The grey market for mobile phones is forecast to slump by 12 per cent this year, ironically because handset makers can’t compete against an increasingly vibrant trade in counterfeit products, according to market watcher IHS iSuppli.
The analysis firm’s China Research Service has released new data predicting the second consecutive yearly decline for a market which is 99 per cent based in China.
From the highs of 2011, when 250.4 million mobes were shifted, shipments fell to 221.5m in 2012, followed by another predicted slump to 194.6m this year and 173.8m by 2014.
IHS is estimating the slump will continue until 2017, when shipments will diminish to 133.9m, thanks to a big drop in feature phone class grey market handsets which a growth in the ultra-low cost handset (ULCH) and smartphone segments will not be able to make up for.
Grey market, as defined by the market watcher, can include counterfeit products but also semi-legal “white box” items which often use fake IMEI codes, aren’t certified by China’s Ministry of Industry and Information Technology (MIIT) and are smuggled out of the country via Hong Kong to avoid VAT.
IHS director of China research, Kevin Wang, said the demise of China’s vast grey market industry is partly down to customers in emerging nations demanding recognisable brand name handsets, and partly because some grey market manufacturers are going legit in a bid to promote their own brands.
An appreciating Chinese yuan and an increasingly large and diverse range of counterfeit alternatives is also making life tough, the analyst said.
As El Reg reported last year, competition in the People’s Republic is increasing from the big name Chinese brands such as Huawei, ZTE and Lenovo.
These firms are now targeting traditional grey market customers, while their budget rivals struggle to source cheap components because of the relatively small scale of their operations.
While 99 per cent of kit is made in China, much of it is exported, primarily to Asian countries including India, Vietnam, Thailand, Pakistan, Indonesia and the Philippines, said IHS.
The analyst claimed that APAC sales would decline to 103 million units this year, however, and eventually slump to 53 million by 2017. The Middle East and Africa in second place is the big growth region, Wang told The Reg, with sales set to reach 38.2m this year. ®