Headwinds in Europe and Asia blow cold in Latin America

Even at the start of the year, most analysts and industry executives were optimistic about 2022. But this optimism faded due to events that occurred in the first few months of the year. Let’s look at these events and consider the impact they’ll have on the technology industry in Latin America.

Russia’s invasion of Ukraine

Even before Russia began its invasion of Ukraine, there were warning voices about the possibility of some rare metals becoming scarce and affecting chip production in the short term. Manufacturers have been able to cope so far thanks to excellent stock control and a wide network of suppliers of raw materials, but an extended conflict could put them in a more difficult position. What has had an impact already is the huge rise in the price of oil, which has doubled from its lowest level in 2021, and gas, which has doubled even compared with its lowest level in 2022. This has increased inflation, directly affecting the purchasing power of consumers around the world.

COVID-19’s resurgence in China

China’s struggle with COVID-19 has been the cause of the biggest headaches for the technology industry. On 30 March, Shanghai, China’s largest city in terms of GDP and population, went into lockdown, causing total paralysis. Other cities and provinces in China have also felt the impact, affecting the production and transport of goods and raw materials, with movement restrictions that vary by location, creating additional complexity. In Shanghai, green corridors have been established and special permits have been granted to companies so they can continue to manufacture, assemble and transport technology products. This situation is likely to last beyond the end of May and its effect on the supply chain is hard to quantify. It is even possible that restrictions will continue for the whole of 2022.

The impact in Latin America

How Latin America is affected regarding the supply of technology products will depend on several factors. Firstly, we need to see how component and smartphone manufacturers, in cooperation with local governments, adapt their operations to current shortages and restrictions, which are not likely to ease in the short term. Secondly, we need to see how manufacturers prioritize the different countries in Latin America. The region’s importance has been growing and it is now considered a high priority for manufacturers, especially Lenovo (Motorola) and Xiaomi, which have grown rapidly and together accounted for 35% of unit shipments in the fourth quarter of 2021. At the same time, Samsung clearly still dominates in Latin America, with a 40% share of shipments in the same quarter.

Smartphone shipments have already fallen by 11% in the first quarter of 2022 (see Canalys press release), though the problems in China are not reflected in this fall. We will keep you up to date with data, news and predictions relevant to Latin America through this blog, with the help of our global network of analysts and offices.