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Branded phones rise, grey-handset market falls

Posted: 25 Jul 2013     Print Version  Bookmark and Share

Keywords:Grey handset  IHS  ultra-low cost handset 

The grey market for cell phones will shrink for the second consecutive year in 2013, with worldwide shipments dropping by 12 per cent as both makers and buyers of these handsets turn to branded products, according to HIS.

Grey-market cell phones sales reached their peak in 2011 with a total of 25.04 crore. But beginning last year, the market began to shrink, contracting to 22.15 crore units. The deceleration will continue this year to 19.46 crore units, followed by another steep fall to 17.38 crore units in 2014. The decline will continue at least through 2017, when shipments will dwindle to 13.39 crore units

"The grey market overall is impacted by an accelerated decrease in the sales of lower-end handsets known as feature phones," reported the market analyst. "And while the ultra-low cost handset (ULCH) and smartphone segments of the grey market will continue to grow until 2014, expansion in these segments won't be enough to counteract the drop in the feature phone sector."

Grey-market handsets, as defined by IHS, include counterfeit products like fake iPhones as well as white-box cell phones on which any logo can be readily imprinted. White-box handsets often are illegal despite sporting a logo because they use smuggled chips, lack official certification from China's Ministry of Industry and Information Technology (MIIT), use fake International Mobile Equipment Identity (IMEI) codes and usually are trafficked through Hong Kong to avoid valued-added taxes (VAT) from being imposed on the devices.

"A combination of supply and demand factors is causing demand to decline for grey-market cell phones," said Kevin Wang, director of China research at IHS. "On the demand side, the consumers in emerging markets who used to be the major purchasers of grey-market cell phones increasingly are preferring brand-name handsets. On the supply side, some grey-market handset makers have become branded manufacturers in order to promote their own names in developing countries."

Furthermore, it is becoming harder for grey-handset makers to differentiate their products from a sea of counterfeits and remain profitable. And with the Chinese currency appreciating in value, the grey handset business is no longer as profitable as it once was, said IHS.

Asia-Pacific, including China, is the largest grey-handset market in the world, and the devices have a strong presence also in India, Vietnam, Thailand, Pakistan, Indonesia and the Philippines. The region, however, is not immune to decline, and the Asia-Pacific grey-handset market will contract this year to 10.30 crore units, on its way to 5.30 crore units by 2017.

For more statistics and forecasts, click here.

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