The Mexican smartphone market grew 25% YoY. LG & Huawei were the fastest growing brands. New entrants such as Xiaomi and Infinix should further drive the growth within the open channel.
According to the latest findings from Counterpoint’s Market Monitor Service, the Mexican smartphone market registered annual growth of almost 25% in Q1 2017. The LTE-capable smartphone segment grew 52% annually. The handset growth was driven by increased financing offers from retailers, appreciation of the Mexican Peso, and the declining smartphone average selling prices (ASPs).
Commenting on the findings, Tina Lu, Senior Consultant at Counterpoint Research noted, “On January 1st, 2017, the Mexican government increased fuel prices by 20%, which triggered a rise in monthly inflation to 1.7%. According to the Banco de Mexico, this was the highest inflation rate in one month since 1999. But on the flipside, the US dollar depreciated approximately 10% during the Q1. This allowed vendors to offer stable prices for smartphones, which contributed to the overall positive uptick in demand for smartphones.”
“In terms of the number of active brands, Mexico is one of the most fragmented markets in Central & Latin America (CALA). This is because Mexico has been a preferred entry point into CALA for most brands. Xiaomi and Infinix have entered the market while Indian ‘local king’ Lava is planning to enter in the second half of this year. Mexico is the second largest market in LATAM in terms of mobile phone sales with fairly low import barriers compared to the largest market, Brazil.”
Ms. Lu, commenting on smartphone brand performance during the quarter highlighted, “LG and Huawei were the fastest growing brands during the quarter taking share from Samsung and Alcatel. Both brands saw strong demand for their mid-range LTE smartphones, which took their market share to a record high level.”
Parv Sharma, Research Associate at Counterpoint Research, further added, “Historically at the channel level, Mexico used to be one of the most operator-concentrated markets. The distribution-retail network used to be largely operator-controlled. Carriers such as America Movil (Telcel), with its lion’s share of the market, has over the years built strong ties with consumers making it difficult for the open market to grow.”
“However, declining subsidies from operators and financing offers, like paying by installment, from retailers are driving open market channels making it attractive for different Chinese and Indian brands to enter the region via Mexico. In addition, Mexican consumers have begun to trust and purchase unlocked devices–another factor contributing to the market growth. Aggressive low-cost entrants such as Xiaomi and Infinix should drive this trend further. Nevertheless, carriers still dominate the market, but participation among the players is changing. AT&T has been the most aggressive operator bundling services with devices. With this strategy, the company gained more than 8% of market share and doubled its shipments.”
- Mexico mobile handset shipments grew a healthy 17% YoY during Q1 2017.
- Smartphones segment grew 25% YoY and contributed 93% of total mobile handset shipments during Q1 2017.
- Samsung led the Mexican smartphone market with 27% share in Q1 2017, slightly down from 28% a year ago.
Exhibit 1: Mexico Smartphone Market Share by Brands
- Huawei more than doubled its smartphone shipments YoY in Mexico in Q1 2017. It was the biggest winner among the top five brands.
- LG’s smartphone market share grew 57% annually and has reached 14.5% share during the quarter. LG’s X Style and K5 models drove a good part of this growth.
- Lenovo (Motorola) shipments grew 33% annually, driving market share gains.
- Apple was the biggest loser with shipments down 43% YoY and following a strong Q4 2016.
Exhibit 2: Mexico Smartphone Brands Shipment Y-O-Y Growth in Q1 2017
- Local brands grew 42% annually by volume in Q1 2017. Lanix was the leader among regional brands and its smartphone shipments grew 74% YoY by volume. The company was one of the brands offered in Telcel’s basic postpaid plans.
- Eight out of ten smartphones shipped in Q1 2017 were LTE-capable, growing 52% annually.
- Almost one in three smartphones was sold in the fast-growing USD100~USD149 price band in Q1 2017.
- Four of the top five smartphones sold in Mexico were Samsung devices. Huawei was the only other OEM to make it into the top five.
- Almost 70% of the smartphones sold in Q1 2017 were phablets (i.e. screen size greater than 5 inch).
- Feature phone shipments declined 37% both YoY and QoQ as users are upgrading to low-end and second-hand smartphones.
Exhibit 3: Mexico Channel Shipment Y-O-Y Growth in Q1 2017
- Telcel led among Mexican sales channels, but it is slowly losing share to rivals.
- The open market is the fastest growing channel among smartphones more than doubling its volume YoY.
- Decreasing subsidies, increasing new brands (e.g. Xiaomi, Infinix) entering the market, and retail financing opportunities are key drivers of open market growth.
- AT&T, the new consolidated operator, grew more than 101% YoY in terms of mobile phone sales. The operator needs to increase its subscription base and has been aggressively capturing users with attractive device bundling offers.