According to International Data Corporation’s (IDC) latest Quarterly Mobile Phone Tracker, total smartphone shipment in Indonesia in 2016Q3 recorded a slight Quarter-On-Quarter (QoQ) drop of 7% but still showed a moderate increase of 4% over the same period last year. “After the peak season of Lebaran ended, a stretch of quiet business begun in 2016Q3 which forced smartphone vendors to lower their shipment and focus more on improving the sales performance as well as laying the groundwork in anticipation of the peak shopping season in 2016Q4.” Says Reza Haryo, Senior Market Analyst, Client Devices, IDC Indonesia.
Key highlights in the Indonesian smartphone market in 2016Q3 include:
US$250<US$300 price band segment grew significantly, which was contributed by the traction of OPPO’s F1s and Samsung’s Galaxy J7. However, when considering the Indonesian market as a whole, the US$100<US$200 segment remained the sweet spot, thanks to the demand for entry level 4G phones which usually offers the combination of 2GB ram and 16 GB internal storage.
The share of 4G phones have also increased from 58% in 2016Q2 to 68% in 2016Q3 and had 8% sequential growth. This is largely due to the fact that telco service providers have been competing to expand their market share in a bid to capitalize on the growing number of smartphone users in the country through data bundling packages. In line with this expansion, the portion of smartphones sold in telco channel has also increased 22% YoY.
“Indonesians use smartphones for entertainment purposes such as social messaging, video streaming, gaming, as well as browsing. Hence, there is a demand for the larger screen sized phones and the share of phablets have increased from 11% in 2015Q3 to 16% in 2016Q3. Most of the volumes came from major vendors such Samsung, OPPO and Asus. Samsung’s Galaxy J7, OPPO’s F1s and ASUS’ Zenfone Selfie were among the most popular models.” Adds Haryo.
Top Five Vendor Highlights in 2016Q3
Samsung’s consistent marketing campaigns in retail shops enabled the vendor to increase shipments despite having a slower demand. This also extended the gap between the market leader and its competitors. The fallout from the Note 7 incident had relatively little impact on its brand perception in Indonesia.
OPPO decreased sequentially relative to the non-peak period but still maintained its aggressive online and offline marketing activities. OPPO’s direct to retail strategy with various marketing supports continued to allow OPPO to increase its retail presence.
Asus continued to rely heavily on the affordable Zenfone Go but the lack of marketing efforts throughout the quarter brought about its decline in the market.
Advan introduced 8 low-cost 4G models in 2016Q3 alone. 4G models have been quick to pick up, partly thanks to the local vendor’s marketing activities heavily focusing on retail channels.
Smartfren. As a local vendor that also operates as a telco provider, Smartfren tried to book more revenue from data services and recorded a 17% sequential decline for its smartphone shipment. Aside from bundling programs with leading smartphones such as the Samsung J Series, Smartfren have been consistent in promoting their Mifi product with attractive bundling program.
Lenovo decreased sequentially relative to the non-peak period choosing to focus on sell-out instead. A6000, A1000 and A2010a were their top 3 models shipped in 2016Q3 in terms of units.
Overall Positive Outlook for Indonesia
IDC maintains the forecast for 2016 as the market is expected to expand significantly in Q4 and high demand during the festive season will allow vendors to increase shipment volume to reach targets. In addition, the continuous economic improvement from heavy infrastructure investment will continue to boost the Indonesia economy.
The Local Content regulation (TKDN) is getting more accepted in a sense of clearer approach. A number of vendors including Xiaomi, LG, and Blackberry have now showed commitment to comply with this regulation. In the short term, it is expected that the industry will be focusing on local assembly but the challenge remains from the inadequate component supply chain ecosystem. But in the longer term, depending on the effectiveness of incentives provided by the government, more component manufacturers could move to Indonesia. This means that vendors would need to be prepared to have end-to-end manufacturing in Indonesia instead of just assembly. Hence, we expect that the future outlook will remain positive for 2017 onwards,” ends, Haryo.
Channel dynamics
With the intense competition and relatively low demand in 2016Q3, it caused vendors to put their utmost focus on liquidating stocks through improvement to their channels. The Direct to retail approach by cutting down the intermediaries has proven to help the sell-out of OPPO. IDC believes smartphone vendors will try to replicate this distribution strategy soon but this will require a strong retail relationship which only the larger vendors will be able to execute given the large volumes that they have and that they are more established in the market.
Telco collaboration
“Telco providers need to challenge the status quo and find ways to innovate as their core business continues to be pressured by over the top players which could be significant threats in revenue loss even as mobile data traffic grows exponentially. With an advanced network infrastructure and strategic partnership between telco providers, over the top players and hardware vendors, IDC believes that Telco providers and smartphone vendors can leverage the increasing demand for over the top players to drive up ARPU as well as brand exposure,” ends, Haryo.
