Forget about China; focus on Africa

The smartphone market is expecting a major slowdown – as high demand from China is expected to cool (CNBC). According to a IDC report, the expected growth for 2015 smartphone shipments was 10.4%, a 17.1% drop from the 2014 growth rate. As China’s demand is cooling off – smartphone companies should focus on Africa, since provide a great growth potential.

The African population has over a billion people, yet only 28.6 % use the internet (Internet World Stats). In turn, this reflects the projected mobile users by 2019 which is estimated to be 28% of the population, as mobile phones become more affordable (Quartz Africa). Overall, there has been a decline in featured phones (low end mobile phones) and an increase in the usage of smartphones. According to Opera Media Networks, owners of the mobile phone browser Opera, the Android platform is slowly taking up the space for feature phones in Africa, as Android devices become cheaper (iT Web Africa). The low percentage of smartphone owners provides growth potential for Samsung, and Apple.

 

Screen Shot 2016-01-02 at 8.55.52 AM
Image Source

One of the major factors to this is change would be that smartphones are costing around $100. Specifically, Google’s Android is spurring the growth of Africa’s smartphone market by offering cheap smartphones. The IDC report notes that 89% of all smartphones shipped during the first quarter of 2015 were powered by Android. 45.1% of those were priced below $100 (QZ Africa). In turn, they are relatively cheaper compared to smartphones sold in North America, making it affordable to more people in Africa. The lower prices can potentially lead to an increase in smartphone sales.

Currently, Africans tend to use web pages instead of apps. Again, despite sales and growth in smart phones a large portion of the population still use featured phones, as they only use it for phoning and texting. The growth of apps could be extremely helpful for innovation, connections and potential jobs that could be acquired. Yet again, this emphasizes that there is an untapped market relating to smart phones in Africa.

 

AFRICA 2
Image Source

The majority of African countries have a young population (AfDB). In turn, the youth might be more intrigued to use the smart phones compared to the elders, providing smartphone companies with a potentially larger market. With a young population, smartphones will undoubtedly continue to grow (UN Org).

AFRICA 3
Image Source

Conclusion

Despite this growth, smartphone will not see an exponential growth because of lack of the internet access in some regions, and lack of affordability. Some Africans live off $1-$2 a day, in turn a $100 smart phone is going to be very expensive for them. However, with current growth, smartphones will continue get cheaper and companies will try methods to acquire low-end customers. This might be a gradual process or exponential depending on how African countries react to foreign and domestic cell phone providers.

If African countries work together will these companies to reach the lower-income segment of the population, growth will be exponential. However, if this remains exclusively to people who can afford it, the growth would only be gradual. Overall, larger phone companies such as Apple and Samsung should focus more on Africa, as there is a new market that can potentially increase their sales.

Stocks Mentioned: GOOGL


Writer: Syed Azam Afzal

Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.