Mobility

January 22, 2007
Cutting Edge Mobile Handsets in Asia

Victor Liu Zhoujiao

SINGAPORE – According to Instat, in India high-end products such as the Nokia Communicator 9500 do well precisely "because they show off how wealthy and successful an individual is, and users tend to be loyal to the smart phone brands they carry", according to IDC. More than two-thirds (69 percent) of respondents in India were likely to recommend their smart phone brand to others, putting them in second place for word-of-mouth recommendations, behind the US.

In line with the surging cellular subscriber numbers, the handset market was fast developing in APAC region. Cutting edge mobile phones, i.e. phones integrated with various multimedia and rich-data functionalities were increasing their share of total phones shipped in the market.

With a sum of nearly 252.3 million phones shipped in the APAC region in 2005, 53.4 percent had camera functions: the plunging price of such modes in emerging markets greatly promoted their adoption. Phones with music playing capabilities were 23 percent of phones sold; the figure is above the global average of 13.6 percent. Smartphones were 3.8 percent of the market and local design and manufacturing capacity emerged as a major driver of the adoption of smartphones in the APAC region.

Mobile digital broadcasting TV phones, and cellular phones with alternative wireless broadband connectivity, were introduced to early adopters in South Korea and Japan. Other cutting edge phones, such as phones with electronic payment function and gaming-centered phones also experienced rapid growth in 2005. Toward 2009, 67 percent of mobiles sold in APAC will have camera function, while 37.3 percent will be music player enabled.

The adoption of other cutting edge functions will remain niche and the marketing efforts will continue to focus on specific customer groups. In Japan and South Korea, cutting edge functions in phones are mainstream, resulting in making up high percentages of the total shipment volumes. Phone makers are placing extra efforts on R&D to push handset sales in the saturated markets, where consumers are willing to make replacing purchases with higher-tier phones that usually incorporate multiple cutting edge functions.

In China, the sales of cutting edge phones notched up rapidly. As price is the main barrier in the higher tier phones market, however, although China’s total mobile phone shipment numbers beat both Japan and South Korea, cutting edge function phones are still competing mainly with regular mobile handsets and will not overtake the market for a couple more years. “In India, cutting edge functions overtaking mobile shipment volumes is unlikely to happen during our forecast period (up to 2009), signaling that the country is still years away from reaching both saturation and high-tier cellphone purchasing,” sais the Instat report on Cutting Edge Mobile Handsets in Asia.

As the market and competition grew, leading phone makers in South Korea, Japan, China, and Taiwan have released very appealing cutting edge phones. Innovative products from some Asian phone makers are sold to consumers in Asia, as well as to higher-income residents in Europe and US. Their established design capabilities will give the US and Europe phone makers a run for their money.

The Asia/Pacific region, including Japan, constantly draws attention from mobile handset makers. In terms of market size, APAC is about three tenths of the global market, larger than either western Europe or North America. Nevertheless, it is a market diversified in terms of customer types and purchasing patterns. With a well-developed cellular infrastructure and a very competitive wireless services landscape, Japan and South Korea stand at the leading edge when introducing various novel handsets, like camera, music, mobile TV phones, and more. On the other hand, the fast emerging wireless services markets in China and India bolster prominent growth potential for those gear makers who offer a well-mixed product portfolio that addresses the broad demand spectrum from budget-conscious, reliable phones to high performance gadgets.

Cutting edge phones gaining toehold in India

According to Instat, as the wireless service liberalises, India will see tremendous growth in mobile phone users from an initially niche market. Total wireless subscribers grew close to 50 percent, to over 70 million in 2005. With some 33.8 million handsets sold in 2005, India became the third largest mobile phone market in Asia. Nokia held the dominating position in India with its 57 percent market share, followed by Samsung’s 13 percent. The handset market also bolsters substantial future growth in the next five years, as the wireless penetration rate remained low, at just above six percent, by the end of 2005. Handsets sold to new subscribers will dominate total handset shipments. Currently and in the near future, the handset market will still focus on first time buyers and offer them cost effective communication centered devices.

To increase sales volumes while keeping prices competitive, major handset makers are building up manufacturing capacities in India to leverage on domestic resource cost advantages and avoid high customs for imported sets.

On the other hand, while replacement sales will gradually increase from its current 21 percent composition, cutting edge phones are gaining a toehold in India as more customers with higher budgets shop for phone replacements. The expanding middle class is bolstering the huge potential to drive the demand for cutting edge phones in the next five years.

(The author of the report is industry analyst, In-Stat Asia Pacific