Indonesia’s smartphone boom may fail to happen
Sales fell for the first time in Q315, hit by local procurement rules and weak demand, but Samsung seized back its market lead
Indonesia’s expected smartphone fireworks may have fizzled out before they were even visible in the dark sky of handset market slowdown. Logically, the world’s third largest country should be a bright hope for smartphone growth, especially with 4G (not to mention Google’s Project Loon) coming its way. But its sector is already in decline, according to Counterpoint Research, with serious potential consequences for vendors, such as Xiaomi, which have been talking up their prospects in the country.
In it most recent quarterly calculations, Counterpoint said Indonesia’s Q3 smartphone market declined for the first time since the product category was first introduced. Smartphone sales fell by 7% year-on-year during the quarter, while overall mobile phone sales were down even more sharply, by 18%, despite the spread of 3G and 4G services in the country. More than one million LTE-enabled smartphones shipped in Q315, for the second quarter in a row.
One factor is the introduction of new rules that force a proportion of smartphone components to be sourced domestically. Similar government moves in the past, in other countries such as India and Russia, have been geared to leveraging growth in mobile consumer demand to build a homegrown industry. However, this can have the effect of slowing availability of desirable devices if the country does not already have a strong manufacturing ecosystem, as is the case in Indonesia.
Other reasons for the slowdown, according to Counterpoint research director Tom Kang, include a period when domestic brands were clearing built-up inventory, and slightly weaker consumer demand. All these factors were leading to a market correction, though he believes it will be a “temporary blip” as vendors “align to regulatory framework”. The current holiday quarter should see some revival of sales.
There may be issues with the ability to source components in India, but a local base of handset vendors is growing up. In the first half of this year, local OEM Evercross took the number one spot in smartphone sales, though it was relegated again by Samsung in Q315. The Korean vendor has 19% of the handset market and 27% of the smartphone space, says Counterpoint, while Evercross has about 14% of each.
Indonesia highlights the way that cellphone markets are shaping up in different ways in different large emerging economies, with implications for all the international players. Whereas recent years saw Samsung, Apple and a few others dominating the league tables on a global basis, there are now far bigger variations between countries, as local suppliers become more important in markets like China, India, Indonesia and Brazil. Even international brands have very varied fortunes according to the territory. In Indonesia in Q315, Microsoft was in third place, based on its former Nokia ‘smart featurephones’ rather than its high end Lumia devices. It took 12% of the overall handset market, but its smartphone sales were down year-on-year.