Chinese fingerprint on smartphone trends in Malaysia, Singapore

• 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.
 
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