The great expectation of this year that is ending was the landing of the Chinese Xiaomi in Argentina. It is the third of the third largest mobile phone maker in the world, whose arrival threatened to break the leadership of Mirgor (Samsung) and Newsan (Motorola). The lack of dollars complicated the plans. “Today we have no supplies. We’ll fix it, but we don’t have a date”complain in Solnik, the allied company of the brand.
The strengthening of the import squeeze, the lack of dollars, the increase in credit and the consumption crisis have had a full impact on the technology industry, which is preparing for a 2023 with equal or worse difficulties. Companies in the sector beg to repeat the very mediocre data of the last 12 months. Most expect sales to drop between 10 and 15% per unit.
“The constraint that requires us to finance the purchase of production factors for 180 days is a very difficult condition and increases the cost of the product by 20%. The most expensive offer beats the demand. The market expects a 15% contraction in sales of the white line (refrigerators, washing machines and cookers) and up to 25% in televisions”, he summarized to clarion Daniel Rosenfeld, Chief Executive Officer of BGH. And all despite official consumer stimuli, such as Now 12 and the failed Now 30.
The data on production and consumption of Afarte (the chamber that represents the producers of Tierra del Fuego) are revealing. Nearly 3.3 million TVs were assembled for the World Cup in 2022 and only 2,540,000 were soldwell below projections. The same happened with cell phones (10,180,000 against 8,404,000) and air conditioners (1,237,000 against almost 956,000).
“There have been many challenges this year. Those that the pandemic has left us, such as the increase in transport costs and the lack of microchips, to which are added the local difficulties in importing supplies”, summarizes Afarte. Production figures deserve clarification. On the market they assure that the volume was overstated due to the “advancement” of imports in the first half, classified asor a “Festival” by Cristina Kirchner
The truth is, initial sales projections have not been met. “Starting in June it was complicated by the 180-day payment delay. But this year we finished with the same figure as 2020 and 2021, ie with 2 million fewer units than expected”, explains the CEO of the local branch of Motorola, Germán Greco.
Due to the lack of dollars, in the middle of the year the government asked importers to finance their purchases from their suppliers for 6 months at their own expense. This barrier, according to some, favors larger companies (and associated brands), with greater volumes and support for obtaining long-term credit. “95% of the mobile phone market is concentrated in two brands. The one who solves the input problem wins”, they interpret in Solnik.
Greco, of Motorola, predicts more problems in supply than demand by 2023. “Volume has been reduced and model renewal is slower. People extend the life of the product and that requires an adjustment in planning”, adds the executive.
According to what they say, the only product that comes off is air conditioners. “Demand is 30% higher than expected and record sales were recorded in Novembersays Rosenfeld. Just like with clothes or some foods, summer is the peak time for air conditioners and refrigerators. These are products that are mostly produced in the country, in the first case in Tierra del Fuego and in the second case in different parts of the country.
Likewise, production depends on imported components. “We are at the height of the refrigerator season, but there is a shortage of stocks”, graphically Carlos Cornejo, of Fedehogar, the body that brings together almost all the chambers of the sector. Cornejo says 2022, on average, “wasn’t a good year, but it wasn’t terribly bad either” and that “repeating the figures in 2023 would be a good scenario.”
Eduardo Echevarría, an analyst at the specialized consulting firm GfK, claims similar things. “A contraction in sales is the most feasible, but everything will depend on the evolution of the economy.” While not ruling out a favorable trend reversal, he stresses that there is no reason to make optimistic projections.
“It is inevitable. In an economy without growth, with wages below inflation, rising rates and the dollar are all negative variables for consumption”, describes the expert. In the household appliances sector, the dispute is concentrated, among others, on Electrolux, the Mexican Mabe (formerly Alladio), Visuar, Newsan and Whirlpool.
This year, some have announced plans to produce more with an eye to the region. Agustín del Castillo, Whirlpool’s communications manager, explained that they plan to export 200,000 washing machines to Brazil “to have a trade balance of 50 million dollars, which is currently in deficit,” he estimated.
As for next year’s elections, the industry is under no illusions. “Consumption incentive measures are limited,” cautions Cornejo. There was already concrete evidence of this. Announced with great fanfare, the Government launched Now 30 2 months ago to finance the purchase of technological products in 30 fixed installments, but the program barely moved the ammeter.
The program went into effect on October 22. In the chains and specialized shops they agree on the fact that there have been many refusals due to the low odds on paper and only 7% of those who have tried to buy have managed to complete the operation. Faced with this, the government decided not to extend the measure for another month (as planned) due to the obvious lack of results.
The import trap is a puzzle for notebooks, especially for international brands such as Dell, HP and Lenovo, the leaders. “In terms of orders we are at record levels. The big problem is the lack of products,” one senior industry executive was honest. Just over 1.2 million laptops entered the country between January and November, which represents a 17% drop compared to the same period in 2021.
A more concentrated market
The blockade on the dollar and imports deepen market concentration. This is indicated by a report drawn up exclusively for clarion by the consultancy firm MRT (Market, Research & Technology), which measures the entry of goods into the local market. An example: only two brands (Samsung and Motorola) they concentrate 88% of the mobile phones currently offered.
Between January and November, almost 9.7 million mobile phones were shipped, this is 3.6% more than in the same period of the previous year. Of this total, 54% comes from Samsung and 33.5% from Motorola. The development of Chinese Xiaomi in the country was expected with great expectation. It is the world’s third-largest mobile phone maker, but import barriers have complicated the brand’s plans.
“The coming year has many unknowns, especially with regard to the flow of payments,” explains Germán Greco, CEO of Motorola. The top executive alludes to the obligation imposed by the government on importers to finance the purchase of production factors at their own expense for 180 days. It wasn’t just supply issues. According to AFARTE, in 2022, 10,180,000 mobile phones were assembled and 8,404,000 sold.
Something similar happened with televisions, a flagship product in the years of the World Cup. 3.3 million units were produced and 2,540,000 sold, much less than initially expected. In the category, indicates the MRT report, 3 brands prevail. Philips (of the Chinese group TP Vision), with an 18.5% stake, surpasses Samsung (16%) and Noblex (14.4%), the flagship brand of the Newsan group. Further behind are TCL (6.7%) and RCA (5.9%). Followed by BGH (6.4%), Hitachi (5.2%) and LG (5%).
As for air conditioners, they entered the market from January to November (mainly from Tierra del Fuego). just over 1.2 million units, which represents a decrease of 9.7% compared to the same period of the previous year. The two leading brands in the category are Philco (23.3% of the total) and BGH (13.5%). The former belongs to the Newsan group and the latter to the Fuegian group of the same name.
The last segment analyzed by the consulting firm MRT is that of notebooks. In the first 11 months of the year, 1.25 million units were placed on the market, almost 17% less than in the same period of the previous year. Of that total, 466,000 were assembled in Argentina and the remaining 784,000 belong to international brands such as Lenovo, Dell and HP.
In companies in the sector, they ensure that the main problem is the barriers to imports, because “in terms of orders we are at record levels”said a senior executive of a brand that caters to the corporate segment. “For a company, technology is not optional. If they cut the budget on this, they’re taking a huge risk,” he concluded.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.