- Mid-range smartphones poised to grow; no sign of saturation near future
- Vendors will face increasingly challenged as competition stiffens
IN THE past few months, I’ve personally reviewed at least two mid-range Android-based smartphones. They are the Huawei Honor 10 and the Asus Zenfone Max Plus. Meanwhile, Digital News Asia (DNA) has also reviewed Xiaomi Redmi 5, Samsung A8+, and the Huawei Nova 2i.
Besides these, there is a plethora of smartphones that have recently been launched in the market from other handset makers including Oppo, Vivo, Nokia, Sony and others. So this got me wondering if the mid-market segment of the market is beginning to saturate given that so many brands and their respective models are launching so many variants, so quickly.
In February this year, a CNBC report suggested that smartphone designs and features in the mid-market segment were at risk of plateauing. A notable analyst even suggested that innovation in smartphones has stalled.
"Beyond the flashy flagship devices where companies are investing hundreds of millions of dollars promoting them, there is an avalanche of unremarkable mid-tier Android phones, with the risk of these shows becoming a veritable trash-fest of 'me too' products that fail to excite consumers," Ben Wood, chief of research at CCS Insight.
The American broadcaster also cited research firm Gartner as saying that global smartphone sales have slowed in the fourth quarter of 2017 for the first time since 2004. It added that consumers to be are holding onto phones for longer and Gartner said “high expectations and few incremental benefits during replacement weakened smartphone sales.”
Similarly, Counterpoint Research concurred, and noted that global smartphone shipments declined 3% annually in Q1 2018 based on its market data. The top 10 players now capture 76% of the market thereby leaving more than 600 brands to compete for the remaining 24% of the market, it added.
Associate director at Counterpoint Research Tarun Pathak said the waning smartphone demand is due to a slow-down in developed markets where replacement cycles are lengthening with overall smartphone features and design reaching its peak.
“However, emerging markets still offer a sizeable opportunity for handset makers to expand and grow as smartphone penetration by users is still around 45%.”
Higher-end features accessible
Just to be clear, I define the mid-range market as smartphones costing between US$200 to US$350 (RM797 to RM1,395). So is the mid-range segment of the smartphone market in Southeast Asia beginning to saturate? Apparently not, according to Neil Shah (pic, above), partner and research director of Counterpoint Research.
In an interview with DNA, Shah says that based on his firm’s data, the segment of this market has actually grown from 15% in 2015 to 24% today in five SEA markets combined, namely, Thailand, Indonesia, Vietnam, Philippines and Malaysia.
“Samsung, Oppo, Vivo are the key brands dominating this segment together accounting for more than 80% of volumes in this segment up from a combined 50% at the end of 2015.”
Shah said one of the major contributory factors is there is still a large market of people having phones costing less than US$100 that may be attracted to mid-range smartphones. The likes of Xiaomi, Huawei, Oppo, and Vivo will drive further growth in this segment bringing attractive models to expand the sales in this segment, he added.
Besides the growth in these markers, another factor in my opinion, is that as technology improves, so do the benefits that spill over to consumers.
For example, two years ago, you’ll be hard pressed to find mid-range smartphones with specifications such as a 1,080 full high definition (FHD) screen, dual-camera systems, a fingerprint scanner and a reasonably fast processor to boot.
Today, features such as the aforementioned cost less than US$300, and are quite commonly found in mid-range smartphones. This, coupled with the fact that many customers in these markets are quite hard pressed to buy high-end smartphones that cost more than US$350, as much of these countries are classified as emerging and cannot readily afford such expensive smartphones.
These factors are really powerful reasons why vendors are consistently targeting the mid-range market in full force.
Besides this, Shah also points out that the adoption of 4G data plans in these markets alongside affordability and higher specifications contribute to the burgeoning market.
Consumers are spending more and more time on their smartphones, which have become central to their lives from communication to content consumption/ creation to commerce (shopping) and this is what’s driving the need for better devices but at affordable prices, Shah argued.
Can it grow further?
Well and good. But how much more can the market grow before it reaches a saturation point?
Shah says that according his research, SEA markets have been growing slightly above the industry average but have not grown consistently due to various macro-economic reasons and policy changes.
“Thailand and Vietnam have been the most promising markets in the last two years driving positive growth but others have been relatively slow pulling down the growth,” Shah explained.
He added that the market has slowed relatively from the higher growth rates seen over the last five years so the bulk of the growth will be spread among those who would willingly pay more to get the features they want in their smartphone.
Going forward, Shah believes that the market will only get stiffer and that smartphone makers must provide more value to customers by moving away from purely just sales of devices to partnering with operators.
“Operator bundling as well as providing more value with content and commercial partnerships could mitigate the slower growth,” he argued.
Asked about what effects this growth of the mid-range market would have on the higher-end smartphone players, Shah said the US$150-US$400 segment is expected to account for more than 55% by end of this year.
“The growth of the higher-end segment at US$600 and above accounts for just 4% of the volumes in these five markets combined,” he explains.
“Samsung and Apple dominate these markets but there is scope for players such as OnePlus, Xiaomi and the likes of Google to take market share if they can invigorate this segment by working with operators to subsidise these premium devices. If not, the premium market outlook is pretty bleak.”
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