There has been a fluctuating trend in Southeast Asia’s (SEA) smartphone market growth over the past few years. In line with the global pattern, smartphone usage in the region spiked during the COVID-19 pandemic and led to a steep rise in mobile phone shipments. However, adoption and supply were relatively sluggish in 2022 and beyond. In the coming years, the industry is expected to rebound due to a surge in demand combined with handset vendors shifting their manufacturing capacity to the region.
Smartphone shipments in the SEA region registered a strong year-on-year (YoY) growth of 33 per cent during the first quarter of 2021. As per market reports, Indonesia saw a YoY growth of 4 per cent. Though relatively smaller, markets in Thailand, the Philippines and Vietnam saw high YoY growth rates of 13 per cent, 19 per cent and 26 per cent respectively. There was robust growth despite offline channel disruptions due to restrictions and sustained component shortages affecting original equipment manufacturers (OEMs). At 96 million units, the 2021 shipments were the highest ever for a calendar year and more than the pre-pandemic levels. More consumers started opting for smartphones in the $151-$250 bracket. Besides, the year saw a rise in the launch of 5G mobile phone models.
However, all SEA countries saw a decline in smartphone shipments in 2022. As per a Canalys report, shipments stood at 26.4 million units, posting a YoY decline of 14 per cent during Q1 2022. There was a further worsening of smartphone shipments in the region in 2023. During Q1 2023, shipments fell by 21 per cent to 20.9 million units in key SEA countries. With this, the region experienced its fifth consecutive quarter of decline.
The slump in shipments has been attributed to various factors. Consumers in the region, especially in Tier 2 cities, remained financially prudent and cut back their spending on high-value purchases during the past few quarters. According to Canalys, this was felt in large-volume, price-sensitive developing countries such as Indonesia and the Philippines, which saw their market size shrink by 21 per cent and 17 per cent YoY respectively. Despite a 13 per cent decline in Thailand shipments, the recent wave of mergers and acquisitions among operators empowered a ramp-up of promotions and 5G bundling, benefiting leading smartphone vendors. In Vietnam, there was a decline in shipments of 40 per cent on a YoY basis. Additionally, currency fluctuations in emerging markets, local manufacturing requirements, the Russia-Ukraine conflict and historic high inflation have also taken their toll.
Despite the dismal performance of the smartphone segment in SEA, a few factors are expected to ramp up consumer demand in the near future. The time spent on the mobile by consumers is growing consistently. As of 2022, the world spent on average three hours and 15 minutes a day on the mobile, while the average time spent on phones in the SEA of 4 hours 36 minutes was far higher. Four out of 10 countries spending the most time on mobile in 2022 were from this region. In 2022, SEA recorded an addition of 20 million new internet users. Consumers in the region use smartphones for a range of purposes, including gaming, food delivery and mobile payments. These segments stand to gain as internet usage expands. According to Insider Intelligence, in 2023, 88.9 per cent of internet users in SEA will also be smartphone users – a rate higher than those in more economically advanced regions such as North America and Western Europe.
The SEA region is an attractive hub for global smartphone manufacturers, owing to its rich labour resources, low production costs and rising domestic demand. For instance, Xiaomi has taken delivery of its first batch of locally made handsets in Vietnam as part of a broader expansion to SEA amid supply chain disruptions in China. Apple is also considering shifting some of its production from China to Vietnam after Covid-19 lockdowns in Shanghai and nearby regions disrupted production.
SEA’s smartphone market has faced numerous challenges leading to a consistent fall in shipments. An unfavourable business environment, lengthening replacement cycles and a slow smartphone adoption rate may further result in ballooning channel inventory and financial challenges in the subsequent quarters of 2023. However, the region is expected to witness a recovery in smartphone shipments by 2024. It will likely benefit from a broader global recovery, increased investments, and a revival in demand. Canalys forecasts a 7 per cent increase in shipments in 2024 as compared to 2023.
SEA continues to be a promising market for smartphone manufacturers, thanks to its expanding middle class and young population, which are key customer segments for smartphone vendors. Furthermore, the rise in digital payment and a wider range of financing options makes high-end devices more affordable for the masses.