SHIPMENTS through mobile phones' gray market to Nigeria, South Africa and the Middle East are expected to decline by 38.2 billion units going by the July report from IHS.
IHS, an Electronic and Media Market Research Company, based in the United States (U.S.), informed that the gray market for cellphones will contract for the second consecutive year in 2013, with worldwide shipments dropping by 12 per cent as both makers and buyers of these handsets turn to branded products.
The IHS report said shipments reached their peak in 2011 with a total of 250.4 million gray-market cellphones, but that beginning last year, the market began to shrink, contracting to 221.5 million units.
It added that the deceleration will continue this year to 194.6 million units, followed by another steep fall to 173.8 million units in 2014. The decline will continue at least through 2017, when shipments will dwindle to 133.9 million units.
The report noted that gray-market handset shipments this year to the Middle East and Africa will decrease slightly to 38.2 million units.
Central and Latin America together represented the third-largest gray-handset market, with 37.3 million units forecast to be shipped in 2013, adding that countries in Eastern Europe, such as Russia and Ukraine, also are major target markets.
The report noted that the market will contract in Nigeria and other African markets due to awareness from the brands and most especially as buyers turning to purchase branded products.
Indeed, in an interaction with journalists in Lagos, Samsung Nigeria's Director, Handheld Products, Emmanouil Revmatas, confirmed the decline in gray market activities in the country, especially on the Samsung brand, stressing that campaign against its usage has helped greatly to stem the scourge.
Furthermore, the IHS report disclosed that the gray market overall is impacted by an accelerated decrease in the sales of lower-end handsets known as feature phones. It noted that while the ultra-low cost handset (ULCH) and smartphone segments of the gray market will continue to grow until 2014, expansion in these segments won't be enough to counteract the drop in the feature phone sector.
Gray-market handsets, as defined by IHS, include counterfeit products like fake iPhones as well as white-box cellphones on which any logo can be readily imprinted. White-box handsets often are illegal despite sporting a logo because they use smuggled chips, lack official certification from China's Ministry of Industry and Information Technology (MIIT), use fake International Mobile Equipment Identity (IMEI) codes and usually are trafficked through Hong Kong to avoid valued-added taxes (VAT) from being imposed on the devices.
Director of China Research at IHS, Kevin Wang said; "A combination of supply and demand factors is causing demand to decline for gray-market cellphones.
"On the demand side, the consumers in emerging markets who used to be the major purchasers of gray-market cellphones increasingly are preferring brand-name handsets. On the supply side, some gray-market handset makers have become branded manufacturers in order to promote their own names in developing countries."
Furthermore, Wang said it is becoming harder for gray-handset makers to differentiate their products from a sea of counterfeits and remain profitable, stressed that with the Chinese currency appreciating in value, the gray handset business is no longer as profitable as it once was.
The report noted that Asia-Pacific, including China, is the largest gray-handset market in the world, and the devices have a strong presence also in India, Vietnam, Thailand, Pakistan, Indonesia and the Philippines. The region, however, is not immune to decline, and the Asia-Pacific gray-handset market will contract this year to 103 million units, on its way to 53 million units by 2017.
The Middle East and Africa in 2012 surpassed Central and Latin America as the second largest gray handset market, driven by increasing demand from countries such as Nigeria, Turkey, Egypt and Iran.
IHS further said in China, the world's largest handset market, total cellphone shipments from Chinese companies will grow to 840 million units in 2013, up two per cent from 2012. However, shipments will begin to decline starting in 2014.
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