There has been a tremendous growth in the smartphone market in the Southeast Asian (SEA) region in the recent past. According to Bain & Company, approximately 89 per cent of the internet users in SEA 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 SEA 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 SEA and the growth can be attributed to a number of factors, the most important of which is the increasing affordability of feature-rich smartphones. A growing number of people are making the switch from feature phones to smartphones due to their increased affordability. According to Bain & Company, of the total smartphones shipped, approximately 62 per cent were priced at less than $150, signifying that affordability remains a key factor in determining smartphone penetration in the region.
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 the June 2017 figures. 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. The 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.
The smartphone market in SEA has historically responded to affordable phones and this 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 have been encouraging consumers to increase their data consumption. 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.
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 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, became a standard offering by Chinese manufacturers over the course of the year. Consumers are demanding additional features such as face unlock and wireless charging, which are expected to make their way into affordable smartphones in the years to come.
Going forward, the increased demand for online services and e-commerce, coupled with the expansion and improvement of 4G networks in the SEA region will drive smartphone demand. Increased competition from Chinese manufacturers will force local manufacturers to lower their prices in order to stay competitive, as has been the Indian experience where Xiaomi, a Chinese manufacturer, has achieved the top position. This will lead to the delivery of affordable smartphones to customers. Moreover, falling tariffs 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.