The LATAM smartphone and devices ecosystem has been one of the least impacted by the COVID-19 pandemic. Many of the trends mentioned below started in 2020 and will further strengthen in 2021. The pandemic has shown that technology and devices are essential allies through a calamity and will thus contribute to steering the LATAM economy back to growth.
- LATAM will have at least 22 operators launching 5G networks. But all of them will have limited coverage, with most of them being non-standalone (NSA) networks. These 22 will be in addition to the nine operators which launched 5G services during 2020.
- At least six LATAM countries will auction 5G compatible spectrum. Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Mexico, and Peru have announced plans to auction spectrum that will enable operators to deploy stand-alone (SA) networks and offer commercial 5G plans.
- 5G smartphones will start to take off in 2021, but not quite. 5G phones will unlikely bag more than 5% share in the region. Apple and Samsung will drive the growth of this segment in LATAM during 2021. Although 5G technology will reach the $150-$200 price band smartphones, buyers under this band will instead focus on having a better camera, a bigger screen, or more memory. 5G will not drive smartphone replacement in the region.
Exhibit 1: LATAM Technology Share, 2018-2021
- The market will see double digit growth in 2021. Although the overall economy will continue to struggle, smartphone sales in 2021 are expected to grow more than 19% YoY. Even if there is a second or third wave of COVID-19, the demand will not decline. It will decline only when there is some disruption in the supply chain.
- Chinese brands’ participation will grow, but slowly. Huawei’s share will continue to decline. Despite the regime change in the US, the trade ban on the company is unlikely to be lifted soon. Many Chinese brands are entering the region, seeking to grab the share shed by Huawei.
- Smartphone ASP might return to growth.In 2020, the ASP decreased slightly but consistently each quarter. The entry of newcomers with aggressive plans may trigger a price war. This will benefit consumers and convince them to spend slightly more while acquiring a new smartphone.
- Several countries will increase taxes on smartphones. As COVID-19 left many economies shuttered and some governments broke, smartphones will come under the tax scanner in many countries. Although the OEMs might absorb a part of the increased cost, it will ultimately impact the overall smartphone market ASP.
- Online channels will see an increase in smartphone sales. Online sales are here to stay. In 2020, online sales in LATAM increased by at least 60% YoY. This growth will continue in 2021 but at a slower pace, trapped by the reality that only 55% of the region’s adult population has access to the banking system (according to the Alliance for Financial Inclusion), compared to 95% in Europe.
- Contactless payment technology to see increasing adoption. COVID-19 accelerated the adoption of this technology in LATAM. All leading banks in LATAM are now launching an NFC (near-field communication) payment platform. Companies like Samsung, Mercado Libre and Facebook are also looking to tap into this trend. On the other end, an increasing number of stores are acquiring contactless payment technology. As the pandemic is still on, this trend will grow.
- IoT devices will surge in the region. With the pandemic, many businesses have realized that it is essential to accelerate digital transformation to stay efficient. On the other hand, operators are pushing IoT solutions while looking for a new stream of revenue. At the consumer level, as many people continue to remain stranded at home, smart home and hearable devices will receive an extra boost. In particular, devices related to security, home entertainment and household tasks will be in demand.