Chinese fingerprint on smartphone trends in Malaysia, Singapore
By Karamjit Singh April 6, 2015
- Larger screen size, phablets are in
- Mid-tier market fast disappearing
AMONG the key takeaways from a recent briefing by market research and analyst firm IDC (International Data Corporation) on the Malaysian smartphone market is that Malaysians have changed their preference for what form factor they prefer.
The desire for Samsung smartphones has dropped significantly and, if you blink, you might just miss the collapse of what used to be the mid-tier market in Malaysia.
The fingerprint of Chinese phone vendors can be seen on all three trends.
The increasing reliance of Malaysians on their smartphones for web browsing, messaging, games, and video has resulted in them gravitating towards phones that provide them a certain level of viewing and holding comfort, according to Jensen Ooi, market analyst for client devices at IDC Asia/Pacific.
As a result, IDC reveals that while the demand for smartphones grew 40% in 2014, models with screen sizes between 4in and 5.5in doubled, while phablets (5.6in and 6.9in) enjoyed even stronger growth of 68% year on year (YoY). IDC classifies phablets under the smartphone category.
In the absence of government subsidies, the increasing availability of feature rich, performance-driven Chinese smartphones such as Oppo and Meizu at competitive price points has been a big driver for budget-conscious Malaysians to move to larger sizes.
Interestingly, in a market dominated by prepaid users, operator packages have had minimal influence on this shift to larger phones and phablets, IDC notes.
“There was no need for such users to anchor themselves to subscriber plans and lose the liberty to switch devices when needed,” says Ooi.
However, it is a different case for flagship phablets such as the iPhone 6 Plus or Samsung Galaxy Notes, where because of their high prices, users see more value by signing up with mobile operators.
Looking at the Singapore market on the other hand, Ooi notes that it is more inclined towards mobile operators as there is considerable demand for phablets. For instance, the 5.5in category in 2014 was dominated by Samsung’s Galaxy Notes, Xiaomi’s Redmi Note, and towards the end of the year, by Apple’s iPhone 6 Plus.
IDC’s data shows that in Malaysia, the share of phablets within smartphones was only 2% in 2012 but increased strongly to 14% in 2013 and to 17% in 2014.
Ooi says that despite the seemingly humble share of 14% in 2013, unit shipments of phablets actually grew by nearly 13 times compared with 2012.
In Singapore, the share of phablets within smartphones was 3% in 2012, increasing to 19% in 2013 and 31% in 2014.
Going, going ... gone
Chinese smartphone vendors entered the Malaysian market in earnest in 2013, and this accelerated in 2014 with the various brands winning over a sceptical market with their price-to-performance models.
As a consequence, what used to be known as the mid-level phone market in Malaysia – the RM700 to RM1,200 (US$190 to US$325) level – is collapsing rapidly, IDC argues.
“The story is that the low-end market is getting more competitive and many phones that carry good specs are already priced below RM700,” says Ooi (pic).
Feeling the pain here from the rapid commoditisation of the mid-tier market are the traditional large players like Samsung, Sony and LG, which are unable to differentiate their phones at price points above RM700.
IDC’s data shows that sub-RM700 phones made up nearly 60% of the Malaysia market in 2014, up from nearly 40% the year before. The majority of the growth has been captured by the Chinese vendors at the expense of Samsung, Sony and LG.
More bad news for these Android vendors: “Their share in the mid-range and high-end market has weakened and will continue to weaken this year, with only Apple continuing to grow there in 2014,” says Ooi.
In fact, Apple had a record breaking 2014, not just in Malaysia, but in Singapore too.
IDC tracks units shipped, with the assumption that with supply chains getting more refined, vendors will ship in units that they are confident of selling.
Total shipment for Apple phones in Malaysia was nearly 600,000, while in Singapore it was almost 1.7 million. No surprise that shipments were mainly driven by the new iPhone 6 and 6 Plus in both countries.
Next Page: Some fight back, but whither local players?
Samsung will fight back in 2015
It is not Apple’s continued strength that poses a challenge to smartphone market leader Samsung, which held on to its lead in both Malaysia and Singapore in 2014.
In Malaysia, Samsung’s market share hovered around the 45% mark over 2012-2013, but fell to 30% in 2014. It was a very similar situation in Singapore, where its share fell from 49% in 2013 to 28% in 2014.
Despite Samsung’s strong marketing and branding efforts in both Malaysia and Singapore over the years, the rapid adoption by consumers of Chinese brands is showing that consumers place a premium not in brand image, but rather in the value they receive from the phone’s performance from the price they pay.
The Chinese vendor that made a significant impact in the Singapore market is Xiaomi, which jumped to the No 3 position just one quarter after launch, and commanded a 16% market share over the course of 2014.
Will Samsung fight back this year? And leveraging on the scale it has, how aggressive will it get in pricing? Will it defend its turf across all price points, or focus on the lower- to high-end tier, giving up on the mid-tier?
With IDC predicting lower 2015 prices for smartphones in the lower-end market – between RM350 and RM400 in Malaysia and around RM500 and RM550 in Singapore, it will be a bruising fight for market share with razor margins – not that consumers will complain.
Life left in local player Ninetology?
While there are no local brands of note in Singapore, one local player which threw its hat into the Malaysian smartphone ring in 2013 and 2014 was Ninetology Marketing Sdn Bhd.
But despite having a low price point and strong channel presence, it too got caught in the storm of Chinese players entering the market with not just strong phones but mainly online channel strategies.
The online marketing strategies negated the previously held belief that a strong physical channel presence was critical to market share.
By IDC accounts, Ninetology suffered a bad year in 2014. And while IDC feels that it could make a comeback in 2015, “we would lean more towards the pessimistic side because unlike in Indonesia and the Philippines, where local brands appeared first, Ninetology is coming into a market that is already flooded with low-cost, high-quality Chinese brands,” says Ooi.
“But if it is able to leverage its channels successfully, and keep prices down, it might be able to enjoy some success in the ultra-low-end segment,” he adds.
Despite the odds, with nearly 10 million units of smart devices shipped into Malaysia in 2014 – and with smartphones outnumbering tablets by a ratio of nearly four to one – Ninetology may find a market segment, especially the sub-US$100 market that it can target.
Looks like 2015 will be another interesting year for the ultra-competitive smartphone markets in Malaysia and Singapore, with the main question being over who will lose out the most to the Chinese vendors.
Six of world’s top 10 smartphone vendors are Chinese brands: TrendForce
SEA smartphone sales exceed US$16.4bil in past 12mths: GfK
Smartphone shipments up 25% in Q3 2014, Apple-Samsung at risk
Pressure mounts on Samsung as competitors up ante
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