Mirror Image: CEE and Latin America Show Lots of Similarities in Device Markets

18 Sep

Mirror Image: CEE and Latin America Show Lots of Similarities in Device Markets

SIMON BAKER (Program Director)

Latin and Slav, chalk and cheese? Quite the opposite actually when it comes to CEE and Latin America in phones, PCs and tablets — they’re more like peas in a pod.

This blog shows how the two regions, though far apart geographically, are close to each other in many ways in smartphones, PCs and tablets, as distinct middle markets with sometimes hesitant, sometimes troubled growth trajectories.

 

Look at the first two charts here: they show product curves that are pretty much interchangeable. They track the installed base through to 2023 for desktop and laptop PCs, tablets and smartphones in Central and Eastern Europe and Latin America, according to IDC tracker data. These two regions are remarkably similar as markets in these technologies.

Some definitions here. In the IDC grouping of Central and Eastern Europe, the area stretches way out East, and includes all the former Soviet Union, and so Central Asia and the “stans”. Together, these countries account for just over 400 million people.

South America has a similar population (425 million), plus a further 225 million if Mexico, Central America and the Caribbean are added (which they are in the figures quoted here).

Together the two regions account for about 15% of the global population.

Each Next to a Great Power, Dominated by One Big Market

Each region sits in the gravitational pull of a great power — the European Union for CEE and the US for Latin America. Of course part of Central Europe sits in the EU, though only about 25% of the population is in the EU in the IDC CEE grouping.

Both are dominated by one country, Russia in the case of CEE and Brazil in the case of South America, with the two often being compared in the BRICs grouping.

GDP per capita is not that far off.

Each Had an Opening in the ’90s, Followed by Some Tougher Times

Both groupings went through an economic transformation around 20 years ago. If that in CEE was much more comprehensive and dramatic with the collapse of Communism in the region, South America also saw a significant move towards integration in the world economy, as well as a move towards more democracy, in the same timeframe. Though the opening up of the Communist economies of the Eastern bloc was more dramatic, Latin America has also seen many of its notoriously closed markets loosened in the past two decades.

Brazil has seen its economy falter in the past couple of years. Meanwhile, the ripples of the shockwave of the oil price crash at the end of 2014 spread across much of CEE beyond just Russia (its effect can be seen in the ASP graphs for smartphones and PCs below, where CEE dipped against Latin America in both product categories; in phones the two are pretty much back on track now, while in PCs CEE still lags behind). Both mega-states are now seeing some recovery. Current economic growth rates are marginal in both regions.

How far do the similarities in device markets go?

The operating system share is similar across the two regions in both PCs and smartphones.

Brand shares are quite similar in the mature market for PCs, with HP and Lenovo strong in both regions, while Dell, unsurprisingly for a US company, is stronger in Latin America.

Looking more widely into device categories, into wearables, CEE is now quite far ahead of Latin America. The markets were fairly similar in their early stages, but Xiaomi’s push in watches has meant the CEE market is now growing quickly. Xiaomi has a more limited presence in Latin America, though it is now starting operations in most of the big markets there.

There are close similarities in the proportion of the value of these device markets that are accounted for by big and medium-sized businesses, though smaller businesses are more significant purchasers in Latin America. Relatively, very few phones are sold to companies in Latin America, and the same is true to a slightly lesser extent in CEE.

From Close Parallels to Strong Contrasts

But then the parallels break down — and in many cases when they do, they break down completely. Brand shares in phones don’t follow a similar pattern at all. The telco channel is much more important in phone sales in Latin America, where telcos have a massive presence in marketing and in bundling additional services such as Netflix subscriptions; for now, at least, CEE does not compare here. Consumers also spend considerably more on telco services in Latin America.

Are these two regions somewhat separate from other parts of the world? As large and contiguous groupings, yes. The other middling ground in the world economy is taken mainly by emerging countries in Asia. They differ principally from CEE and Latin America in that they show more zest in their transitions. If we take for instance a grouping of Indonesia/Malaysia/Taiwan/Thailand, which together have a population similar to CEE and quite similar GDP per capita, they show a more rapid transition to 4G, for instance.

So the IDC CEE and Latin America grouping is fairly distinct.

The Future Looks Similar Too

The similarities are likely to continue.

The PC markets will track each other closely, according to IDC forecasts, but the Latin American tablet market will remain larger than that in CEE.

Meanwhile, the latest mobile data projections from Ericsson show that in consumption too the regions are very close; Ericsson is projecting a sixfold increase in data consumption for both regions, with the per device total remaining very similar — CEE at 4.5GB per month in 2018, rising to 19GB in 2024, and Latin America at 3.1GB now and rising to 18GB.

IDC’s 5G smartphone forecasts show fairly close parallels, with the Latin American market starting off a bit more quickly than that in CEE, but the latter catching up; both are expected to have shipments of around 4 million 5G smartphones in 2022, before CEE pulls ahead.

With its main economy dependent on oil, CEE will always remain a more difficult to predict environment than Latin America, but though they are far away geographically from each other, CEE and Latin America still have a lot in common as device markets.

They are middling sorts of markets, which look as if they are destined to be stuck there in the centre just as they have been in the past few years.

 

If you want to learn more about this topic or have any questions, please contact Simon Baker or head over to https://uk.idc.com and drop your details in the form on the top right.

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