The Brazilian market presents remarkable opportunities for the mobile device industry. In 2014 alone, 54,5 million smartphones were sold in the country which is currently the fourth largest market for these products in the world. As the sheer volume of sales continues to rise, the installation of local manufacturing plants should continue to be a trend for Brazil, with some of the largest producers of these devices already in place to serve this growing and avid consumer base.
Aside from the market size, one of the main reasons for the installation of local manufacturing plants of mobile devices are the substantial incentives provided by the country’s government to incentivize the consumption of technology products manufactured in Brazilian territory. A national policy known as “Lei do Bem”, originally intended to promote research and development in the country and later updated to lower the cost of mainstream technology products, was one of the major causes for the explosive growth in sales of mobile devices during the last three years.
As of today, some of the best selling smartphones and tablets in Brazil have retail prices comparable to the ones offered in the North-American and European markets due to the incentives provided for local manufacturing. Motorola’s Moto G smartphone can easily be found at Brazilian retailers with a price tag of USD 220, or only 20% more than its retail price in the United States. This level of affordability can be considered unusual in a country where import taxes combined with logistics costs can lead technology products to cost more than double the price offered in other global markets.
Besides from installing proprietary manufacturing facilities, the OEM and ODM business models have been widely adopted by mobile device brands to benefit from the taxation benefits and consumer base of Brazil. The country has also turned into one of the main poles for exports of these products to other markets in Latin America, as local manufacturing allows for these devices to be shipped at reduced prices to countries like Argentina, Chile and Uruguay.
Manufacturing plants of global mobile device brands
Most of the leading brands of mobile devices in Brazil have proprietary manufacturing plants operating in the country. This is the case for Samsung, which operates a facility in the city of Campinas, responsible for the production of devices that include smartphones, tablets and notebooks. Manufacturer LG adopts a similar model, operating a plant in the city of Taubaté, that is responsible for the production of smartphones, tablets, notebooks and TV sets.
Both these companies, Samsung and LG, manufacture mobile devices for all consumer segments in Brazil, from entry-level products to flagship smartphones and tablets, and are respectively the first and third brands with the largest market share in the country. The company in second spot, Motorola, achieved this position following the massive success of its intermediate-level Moto G, the highest selling smartphone in Brazil during 2014. Contrary to its main competitors, Motorola outsources the manufacturing of their products to EMS company Flextronics, which operates a facility in the city of Jaguariúna.
Recent reports suggest that Android devices have a market share of over 90% for smartphones in Brazil, while the remaining share are Apple’s iOS and Microsoft’s Windows operating systems, brands that serve two distinct audiences in the country. Apple’s iPhone line of smartphones, manufactured in a facility owned and operated by Foxconn in the city of Jundiaí, caters to more affluent consumers. Microsoft’s Lumia line, on the other hand, recently gained a lot of traction with budget-conscious consumers, and has its production based in a facility located in the industrial pole and free-trade zone of Manaus.
Xiaomi chooses Brazil for first venture outside Asia
Chinese smartphone maker Xiaomi Inc. announced its first foray outside Asia on Tuesday with the launch of its latest device, the Redmi 2, in Brazil. The decision to both manufacture and sell the phone in Brazil underscores the challenges companies face in entering Brazil’s booming electronics market. Smartphone sales have doubled since 2012, to an estimated 1.45 million units this year, according to research firm IDC. But the Brazilian government heavily taxes electronics imports, while giving breaks to manufacturers who assemble their products and source components locally. That forces companies such as Xiaomi to use factories in Brazil, where labor and parts are more expensive, if they want to tap the local market.
For Beijing-based Xiaomi, the Redmi 2 launch marks the first time the company will sell a device outside Asia or assemble one outside of China. The company will be importing some of its parts and sourcing others locally, a strategy that is in line with other electronics manufacturers that have entered the market, said Hugo Barra, Xiaomi’s global vice president.
Local brands and tablet manufacturers
In recent years, a number of Brazilian brands have made significant efforts to expand their share in the national market for mobile devices, offering mostly entry-level to intermediate products. This is a strategy that functioned well for the segment of tablets, as this market in the country is mostly dominated by local brands who offer entry-level products priced below USD 150.
One of the most prominent national mobile device manufacturers, Positivo, launched its Octa line of smartphones to compete in the profitable segment of intermediate devices and has its production centered in the city of Curitiba. A similar strategy was adopted by local brand Multilaser, which produces budget-focused devices in the city of Extrema. Market researcher IDC foresees that the Brazilian market for smartphones will expand 16% in 2015 and both local and foreign brands should compete to gain the attention of the country`s public in the near future.