China-based vendors have strengthened their positions in the region with ad tactics as replacement demand becomes the key driver in smartphone market gains.
International Data Corporation (IDC) has reported in its Quarterly Mobile Phone Tracker that 101 million smartphones were shipped in the emerging markets of Southeast Asia (SEA) during 2016, a 4.3% year-over-year (YoY) growth versus 2015. Samsung maintained its pole position in the emerging SEA smartphone market, with 23% market share in 2016. However, its market share was cannibalised by China’s top three players, Oppo, Huawei and Vivo that has a combined 21% market share. IDC categorises Indonesia, Malaysia, Myanmar, Philippines, Thailand and Vietnam as emerging markets in SEA, while Singapore is classified as a mature market.
China's smartphone vendors continue to increase their penetration into SEA and now account for one-fifth of the SEA smartphone market in 2016. Various factors have contributed to the success of each brand, although aggressive marketing activities were the common element.
Oppo, being half-a-decade-old in SEA, has become one of the leading vendors by investing heavily in its marketing activities and incentivising its resellers. It standardised its marketing approach across countries, mainly relying on local celebrities as brand ambassadors to promote itself as an “aspirational/trendy” brand and targeting mainly the millennial crowd.
Huawei is one of the oldest players in the region, with roots in operator partnerships. It has improved its reputation over the years as it progressed to providing handsets that have undergone significant improvements to quality and build. Similar to Oppo, Huawei's marketing approach is standardised across the region; however, the company makes use of international ambassadors rather than local ones. Moreover, Huawei focuses more on the features and quality of its key flagship models in its marketing as opposed to relying on the star power of celebrity endorsers.
Vivo, a contender from the same parent company as Oppo, BBK, has been following the same approach as Oppo, within and outside China. However, it had a slower start in SEA as it faced various challenges, mainly inventory management and competition from Oppo. Its growth was slow and gradual as it played itself up as a global brand initially by appearing in international movies and having Caucasian models in its ads. However, toward the end of 2016, Vivo started to use local celebrity ambassadors as well for its marketing for better familiarity among locals.
Figure 1: IDC Chart showing the Top 5 smartphone vendors, emerging SEA shipments, market share and YoY growth throughout 2016 (units in millions).
The three vendors’ products have unique attributes that they promote a lot in their marketing initiatives. Oppo and Vivo would highlight their “selfie”-specialised handsets such as Oppo’s F1 series and Vivo’s V5 series, targeting enthusiastic self-shooters. Huawei, on the other hand, accentuated the photography quality of its device, namely the P9 series, targeting photography enthusiasts. Furthermore, the three vendors’ marketing collaterals would be placed in highly populated cities and areas with high human traffic.
As the China-based vendors strengthen their positions further in the region, local vendors and lesser-known ones are getting squeezed as their sales and brand strength weaken, combined with component shortages impacting the smartphone supply chain in 2016H2. The component supply shortage is expected to continue for the rest of 2017H1, affecting some of the local and lesser-known vendors. Manufacturers are required to be cautious with their supply distribution in order to cope with orders coming from top China-based vendors and several global players that are already ramping up their orders in preparation for the release of new handsets in 2017 across the globe.
“As the smartphone market matures and replacement demand becomes the key driver particularly in urban areas, vendors that cater to customers’ expectations of a better experience are more likely to succeed. Both China-based and global players will remain focused on the midrange and high-end smartphone segments while local and lesser-known vendors that operate on a smaller scale will begin to have their share in urban areas eroded that will lead them to pay more attention to rural areas where their lower price points will have a better competitive edge,” said Jensen Ooi, market analyst, Client Devices, IDC Asia/Pacific.