"Aggressive" China-based vendors have invaded Indonesia's smartphone market, according to market research firm IDC.

Smartphone shipments in the country reached 7.3 million units in the first quarter of 2017, a 3% year-over-year growth while experiencing a 15% quarter-over-quarter decline. The Top 5 smartphone vendors in Q12017 were Samsung, Oppo, Asus, Advan and Lenovo, including Motorola, according to IDC analysts.

“The smartphone market in Indonesia as we know it has changed with the China-based vendors becoming more aggressive with their strategies, not just with their product line-up but also their overall marketing plans and activities," said Risky Febrian, associate market analyst, IDC's Indonesia Client Devices. "Their cash-rich initiatives have left local vendors struggling to compete in the market space with their limited resources. Meanwhile, Samsung has revamped its strategy to fend off the competition and maintain market leadership."

20170724_EETA_IDC-Indonesia-smartphone (cr) Figure 1: Indonesia smartphone market share by vendor (Source: IDC)

The China-based vendors have been focused on both below- and above- the-line marketing activities, mainly billboards, flyers and TV ads, among others. Brand ambassadors were also hired, consisting of mainly popular local young celebrities that their target segment can relate to. More sales personnel were hired as well to further push the sales of their products nationwide. Local vendors, struggling to compete on such a scale have been coming up with alternatives such as launching their in-house applications, introducing competitively priced smartphones with similar specs to the China-based ones and more focus on lower-tier cities and rural parts of the country.

Among the China-based vendors, Oppo and Vivo are the most notable brands in the Indonesian market, competing in the space with their marketing initiatives, attractive incentives and margins for their channel partners and enhanced post-sales services to address the negative stigma of China-based smartphones. This, in turn, has set a new standard for some of the global and local vendors scrambling to add more to their marketing activities to match the new standard of competition, according to IDC.

The China-based vendors have also positioned themselves well in the mid-range segment with most of their handsets priced at $200<$400. Due to the lack of brand equity, local vendors’ attempts to match them were unsuccessful, resulting in them having to continue playing in the low-end segment of <$200. However, this has not dampened the local vendors’ attempt to gain back share in the smartphone market as they try to provide more value-added services such as Advan developing its own Android user interface variant called IdOS, Polytron with its own Android user interface variant called FiraOS and Evercross partnering with Foxconn to develop their Luna series smartphones, a complete re-branding of Evercoss, which, armed with more features and better build, is aimed at the growing mid-range users.

“In the coming times, competition will further intensify in the mid-range segment with BlackBerry’s (via BB Merah Putih) and Xiaomi’s re-entry in Q12017, followed by HMD’s Nokia that is expected to enter soon," said Risky. "While features and tech innovation are crucial to sustain long term growth, some local vendors will continue to make efforts to localise their product and service offerings to address the specific needs and preferences of Indonesians, as we have seen with Advan’s smartphones equipped with locally developed apps such as Muslim Guide for Ramadan."