Until a few years ago, mobile users in Latin America renewed their devices roughly every 18 or 24 months. But that has changed: today, they keep their smartphones longer for several reasons, including the perceived lack of innovation in mobiles and the increasingly high price of devices. In this last sense, “the economic crisis and inflation mean that renewing a phone represents a luxury in Latin America,” points out Juan Maistch from Trustonic.
In reality, the phenomenon of late device replacement is not exclusive to Latin America. According to , the global changeover period is growing from six to nine months in all ranges, and it also anticipated that smartphone shipments worldwide would decrease by 4% in 2023.
“Consumers are holding onto their phones longer than expected and moving away from fixed contracts to flexible contracts in the absence of significant new technology,” the analysts at Gartner noted. They added: “In addition, suppliers are passing on inflationary component costs to users, which is further reducing demand”. As a result, Gartner predicted that end-user spending on mobile phones would decline by 3.8% in 2023.
Smartphone shipments to Latin America
According to an international survey, during the fourth quarter of 2022 in all of Latin America, smartphone shipments fell 14% year-on-year, marking the worst Q4 since 2013. This is despite the comparatively slow market in the same period of 2021, in which supply chain problems had been observed.
Taking all of 2022 into account, smartphone shipments in Latin America decreased 5.5% year-on-year, according to the same study. The leading causes were the reduction in consumer demand “due to high inflation, regional political instability and weak regional currencies. Additionally, smartphone prices increased in most local currencies. All this is slowing down the replacement of smartphones,” the analysts highlighted.
Why is the smartphone market falling in LATAM?
The same consultancy recently presented an update of the data for the second quarter of 2023. It found that smartphone shipments fell by 15.6% year-on-year in that period in Latin America. The decline was due to the negative impacts of regional economic crises and weak global shipments. Still, shipments increased 2.4% quarter on quarter compared to Q1 2023, helped by seasonal factors – such as Mother’s and Father’s Day promotions. In addition, it was detected that one in four smartphones shipped to the region is a 5G smartphone.
In this regard, an analyst indicated: “Although most Latin American countries are experiencing a decrease in inflation, consumer confidence has not yet recovered since political turmoil continues to limit the general economy.”
Why is demand for 5G smartphones increasing?
Beyond the impact of price and inflation, other views indicate that the longer delay in equipment replacement could also be related to another factor. A particular segment of customers began to purchase higher-cost phones in search of a better user experience. For example, 5G technology is slowly picking up as many operators fuel its growth, although, in 2022, this type of device only captured 17% of the regional smartphone market.
In 2023, “there is a slight tendency to move to premium equipment in Latin America. Some established brands are pushing to increase the average selling price with 5G models,” the analysts suggest.
For its part, data from the consulting firm Statista anticipates that 2023 shipments of 5G-capable smartphones will reach 134 million units in Latin America. This will represent an increase of 3% compared to 2022 – when they reached 130 million units – and 11% compared to 2021 -120 million.
How do unemployment levels affect the sale of smartphones?
By the end of 2023, Latin America and the Caribbean reached an unemployment level of 6.3% above the expected global average which was 5.3%. This indicator would represent an improvement compared to the 2022 figure, which stood at 7.2%. In any case, the region’s slow recovery of employment levels does not invite us to project very important advances in smartphone sales during the current year.
How many smartphones are stolen each year?
Another factor that also complicates the cell phone market in Latin America is theft in the supply chain. For example, statistics indicate that an average of three trucks a day with different kinds of high-value and easy-to-sell merchandise, including smartphones, are stolen at the transportation stage.
Is there a market for stolen phones?
Mobile device theft in the supply chain is a global problem that costs the telecommunications industry billions annually. Some regulations, such as IMEI blacklists, help stop the flow of trafficked equipment in countries where they are active. However, these lists could be of more effectiveness.
For this reason, the appearance of new technologies designed to discourage criminals from stealing smartphones opens up hope. This technology allows devices to be managed throughout their entire lifecycle, from when they leave the factory until they are recycled.
In addition to theft, other problems affect the global smartphone supply chain. One of them is the risk of interruptions caused by geopolitical issues, while another is derived from disruptive climate events.
Light on the horizon
Beyond these drawbacks, there is a light on the horizon.
A report from GFK indicated that the smartphone segment registered a drop in revenue of almost 10% in 2022 globally. Still, at the same time, it forecast a more robust 2023. GFK stated that “although replacement cycles are extending, smartphone purchases made at the height of the pandemic in 2020 and 2021 are entering the window of the expected renewal cycle this year”.
The delay in the renewal of cell phones represents an inconvenience for manufacturers and sellers of devices.
But there are ways to avoid this.
One possible action is implementing Trustonic’s device financing technology so that users find it more bearable to renew their cell phones in the region where it is difficult to access credit. This proposal makes purchasing much more accessible and drives sales for mobile operators and retailers without financial risk, allowing them to say yes to more customers.
