Smartphone brands leave Russia Following the Russian invasion of Ukraine on the 24^th of February 2022, several smartphone makers withdrew from Russia, including two of the biggest – Samsung and Apple – which led the market in terms of shipments and revenue respectively. Apple initiated the move on the 1^st March, followed by Samsung three days later. With the two major brands out, the market is facing a void which Chinese brands – so far operating in Russia largely as normal – will struggle to fill in the short-term considering their own risk-taking ability, supply chain issues and China’s official stance on the crisis. With shipments cut off, consumers flocked to snap-up limited handset stock from their favourite brands, evidenced by Russian smartphone sales increasing slightly in March. However, with Samsung and Apple inventory dwindling, sales declined steeply in April. The market also missed out on major launches like the Galaxy A series refresh and Apple’s iPhone SE 2022, which would have helped shore-up the market. Russia legalises parallel imports To ease the stress placed on consumers, the Russian government temporarily legalised parallel imports, allowing devices to be imported via non-official channels. This differs from the grey market, which involves distribution channels that are not authorised by the original manufacturer, in that the government is aware of and is able to tax the sale of these devices. However, it remains unclear when these parallel imports will be halted by the government. First batch arrives The government announced the decree in March 2022, but the first parallel imports appeared in late May. Smartphones like the Samsung Galaxy A23, A33 and A53, and the Alpine Green variant of the Apple iPhone 13, all launched after Samsung and Apple’s exit, are listed with major retailers like Svyaznoy, M.Video and DNS. The devices are imported from Kazakhstan, evident from the model numbers ending with “KZ”. These parallel imported smartphones do come with their issues:

• Buyers of the imported iPhone 13 will face difficulties in side-loading alternatives to applications blocked in Russia, although Samsung users will find it easier given the openness of the Android ecosystem.
• The prices are higher and post-purchase service for these devices is not guaranteed from official stores. Third-party repairers might help, but may struggle to source parts.
• Some smartphones will be locked by carriers unless a supported SIM is inserted. Such devices are reported to make up 20% of Samsung’s parallel import in the country.
• The smartphone brands could devise ways to deactivate these devices if deemed necessary.

Future Outlook The parallel imports can provide temporary relief to Russian consumers by easing supply issues. However, the quantity is expected to remain low as distributors would have to source from various countries, and consumer confidence in such devices would also be low due to warranty issues and the potential inability to use applications like Apple Pay, Google Pay etc. Several brands like Svyaznoy and MTS have started selling refurbished devices, which may be more favourable for consumers due to lower prices and certainty of service from official stores. Samsung will likely account for most parallel imports due to the ability to side-load applications. Meanwhile, we expect the Chinese OEMs, especially Xiaomi, realme and HONOR, to capitalise and capture significant share in Russia by the end of this year. Nevertheless, the overall smartphone market is still expected to decline in 2022.