The outbreak of the war in Ukraine made many western tech companies to leave Russia, including smartphone makers like Apple, Samsung and Google. At first, many people claimed that the country would end up suffering by paying the consequences of these departures.
But the reality is that life goes on and has not suffered a technological shortage in 2022, at least in terms of mobile it means. Smartphones have continued to function and sell relatively normally in 2022.
In fact, some technology brands, including Chinese companies such as Xiaomi, realme and Transsion –the first 2 are well known to Spanish users–, they have taken advantage of the Russian market as an ally to regulate their international inventory.
These 3 firms practically monopolize the market for new terminals, according to data that the analyst Canalys has shared with Business Insider Spain. Xiaomi was the leader in Russia in 2022, with 41% Of units; realme follows, with a 21% share; the also Chinese Transsion, quite unknown outside of Africa, is third and achieves 17%.
But, how has the Russian mobile market evolved in the midst of the war in Ukraine during 2022 and what are the interests that exist right now?
Russia, an escape valve for brands like Xiaomi and realme to the drop in international sales
The international smartphone market has had a complex year in 2022, afflicted by a notable drop in sales of 12%which has been especially hard in the fourth quarter (-18%), according to Canalys.
Russia is no exception to these falls. The legal Russian smartphone market has fallen by 36% on average throughout 2022 –went from 37.1 million units to 23.7 million–, as reflected in the data from the same analyst.
These drops are even higher than the international average due to the departure of Western brands.
So how do you explain that Chinese brands not only do not fall but have skyrocketed in 2022?
Xiaomi has had a significant increase of 45% in the third quarter of 2022although it has fallen by 17% in the calculation of the total year, in line with its international data.
Business Insider Spain has asked Xiaomi for statements, which has preferred not to participate in this report.
In the case of realme and Transsion, the second and third brands in Russia are growing impressively.
Realme sold 184% more in a truly extraordinary third quarter. In the entire year 2022, its sales have grown by 59%something that contrasts with its drop in international sales in the last year.
Russia’s invasion of Ukraine is slowing the takeoff of one of Russia’s biggest tech giants
For his part, Transsion grew by 1,877% and 2,102% in the third and fourth quarters –this brand already operated before in Russia with its brand low cost Tecno, with which it came to lead the African market a few years ago. In all of 2022, it has grown a 833% by volume.
It is not common to see these growths in the technology sector, with the exception of brands that reach a new market – it is not the case of realme or Transsion.
Dumping inventory: what it is and why it may be happening in Russia
Both companies may have followed the same strategy to achieve these outrageous growth figures: a practice known as dumping of inventory. Actually it is explained in a very simple way, since as a result of the drop in global sales they have a lot left over stockput these units on the Russian market.
“In the third quarter, the market started to pick up again, although in large part this was due to some Chinese suppliers making dumping of inventory in a short-supplied market. Realme and Transsion are surely the brands that have taken advantage of it the most“, as Runar Bjørhovde, an analyst at Canalys, assures.
Experts agree that this practice is not only applied in Russia, but that it is quite common, especially in markets of less developed countries and with less technological offer.
“It is a common practice of many brands, which allocate outdated inventories to less mature or less demanding markets. Being products that are already in decline, being able to sell them even at lower prices will be very beneficial for these brands“, says Ángel Barbero, a professor at EAE Business School.
Other experts agree that the rise of these brands is explained by the complex economic situation that the Russian population is going through, which makes them look for products similar to those that dominate in developing countries.
According to Christophe Canler, a professor at Carlemany University, Chinese brands have succeeded in offering “cheap products designed for emerging countries” to a population that has seen its standard of living fall in 2022 despite the “relative strength of the ruble, and bypassing possible embargoes”.
In this sense, it has really assured me Business Insider Spain that the brand has already had “amazing growth” in other markets in which it has entered its 5 years of young history. And he ensures that his current inventory is not saturated but “maintaining a virtuous cycle.”
