There has been tremendous growth in the recent past in the smartphone market in the Southeast Asian region. According to Bain and Company, approximately 89 per cent of internet users in Southeast Asia use a smartphone as their primary device to access the internet. Further, with approximately 200 million digital consumers in 2017, an increase of 50 per cent year on year, the Southeast Asian region is increasingly demanding products and services online, which is also providing the necessary push for the uptake of smartphones in the region.
Smartphone penetration has been increasing in Southeast Asia and the growth can be attributed to a number of factors, the most important of which is the increasing affordability of feature-rich smartphones in the market. Due to this increased affordability, a growing number of people are making the switch from feature phones to smartphones. According to Bain and Company, of the total smartphones shipped, approximately 62 per cent were priced less than $150, signifying that affordability remains a key factor in determining smartphone penetration in the region.
Key trends
Expansion of 4G networks
The proliferation and improvement of 4G long term evolution (LTE) networks in the region is driving the demand for 4G-enabled smartphones. According to UK-based OpenSignal, 4G availability as of February 2018 increased in Cambodia, Indonesia, the Philippines, Singapore, Thailand and Brunei when compared to June 2017 figures. Further, 4G speeds also increased in Cambodia, Indonesia, Malaysia and the Philippines in the corresponding period. Interestingly, Singapore ranked first globally, with an average speed of 44.31 Mbps in February 2018. The report also found that the mobile industry is focusing on expanding access to LTE rather than improving the raw speed of networks. This increased availability of 4G along with faster average speeds is expected to further expand the demand for 4G-enabled smartphones, gradually paving the way for the launch of 5G in the near future.
Increased affordability
The smartphone market in Southeast Asia has historically responded to affordable phones and the trend is expected to continue in the coming future. Due to the rapidly expanding middle class, smartphone demand is expected to be restricted mostly to affordable and feature-rich budget smartphones. For instance, Indonesia’s Smartfren and ADVAN are launching low-cost smartphones to compete with global brands.
Decline in data tariffs
Declining mobile data tariffs in the region has encouraged consumers to increase data consumption in the region. This has also led to consumers shifting from feature phones to smartphones. This trend is expected to be reinforced by a further decline in data tariffs.
Cosmetic trends
The year 2017 saw big changes in terms of smartphone form and design. Taller and more immersive displays with an 18:9 orientation have become the new industry standard. Although the trend was initiated in premium flagship smartphones, by the end of the 2017, Chinese manufacturers had managed to incorporate these new design enhancements in mid-tier as well as budget category smartphones. The industry is also rapidly putting to rest metallic designs for flagship devices and is moving towards a glass-sandwiched form factor. Dual cameras, which were niche offerings in flagship phones in the early part of 2017, have become a standard offering by Chinese manufacturers over the course of the year. Additional features such as face unlock, wireless charging, etc., are being demanded by consumers and are expected to make their way into affordable smartphones in time to come.
Future outlook
Going forward, increased demand for online services and e-commerce coupled with the expansion and improvement of 4G networks in the Southeast Asian region will drive smartphone demand. Increased competition from Chinese manufacturers will force local manufacturers to lower prices in order to stay competitive as has been the Indian experience, where Xiaomi, a Chinese manufacturer, has achieved top position. This will lead to the delivery of affordable smartphones, as is being demanded by customers. Moreover, falling tariff rates will allow more consumers to make the switch from feature phones to smartphones.
According to the Ericsson Mobility Report, the number of smartphone users in Southeast Asia and Oceania is expected to increase at a compound annual growth rate of 13 per cent from 480 million in 2016 to 1,000 million in 2022. Further, as per the report, smartphones are expected to account for around 70 per cent of the total mobile phone subscriptions. Therefore, with smartphones becoming the go-to device for internet access and for other online services, the demand for smartphones is poised to grow significantly.
