NZ smartphone market grows as 1 in 5 Kiwis buys an ‘ultra-premium’ model

The New Zealand smartphone market went through a “year of two halves” in 2021, according to market research firm IDC.

“While shipments in the first half of 2021 grew 17 per cent year-on-year, the New Zealand market stuttered in the back half of 2021 as supply issues on chipsets and components impacted the market and the Covid-19 Delta variant limited shipments into retail channels,” IDC analyst Maxim Wilson says.

The net result was that the New Zealand smartphone market dropped 3.6 per cent to 1.5 million units for the full year.

But while Kiwis bought fewer phones, those they did buy tended to be flashier. One in five sales was what IDC calls an “ultra-premium” model – a big increase over 2020.

“Despite shipments decreasing in 2021, the overall performance of the market was strong, as revenue grew 9.4 per cent year-on-year,” Wilson says.

“This was mainly due to standout volume in the ultra-premium price band, as demand for flagship devices across Apple, Samsung and Oppo stayed elevated all year.

“The $1500-plus price band accounted for 20 per cent of shipments in 2021, up 48 per cent year-on-year.”

That could be because we’re becoming more status-conscious with our phones, but IDC has an alternative theory: As Covid crunched the supply of key components, gadget makers of all types prioritised higher-end models, which carry a higher profit margin.

How the brands stacked up

December saw a bit of a market shake-up, reflecting the above theme.

“Samsung took the number one spot in the big holiday quarter for the first time since 2015Q4, as Apple’s primary focus on the iPhone 13 series impacted supply and fulfilment of older models,” Wilson says.

The big loser continued to be Huawei, which has been marginalised in the NZ market (and much of the world outside its home base in China) by US sanctions that have crimped its access to Google’s Android software and app store.

It’s unclear when the sanctions will lift. So far there’s no sign of any movement any time soon. In the meantime, another Chinese brand – Oppo – has filled the breach, along with various low-cost house-brand Androids sold by Vodafone.

IDC sees an Apple comeback in the first half, in terms of mass sales.

“Apple released its first 5G mid-range device, the [$799] iPhone SE 3 in March, which IDC expects to perform well in the first few quarters but is cautious over the longer term given the small 4.7″ screen size, in a market used to much larger screen real estate,” Wilson says.

But overall, IDC sees more contraction ahead. It’s forecasting 624,000 smartphones will ship into NZ in the first half of this year, a 1.4 per cent drop as Omicron and supply headwinds remain.

But although the overall market will contract, IDC sees 5G models growing to account for two-thirds of all smartphone sales in the first half – driven in part by the fact 2degrees has now joined in Vodafone and Spark in upgrading its network to 5G (surprisingly, 2degrees did not include iPhone support in its initial 5G launch, but the telco says it is close).

More trouble ahead

March has seen many Chinese cities – including the electronics manufacturing hub of Shenzen – go back into lockdown, which is expected to cause fresh problems in the smartphone market, and many others.

Jarden global equities analyst Jeremy Ward notes the Ukraine invasion also has the potential to play havoc with the smartphone market – as well consumer electronics in general.

Ukraine is the source of 90 per cent of the high-grade neon used in the lasers that etch circuit boards onto silicon.

Although the smartphone market is our focus here, Ward says there’s potential for high-tech manufacturing disruption across the board.

Russia, for example, accounts for around 50 per cent of the world’s palladium – a key component in the manufacture of the catalytic converters that scrub carbon monoxide from a car’s exhaust.

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