“Realme is on its way to becoming a healthier and more sustainable company, which is why it has adhered to a more mature and complete business model“, says the company statement.
In addition to regulating inventory, the commitment of these brands to Russia is still a way of growing in a more. Realme was already present in Russia for several years, and Transsion also with its Infinix, iTel and Tecno brands.
They are not the only Chinese brands selling in Russia. Alive it was fifth in all of 2022 with a 3% share. TCL it was fifth in the third quarter with 1%. OPPO it was fourth in the last quarter, with 5%. All of them grow but in a much more modest way.
In the first 9 months of 2022 they were also delivered to Russia more than 500,000 Huawei smartphonesthe highest figure for the brand since 2019.
“Not only has it been the strategy of these brands, it has also been driven by the need of Russian retailers and consumerswhich started looking to China to fill the gap after financial sanctions and airspace bans hit supply chains,” said Marc Bara, a professor at OBS Business School.
It is not an illegal practice nor does it pose risks to your business, according to experts
By way of disclaimerit is important to clarify that Chinese mobile phone companies they are not doing anything illegal by continuing to sell in Russia.
Companies like Samsung and Apple that have taken this step have done so on their own and for their own corporate values. And although brands like Qualcomm and Intel, with technologies present in their products, have paused their shipments to Russia, that is not a technological embargo.
“For now, the US State Department is not imposing bans on Chinese companies that use material with non-lethal US technology destined for Russia,” says Luis Ríos, a professor at ESIC, which separates smartphones from technology for military purposes. .
“Since this is non-lethal technology, I do not foresee any risk of sanctions for these brandspredicts Rios.
In addition, the probability that there are risks due to these practices is low today because they are mostly low- and medium-range smartphones. Although this could change if the Russians start buying the most cutting-edge mobiles.
“In the short term and in medium or low-end segments, Chinese brands will not have problems, because they do not carry technologies considered sensitive by Western suppliers. On the high end, yeah“, asserts Christophe Canler.
Despite this, the logistics of handing over to a country at war are not the same as under normal conditions, and have their particularities.
“Chinese manufacturers have already established ways to import their products trying to avoid sanctions: deliveries to Russia can be made through distributorswho buy from intermediaries in China, and not directly from the manufacturer”, points out Marc Bara.
The gray market of parallel imports creates a paradox: Apple continues to be the leader and Russians can buy iPhones legally
Before, it specified that Canalys’ figures corresponded to legal phone sales in Russia. But the situation is a little more complex than that.
With the war, in addition to the black market of citizens buying products in other countries, a gray market has proliferated that is allowing Russians to get hold of the latest Apple and Samsung smartphones, known as parallel imports.
This system, which has been approved by the Kremlin since May, consists of authorizing retailers to import items without having the manufacturer’s permission. Until August 2022, this system had collected some 6.5 billion dollars, according to official Russian sources assured interface.
For example, in the case of the iPhone 14, this Apple device has been put up for sale in Russia for a price of 84,990 rubles, or 1,110 euros to changeonly slightly above the price it has in Spain, where it costs 1,009 euros.
Statcounter’s statistics can be an ally to better understand the puzzle, since they reflect the market share by end users through web page analytics, not just official sales.
This source shows that Apple was the most used smartphone brand by Russians in December, with more than a 27% sharedespite not officially selling there for months.
They are followed by Xiaomi, second with about 25%, and Samsung, third with 22%. Huawei continues to appear on the list, with a 9.6% share, and despite its growth in sales, it is actually fifth with close to 5% of the market.
He gray market does not exist only in Russiasince worldwide sales of products take place behind the manufacturer’s back, but the context has meant that it represents an important part of the market with respect to official sales.
Experts agree: brands like Apple and Samsung can hardly do anything to control these parallel imports, since it is beyond their control and responsibility.
Luis Ríos, from ESIC, highlights the “negative impact on the consumer, who could purchase a product exempt from warranty coverage and official after-sales service” if they buy a smartphone on the gray market and not through official channels.
