In the second quarter of 2023, global smartphone market revenue declined 8% year-over-year and 15% sequentially, well below $90 billion, the lowest figure for the second quarter since 2020, when the global pandemic-related lockdowns were at their worst. According to Counterpoint, Q2 global smartphone operating profit fell below $13 billion, down 3% year-over-year and 27% sequentially. At a time when the global mobile phone market has experienced a sharp decline, India and Southeast Asian emerging markets, especially the Indian market, are unique, and this article will briefly analyze the three key markets in Southeast Asia: India, Indonesia and the Philippines.
The cumulative number of "Made in India" mobile phones exceeded 2 billion
According to Counterpoint, from 2014 to 2022, under the "Make in India" program, "Make in India" mobile phone shipments have cumulatively exceeded the 2 billion mark, with a compound annual growth rate of 23%. Huge internal demand, increasing digital economy, and government push are the main reasons for this growth. India has thus become the second largest producer of mobile phones. The Government of India has launched programs and initiatives such as the Phased Manufacturing Program (PMP), Make in India, Production Linkage Incentive (PLI) and Atma-Nirbhar Bharat (Self-Reliance India) to increase local manufacturing and added value.
Tarun Pathak, director of research, said: "India has come a long way in mobile phone manufacturing. Over the years, we have seen local manufacturing grow to meet domestic demand. By 2022, more than 98% of shipments across the Indian market will be "Make in India".
When the current government took office in 2014, it was only 19%. At the same time, India's local value added and supply chain development are increasing. India's local value added now averages over 15 per cent, up from single digits eight years ago. Many companies are setting up factories in India to produce mobile phones and components, leading to increased investment, increased employment and overall ecosystem development. The Indian government now intends to use its various schemes to make India a "semiconductor manufacturing and export hub." Looking ahead, as India strives to bridge the urban-rural digital divide and become a major exporter of mobile phones, the market is likely to see an increase in production, especially smartphone production.
The proportion of "Made in India" mobile phone shipments in the local market from 2014 to 2022
Source: Counterpoint Statistics 2022
Regarding the Indian government's initiatives, Senior Analyst Prachi Singh said: "The Indian government has launched and implemented many programs that have led to a significant jump in mobile phone manufacturing over the years. Under the "Make in India" initiative, the government has introduced a phased manufacturing scheme and has increased import duties on finished vehicles and some key components over the years to promote local manufacturing and value added. Under India's Self-Reliance Initiative, the government has introduced a Production-Linked Incentive (PLI) scheme for 14 industries, including mobile phone manufacturing. As a result, India's exports have increased. Going forward, the government's focus is on making India a hub for semiconductor powers. It proposed the Semiconductor PLI Initiative and is now focusing more on infrastructure, with a proposed $1.4 trillion investment. ”
Q2 Indian smartphone market: down 3% year-on-year, has become Apple's fifth largest market
According to Counterpoint, smartphone shipments in India in Q2 fell 3% year-on-year. This is the fourth consecutive quarter of decline in the Indian market, but its decline has fallen from 19% in the first quarter to 3% in the second quarter. Base effects, pent-up demand, and improved macroeconomic conditions helped the market close lower than expected.
However, the high-end smartphone market presents a different picture, with a 112% year-over-year increase in the second quarter and a record 17% of overall shipments.
Commenting on market dynamics, Senior Research Analyst Shilpi Jain said: "In the second quarter of 2023, OEMs saw an improvement in inventory and demand conditions ahead of the upcoming holiday season. During the quarter, OEMs and channels took proactive steps to clear existing inventories through multiple sales and promotions. On the consumer side, lower inflation and improved growth prospects have contributed to a recovery in demand. 5G upgrades have also played an important role, with OEMs constantly rolling out 5G devices in the INR 10,000 to INR 15,000 (about USD 122 to US$244) segment to expand coverage. We believe brands will launch interesting products and offers to engage consumers during the holiday season, and 5G will be a big growth driver here. ”
Source: Counterpoint
Samsung maintained its lead for the third consecutive quarter with an 18% market share, but Apple continued to lead the ultra-premium segment (> INR 45,000 or about $549) with a 59% share. India is now Apple's fifth-largest market.
To sum up, the characteristics of the Indian smartphone market in Q2 are:
- 5G smartphone growth: In the second quarter of 2023, India's cumulative 5G smartphone shipments exceeded the 100 million mark, as the pace of 5G upgrades accelerated, driven by the expansion of 5G networks and the spread of affordable devices. 5G smartphone shipments increased 59% year-over-year in the quarter.
