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The UAE is a leading global consumer electronics market, not merely on account of its strong growing domestic demand, but also because of its role as a trading hub serving the expanding Saudi Arabia and Gulf markets, as well as the Commonwealth of Independent States (CIS) and East Africa. Located at the crossroads of Asia and the Middle East, the electronics distributors in the emirates serve a potential market of almost two billion people.
According to Business Monitor International (BMI), there has been a subdued growth outlook for the UAE's consumer electronics market over the course of the forecast period 2016-2020 due to uncertain economic outlook and diminished organic growth potential.
The value of consumer electronics devices sales is expected to remain stagnant at around $4.57 billion in 2020, with a forecast compound annual growth rate (CAGR) of zero per cent from 2016 to 2020. This is attributed to low oil prices, high degree of electronics saturation and regional macroeconomic uncertainty.
After spending on devices contracted by 0.4 per cent in 2015 in the UAE, BMI forecasts a return to growth in 2016, with a rate of 0.3 per cent to $4.58 billion forecast. Economic uncertainty exacerbated existing negative product cycles in 2015 and resulted in a significant contraction of the IT and AV segments that dragged down the market as a whole and countered continued growth in handset spending.
Market drivers
The UAE economy will continue to be supportive of a lucrative devices market under its core scenario. According to BMI, the UAE's average annual real GDP growth rate forecast for 2016-2020 is 3.2 per cent in Q12016, while the real private final consumption will grow at an average of 4.9 per cent over 2016-2020.
The household income analysis provides additional details to the headline economic forecast, and illustrates the fact the UAE will continue to be a lucrative market in per capita terms, despite limited growth prospects.
BMI's forecast for 2016 shows the UAE's status as one of the highest income markets in the region, with 35 per cent of households with incomes above $50,000, and a further 33 per cent of households with incomes of between $25,000 and $50,000, which together form the basis of the lucrative consumer electronics market.
The analysis of medium-term household income growth trends envisages a gradual migration of UAE households to higher income bands. Based on this income growth analysis, premium vendors such as Apple are expected to outperform in the UAE in 2016-2020. There is also potential for leading Microsoft partner vendors to capitalise on grow high-value hybrid notebook revenues as consumers look beyond the Apple-defined tablet-notebook divide, as well as Ultra-HD TV set vendors.
BMI noted a strong correlation between high visitor numbers and new residency permits in the UAE and sustained sales growth of ICT products and services. Leading retailers are already responding to the opportunity created by rising visitor numbers to the UAE by announcing plans to open new stores over the next few years.
Domestic market outlook
The sophisticated local market has grown strongly in recent years. The UAE has one of the highest GDPs per capita in the world due to its oil wealth. The consumer electronics market is also boosted by an excellent telecommunications and information technology infrastructure. The large expatriate community also drives market development and helps swell a growing population.
In the past few years, the local market has steadily become more important in relation to the re-export trade. The UAE is a favourite testing ground for multinational consumer electronics vendors for new product launches and marketing initiatives. Moreover, contrary to some stereotypes, Arab women are highly techliterate, and there is a high usage of social networking media. Women are an important segment for vendors and marketers.
UAE: An ideal re-export hub
Low import duties have helped make the UAE, particularly Dubai, an electronics trading hub for the Middle East and other regions, as well as a window for the latest consumer electronics goods.
Industry Risk Reward Index
The extension of BMI's forecast period to 2020 in the Q2 2016 update has a positive impact on the Consumer Electronics Risk Reward Index (RRI) scores for the Middle East and Africa (MEA), as the economic outlook is brighter later in the forecast period. The small q-o-q increase in the regional RRI did not however offset the y-o-y decline due to the depressed global oil and commodities markets, with price declines hitting MEA markets hard through depreciation against the US dollar and weaker economic confidence. The impact has been unequal across the region, and as a result there were several positional changes in the Q2 2016 update.
Boost in ICT partnerships
In October 2015 Taiwan announced its intention to further boost ties with the UAE by launching international Taiwanese ICT brands in the country. Taiwan's Computer Association claims that exports of electronics and ICT Taiwanese products to the UAE increased 14.6 per cent y-o-y to Dh415 billion ($112.9 billion) in 2014. The association noted that the successful rise in the exports of devices like smartphones and tablets from Taiwan is the main facet of the strengthening growth between the two countries.
Diversification and foreign exchange
The UAE and Hungary have attempted to explore mutual investment opportunities in each other's countries. Dubai and Hungary are considering collaboration on mutual investments that support electronics manufacturing, technology and renewable energy.
Initiative mobile security
In April 2015, the UAE's Telecommunications Regulatory Authority (TRA) launched a countrywide initiative, known as Secure your Mobile, to protect mobile phones in the country. As part of the initiative, the regulator seeks to reduce the number of lost or stolen devices by allowing owners to block their devices across the country as soon as they are reported.
Strengths
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