analysts perplexed.

“Let’s say it is not to their advantage if they delay this product, they certainly need that new flagship phone to stop the current downward trend,” says Annette Zimmerman, research director at Gartner.

Among the devices that will directly compete with Samsung’s flagship are South Korean rival LG’s G6, Japanese firm Sony’s XZ Premium and Chinese manufacturer Huawei’s P10 and P10 Plus.

All three are seeking to bring something different to the fray other than the usual updates to chipsets and internal hardware. LG’s offering makes better use of the front space with a larger QHD 5.7-inch screen. Sony is boasting what is claimed to be the first 4K HDR display on a smartphone and super slow motion video recording and Huawei has focussed on design and photo taking functionality with a dual lens rear camera produced in partnership with German optical firm Leica.

Read: Sony unveils new 4K smartphone

Rise of Chinese entrants

That Huawei is even mentioned alongside rivals at the top of the smartphone market is some indication of how things have changed in recent years. From launching its first Android smartphone in 2009 the Chinese firm has built its global market share to become the third largest manufacturer behind Samsung and Apple, with 132.8 million units sold in 2016, according to Gartner.

Huawei and Chinese rivals Oppo and BBK now complete the top five vendors globally with market shares of 8.9 per cent, 5.7 per cent and 4.8 per cent compared to 7.3 per cent, 2.8 per cent and 2.5 per cent in 2015.

And similar results are being seen in the Middle East and North Africa region.

“Huawei had pretty stable shipments in 2016 over 2015 while TCL (Alcatel), Lenovo, and Tecno are the runner ups having expanded their shipments. This is the challenge for Samsung: the disaster with the Note 7 left Samsung with a gap in the high-end, large screen portfolio and at the same time Chinese vendors putting pressure on the vendor from the middle,” says Zimmerman.

Huawei is also taking an ever-larger share of the premium market having closed the gap globally with Samsung in the segment last year to 36 million units from 50 million in 2015.

“Huawei’s devices have increased in popularity because they are very good products (good quality) with good features for the money. Plus, Huawei has invested in important partnerships like Leica for the camera technology. They are a serious competitor in the high-end now,” says Zimmerman.

This push has also translated into increased sales in the Gulf region, where the Chinese manufacturer was one of the few players to defy the sinking market with a 9 per cent year-on-year increase in shipments in 2016. In comparison market leaders Samsung and Apple saw shipments dip 32 per cent and 21 per cent respectively, according to IDC.

Speaking following the global launch of the P10, Huawei Consumer Business Group president for Middle East and Africa Gene Jiao suggests the company still has some work to do in cracking the regional consumer.

“The journey is not that easy, we have to find our position. Even the customer does not know themselves about their requirements – we have to dig deeper to find out what they want,” he says.

But he draws confidence from the company’s growing share of the market, which he says stands at around 20 per cent in the Middle East and 10 per cent in the UAE.

Nokia makes a return

Another player seeking to make an impact in the Middle East is HMD Global. The Finnish firm, which launched in May last year with rights to the Nokia brand, has established regional offices in the UAE ahead of the launch of its new device line-up in the second quarter.

Read: Nokia phone brand plans Q2 return to Middle East, regional hires

But it is not necessarily the manufacturer’s smartphones that are getting the most attention. At Mobile World Congress in February it was arguably the manufacturer’s new version of the classic 3310 feature phone that stole the show.

Patrick Mercanton, the company’s Dubai Media City-based global head of marketing strategy and planning, says it was formed by former Microsoft and Nokia staff, among others, with an eye on filling a gap in the market.

“If you look at the market for smartphones today it is very much a flagship-driven tech leader focussed market, the human factor has gone out of it, no one talks about people anymore, no one talks about experience,” he says.

“Possibly two years ago it wasn’t the right time but now is definitely the right time to come back with a different approach to smartphones. For instance, much more about people, much more about providing quality to the majority than technology specs.”

Mercanton says the firm’s new device line-up – with three mid-range smartphones ranging from the $243 Nokia 6 to the $147 Nokia 3 – aims to address several pain points in the market including build quality, preloaded apps and complicated user interfaces. All come with metal frames and promise to include the latest version of Google’s Android operating system without customisation.

He believes this approach, without the objective of controlling the ecosystem previously pursued with the brand at Nokia and Microsoft, will produce results and the company is aiming to be a top three player in smartphones within the next five years.

But in the meantime the brand’s challenge will be meeting the hype of its re-launch with interesting products. He hints new versions of other classic mobile phone designs are also being considered, with the 7280 ‘lipstick phone’ one potential option.

“Feature phones are not dead – it’s a category actually rebounding potentially. The erosion has stopped and people are starting to see feature phones can be used with smartphones, or on weekends.”

Zimmerman suggests, despite the nostalgia with the 3310 in the West, it is emerging markets like the Middle East where the Nokia brand will have the most impact because this is where Nokia feature phones are still being sold in “decent volumes”.

“The Nokia brand is still one of the leading feature phones brands next to Samsung and Alcatel. Hence, users in those regions are more likely to adopt Nokia-branded smartphones compared to Western Europe,” she says.

Gartner is predicting 65 per cent of phones sold in the MENA region this year will be smartphones, still leaving a sizeable, if shrinking feature phone market.

The world’s most secure smartphone

Amid these predictions others are eyeing their own niche segments of the market with a specific customer or client base in mind. Among the most intriguing is UAE-based cyber security firm DarkMatter, which recently announced its own smartphone – claimed to be the most secure in the world – targeting heads of state, government entities and security conscious large enterprises

On the face of it, KATIM, which roughly translates from Arabic as ‘silence’, features competitive specs including 4GB of RAM, 64GB of storage and a 3,800mAh battery. But its unique selling point is its security functionality.

Read: UAE’s DarkMatter launches new secure smartphone

This includes a shield mode switch that securely cuts off recording functions, multiple levels of tamper prevention, and a self-destruct option in case of prohibited access. It also comes with a hardened version of Google’s 7.0 Android operating system and a secure app store, with downloads including a secure messaging app.

But among the biggest features is the included end-to-end 256-bit encryption, which the company says can be configured using the customer’s own chipsets and standards at an additional cost.

DarkMatter’s CEO Faisal Al Bannai says the product was conceived due to the lack of a holistic solution on the market covering hardware, the app layer and the operating system, and he expects secure communications to become one of the firm’s key product pillars.

“There is a gap in terms of what the most secure customers want and what is available out there in the market,” he says. “We’re definitely putting a stake on the ground saying this is the most secure comms solution on the market.”

Initial customers have already been confirmed for the firm’s applications, which include a secure workflow solution, and other products will be announced later this year.

“When I talk about transparency, many of the solutions you see on the market are not very transparent to the customer, they are a black box or at best a grey box,” adds Al Bannai.

“We are saying if you are qualified to buy our solution you could review full capabilities on the hardware, there is no black box, you could do full assessment and full review of the code.”

Pricing of the device and wider ecosystem was not disclosed but it is expected to become available on the market in the fourth quarter of what is sure to be a competitive year across the regional smartphone market.

“Global smartphone sales growth is expected to revolve around small single digit growth over the next few years. The Middle East and North Africa will show a bit better trend of mid-single digit growth,” says Zimmerman.

While IDC is expecting the start of a slow recovery in the Gulf region with growth of just 3 per cent expected in the mobile market in 2017, making for what is sure to be a competitive period to come.