Iran's electronics and mobile handset sales over the past decade have begun to slow down at the luxury end of the market.
However, future growth will be for first-time buyers of smartphones and flat-screen televisions, along with the gradual replacement of older electronics. That is according to Business Monitor International's latest report on the status of the Iranian electronics sector.
The British-based market monitoring service predicts the Iranian consumer electronic market to expand at an annual compound growth rate of 6.5 percent from this year to 2019. It expects continuing growth in the sales of mobile phone handsets, primarily the Google Android variety. The market monitor also predicts the country will go beyond its 110 percent saturation rate currently and head towards 164 percent by 2019.
Compared with the UK's 71 percent saturation rate, the predicted figure suggests that Iranian homes will have multiple electronic devices in use at the same time. Unlike markets like the United Kingdom, Iranian users tend to hold on to their devices for longer periods as they buy them outright, thus slowing down penetration.
The group reports that a potential lifting of sanctions from June 30 will likely add a huge boost to the market. BMI predicts that easier access to US and other international brands will erode the dominance of Samsung and LG in the consumer electronic market.
It adds that with the possible shrinking market share of the South Korean giants, Apple, America's largest electronics maker could finally enter the Iranian market officially, thus reducing the cost of Apple handsets and computers for Iranian users.
Enterprise Take-up
The report adds that up until recently, due to sanctions, Iran's corporate and enterprise sectors have had little impact on sales of electronics. However, with the continuing goodwill regarding nuclear negotiations, the group expects that contracts could be signed with Iran's larger companies, thus increasing the use of foreign brands.
The report adds exporting to Iran remains a huge logistical challenge while key trade routes are closed and restrictions apply to the financial sector and many vendors have been unwilling to invest without the greater certainty provided by a wider sanctions relief agreement. US vendors are not the only ones waiting for greater stability; even leading Chinese PC vendor Lenovo stated in early 2014 that it would wait for an agreement between western nations and Iran before formally expanding into the country.
The group through its internal algorithms forecasts Iran's economic growth to pick up from a 0.5 percent contraction in 2014 to 2.9 percent growth in 2015 (March 2015-16 fiscal year)
The group predicts that in the longer term, Iran's economy has many positive traits that provide consumer electronic companies with many opportunities. It adds that a steadily growing population will support private consumption growth, while Iran's penchant for electronics will remain strong with the generally youthful population.
Mobile Sales
Like similar previous reports, BMI suggests the sale of mobile phones is hampered by the "huge size of the 'grey' market" particularly in mobile phone handsets. The increased presence of China in sales continues apace, however Chinese saturation of the electronic market, or "Eastoxification" has, so far been avoided by Iranian consumers’ interest in premium brands from South Korea and the US.
Mobile phone sales are estimated by BMI to account for about 21 percent of total spending in 2014, but expect this to grow as foreign companies start selling directly and not through the 'grey' market. It also notes that since the end of RighTel's exclusive period of 3G sales, fast mobile Internet connections have skyrocketed to as much as eight million new connections this year.
Computer Sales
The report suggests Iran's PC market will attain sales of $5.475 billion in 2015, rising to $7.1 billion by 2019. The UK group has upgraded its outlook for the Iranian market as it appears that the sanctions that have been crippling Iran's economy for years could be lifted soon. Despite 'limited' broadband access, "we believe the market has strong growth potential as the government rolls out its own Internet network and household computer penetration increases."
As for 2014, it suggest that laptop computers will drive the market and tablets will be increasingly important along with the expansion of mobile data networks will drive the demand for dongles.
Moreover, the report notes that computer sales will continue to be driven by Asian companies like Sony, LG and Samsung rather than American counterparts. It, however, adds that after Apple Co. in 2013 removed the ban on sales to Iran, the US company is continuing to look at a suitable entry point, post agreement, to enter the country.
