In a surprising bit of news, Egypt is producing smartphones, selling them locally, in what looks like a price war with any producer that dares to compete.

Silicon Industries Corporation (SICO), Egypt’s first phone maker, has told Reuters that it will broaden its exports to more African countries.

Already exporting to the GCC, it is seeking to also sell phones in Kenya, Morocco, the Democratic Republic of Congo, South Africa, Nigeria, Mozambique and Ghana, Sales Director Mahmoud Ali told Reuters.

“It’s a promising market and there’s much less competition than in the Gulf,” Ali said, noting big demand for affordable phones in Africa. He said he mostly expected to sell smartphones in the $50 to $60 price range to African customers outside Egypt, he told Reuters.

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A homegrown Egyptian business

SICO was officially launched last year. Its flagship phone, the Nile X, was manufactured thanks to a $22.5 million investment in the company’s factory in Assiut, Cairo, explains African news site AfroHustler.

With five production lines spread over 4.520 square meters, the factory has the capacity of producing 1.8 million smartphones yearly, AfroHustler states.

SICO was funded with a capital of $8.4 million (EGP 150 million), Reuters notes. Their phones use a Chinese design of 3G/4G U.S. technology.

Private investors hold 80% of the company and the remaining 20% is held by Egypt’s Ministry of Communication.

Gauging online customer reviews, it seems that Egyptian locals are quite happy with the Nile X, which they deem as a triumph for the country. Many were surprised with the phone’s specs and performance in regards to its budget-friendly price, especially in comparison with the devices of more popular international brands.

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Broadening focus to Africa

In 2019, the company aims to export 40% of its production and keep 60% local, Ali said. It also wants to expand its market share in Egypt from about 4% currently to 12-15% next year, Ali said.

He told Reuters it was too early to set a sales target for exports to African countries, but he expected to export more to customers in Africa than in the Gulf next year.

The company expects to triple its total production from 500,000 units in 2018 to 1.5 million units in 2019, Ahmad El-Sawaf, SICO’s international business development manager said. Of the 1.5 million, 900,000 would be sold in Egypt while 600,000 would be sold abroad, he added.

El-Sawaf said the company targets sales of $22.4 million (EGP 400 million) this year, tripling to $67 million (EGP 1.2 billion) next year. The target for 2020 is $139.6 million (EGP 2.5 billion), he said.

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Some hope for SICO in the GCC

The GCC is known to be a major smartphone market, with high demand for premium phones. SICO’s flagship device, the Nile X released last year, is currently going for $167 (EGP 2,999) on Souq.com. This puts it leagues behind devices such as the Samsung S9 and the new iPhone XR, XS and XS Max in terms of price. Apple’s ‘budget’ iPhone XR option has a starting price tag of $749, a far cry from the budget-friendly Nile X.

There might be hope for SICO in the GCC after all, however. According to research firm IDC’s Quarterly Mobile Phone Tracker, “Global brands like Oppo and Xiaomi have gained significant traction among low-income consumers” – Xiaomi budget phones range from around $100, for example. This has been due to a higher demand for lower priced phones, which could be attributed to the growing number of lower-earning expats in the region. As countries like the UAE continue to undergo a construction boom, the Gulf states have a constant demand for a manual labor workforce to supplement this growth, who typically have lower income than expats in the tertiary sector.

Yet, SICO has likely made the right move by focusing on Africa. IDC expects 2018 to be a very tough year for the industry, with overall mobile phone shipments to the GCC forecast to decline 12.9% YoY for the year as a whole. Nonetheless, if this trend continues into 2019 and 2020, SICO will have a very difficult time acclimating and finding its footing in such a shifty market.

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