Argentina smartphones sales grew 59% annually in Q3 2017, and 22% compared to the previous quarter. The top 3 brands represent more than 87% of the market, with more than 35 other brands disputing the remaining 8%. Furthermore, the top 5 models alone represent almost 45% of the market.
Argentina is an extremely closed market. Imports of mobile devices are allowed only with special authorization. Less than 3% of all the mobile devices sold between January and September, were imported as imported devices are subject to greater than 110% duties. Most devices are assembled in the Tierra del Fuego region. This confers a high assembly cost, but still less than import duties. The consequence of the high production costs is that Argentinean consumers have to pay, on average, as much as double the price compared to Chile and USA, for similar models.
The current government intends to slowly open the market and decrease taxes on imported mobile devices in moves similar to that of the personal computer category. However, the government has not yet set the timeframe to incentive mobile devices purchasing by allowing imports and lowering the category taxes.
Strong Macroeconomic Conditions Drive Growth – but also of illegal imports.
Despite the high prices, the improving macroeconomic conditions in the country have led to 59% YoY total market growth, and almost 22% QoQ growth. We forecast that Argentina will finish 2017 with approximately 11.5M units sold. This is still around 3 million units below the current total addressable market (TAM). Since 2014 more than 2 million mobile devices enter the country illegally each year. Most of these come from neighboring countries, such as Chile, Paraguay and Uruguay. The government has recently announced that it will implement a mechanism to block mobile devices that were not assembled in the country or were imported illegally into Argentina. This process would be difficult to implement, but the government is signaling that it will try to control organized smugglers selling large quantities of illegally imported mobile devices.
Samsung has been the absolute leader of the Argentine market. It has refined its production process with assemblers in TdF. And its consistent brand building and marketing execution has given it a strong competitive advantage. Samsung is the only brand that has branded stores in the country, with four stores strategically located around Buenos Aires. It recently opened more points of sale in a smaller kiosk format, dedicated to selling accessories. Samsung also has a sizeable team of trade representatives that are present in almost all provinces.
After being absent for more than five years, Apple has recently re-entered the Argentine market. It currently has less than 1% share. This is because iPhones cost more than twice as much as they do in the US. An unlocked iPhone 7 32GB currently costs around USD$1400 in Argentina. More than half of this cost is taxes and distribution costs. Claro is the only operator offering iPhones, together with a few retailers.
Exhibit 1: Argentina Smartphone Shipments Ranking and Market Share – Q3 2017
Source: Counterpoint Research: Quarterly Market Monitor Q3 2017
- Q3 2017 had almost 59% YoY growth and almost 22% QoQ growth.
- Smartphone penetration reached 99% of Q3 2017 sales.
- LTE devices grew 74% YoY and 23% QoQ.
- 99% of the market are LTE-enabled devices.
- At the end of Q3 2017, there was some inventory building in the channel, as the market was preparing for Mother’s day, which, in Argentina, is in October.
- More than one out of every two devices sold in Argentina is a Samsung. Although its sales volume grew more than 26% in Q3 2017 annually, it lost more than 10% in market share compared to Q3 2016.
- LG has been Samsung’s biggest competitor. Its share increased only marginally, by 1% YoY, but its sales volume increased more than 71% annually. Its K series smartphones were very competitive, which helped the brand to grow above the market rate. But it is facing tough competition from both Samsung and Motorola.
- Motorola grew its smartphone volume by 254% YoY. It more than doubled its volume share reaching 13.9%. The launch of its C series has allowed the brand to compete head to head with Samsung’s lower J series.
- Huawei grew its share slightly compared to last year. Huawei has successfully built its brand in Argentina over the last year. However, local assembly requirement, forces it to have a limited portfolio, compared to its offerings Mexico or Colombia; this has been a roadblock for the brand’s growth.
- Alcatel also more than doubled its share and volume sales, compared to 3Q16. It has been facing difficulty in getting enough product and has lacked investment in its brand.
Exhibit 2: Argentina Bestselling Smartphone Rankings – Q3 2017
Source: Counterpoint Research: Quarterly Market Pulse Q3 2017
- The top 10 smartphone models represent more than 66% of Q3 2017 sales in Argentina.
- Samsung had 5 out of the top 10 models.
- Samsung’s Galaxy J2 Prime is the best-selling model as it has enjoyed a special push from operators.
- All but one of these models are from the sub-US$200 price bands.
- Samsung’s Galaxy J7 is the highest price model from all the top 10. An average sell in price of $161. While J1 mini prime is the least expensive model from the list.
- LG has 3 out of the top 10 models. All from the K series.
- Motorola has the remaining models. Both of these models prices are intended to compete with Samsung’s lower order J series.
- Except for Samsung Galaxy J1 Ace VE and J1 Mini, all the models have screen size above 5”.