BMI View: An uptick in consumption is expected to drive the Mexican economy over 2015, which will see it become one of the better performers in Latin America. This has spillover effects for the Consumer Electronics industry, which stands to benefit from higher levels of spending. Computer sales will drive the market over the next five years, as adoption remains less than 50% across the country. Particular a reas of opportunity include tablet and hybrid notebooks, smartphones and digital TV set upgrades. The focus of a wider range of international vendors will give consumers wider choice and put downward pressure on device prices, helping to deepen the market, particularly as currency performance strengthens. While Latin American currencies are expected to depreciate against the US dollar over 2015, Mexico will largely be spared from this trend, bolstering consumer purchasing power.
Headline Expenditure Projections
Computer hardware sales: USD8.2bn in 2014 to USD8.4bn in 2015, an increase of 3.0%. Tablet sales will continue to outperform, but reports in H214 also indicate strong momentum in the hybrid notebook market.
AV sales: USD2.6bn in 2014 to USD2.7bn in 2015, an increase of 1.9%. Demand growth expected to slow substantially from 2014 after TV set upgrade demand was brought forward ahead of the FIFA World Cup tournament in Brazil.
Handset sales: USD5.7bn in 2014 to USD5.9bn in 2015, an increase of 4.1%. The handset market is again expected to outperform in 2015, but growth will continue to move to a slower growth trajectory as a combination of saturation and price erosion limit value growth.
Key Trends And Developments
The first wave of smartphone growth in Mexico was spearheaded by global leaders such as Apple and Samsung Electronics. These vendors reaped large financial rewards, and BMI calculates from browsing traffic data that they remained the largest vendors by smartphone installed base in Mexico at the end of 2014.However, there is a major shift in competitive dynamics underway across emerging markets as competition from Chinese vendors intensifies. They have been expanding internationally with increased purpose after achieving scale (and therefore favourable cost structures) domestically. Motorola (acquired by Lenovo in 2014) was the outperforming vendor in 2014, while Alcatel has also made great strides in recent years. Looking ahead we also expect competition to come from Huawei, ZTE and potentially Xiaomi. We expect fierce competition on price and specifications will result in price erosion and narrower margins as these newer vendors focus on market share maximisation, at least in the short term.
BMI expects growth momentum for PCs and related hardware will be maintained into 2015, particularly SMEs and home users. In October 2014 global PC chipset market leader Intel highlighted the strong growth in PC sales in Mexico as standing out, along with Colombia, among Latin American markets. There are also important trends across device categories in the retail hardware market. For instance, Intel reported that tablets running its processors had grabbed 20% market share in Mexico (and Argentina) in 2014, fighting off competition from low-cost APAC rivals through differentiation. However, the outperforming device category was the hybrid notebook, which Intel reported saw strong growth, with Mexico a leading market for the adoption of such devices globally in 2014. The potential uptick in hybrid notebook sales is a trend we identified in 2013 based on IT market and economic fundamentals.