- Premiumization trend: With the segment growing at a faster rate of 112% year-over-year, the premiumization trend is gaining momentum. The rise of value-based retailer incentives, aggressive promotions, credit available through various financing schemes, and a centralized approach by OEMs are driving premiumization in India.
- Channel dynamics: The share of offline channels has been growing and is expected to rise to 54% in 2023. Online heavyweights such as Xiaomi, realme, and OnePlus are now emphasizing offline expansion to increase customer engagement and ecosystem development. Samsung and Apple are also increasing their offline business to meet the preferences of different consumers. This shift represents a more holistic approach to creating seamless and personalized customer experiences across online and offline channels.
- 4G feature phone growth: The share of 4G feature phones in overall feature phone shipments increased to 10% in the second quarter of 2023, driven by the launch of the JioBharat and itel Guru series. We believe this share will increase to 18% by the end of 2023. The growing demand for UPI, multiple OEM launches, and the push from Reliance will help the segment grow further.
- Stock levels: Since Xiaomi and Realme managed to clear most of their inventory through multiple sales and promotions, the market still had eight weeks of inventory at the end of the second quarter of 2023.
- Other well-known brands that saw growth in the second quarter of 2023 include Apple (up 56% year-over-year), TRANSSION (up 34% year-over-year), Lava (up 53% year-over-year), and Nokia (up 6% year-over-year).
Q2 Indonesia smartphone market: shipments down 10% y/y
According to Counterpoint, smartphone shipments in Indonesia fell 10% year-on-year in the second quarter of 2023 as macroeconomic headwinds continued to weigh on demand. The increase in shopping activity during Eid al-Fitr in April was also lower than last year. Promotions such as price discounts, bundled offers, installments, and trade-in programs failed to have the desired impact on sales. Consumers' buying interest has shifted to accommodate rising prices of commodities such as fuel, household and personal products, as well as services such as travel offered during the holiday season.
The characteristics of the Indonesian market are as follows:
- Indonesian smartphone shipments declined in the second quarter of 2023 due to macroeconomic headwinds.
- OPPO surpassed Samsung with a 21% share to regain the top spot.
- With the exception of Infinix, major OEMs saw declines. Infinix's shipments increased 17% year-over-year.
- In the second quarter of 2023, Xiaomi's shipment decline slowed to 12% year-on-year.
- 5G smartphone shipments in the sub-$400 price segment increased 11% year-over-year.
2022Q2 vs 2023Q2 Indonesia Smartphone Monthly Report, Source, Counterpoint
In the second quarter of 2023, OPPO regained the first place in the market with a share of 21%, mainly supported by its A17 series low-end models. The brand continues its aggressive marketing campaigns, with models such as the Reno8 T series and Find N2 Flip released last quarter having a spillover effect on its market awareness. The Galaxy A04 series has made a significant contribution to Samsung's sales, limiting the brand's shipment share decline to just 1%.
Among the top OEMs, only Infinix's shipments increased by 17% year-on-year. The brand focuses on the sub-$200 price range, offering better specs in its models. In addition, Infinix actively conducts marketing activities to increase brand awareness and awareness. Its newly launched products, such as the Note 30 series, Hot 30 series and Smart 7 series, have contributed significantly to the brand's overall shipments.
Xiaomi's shipment decline slowed significantly from 47% year-over-year in the second quarter of 2022 to 12% in the second quarter of 2023. Recent initiatives show that Xiaomi has been working hard to strengthen its supply and distribution. The OEM made strong marketing moves during the quarter, such as new product launches and adjustments to discount programs. The performance of Xiaomi's sub-brand Redmi is mainly due to its newly launched models, especially Redmi A2 series and Redmi Note 12 series.
5G smartphone shipments in the sub-$400 price segment in the second quarter increased 11% year-over-year. Major OEMs in this segment include Samsung (its Galaxy A14 5G, A23 5G, and A34 5G series) as well as Xiaomi (its Redmi Note 12 series). The new iQOO Z7 5G series has also joined this segment.
Q2 Philippine smartphone market: shipments down 20% year-on-year
Also according to Counterpoint, smartphone shipments in the Philippines fell 20% year-on-year in the second quarter of 2023 due to a combination of high consumption taxes, higher production and distribution costs due to utility privatization, and weak pesos.
The key features of the Q2 Philippine market are as follows:
- Philippine smartphone shipments fell 20% year-on-year due to persistently sluggish demand due to factors such as high taxes and inflation.
- Xiaomi rose to third place with the success of the Note 12 series and 19% year-on-year shipment growth.
- Back-to-back launches drove TECON's year-over-year growth rate to 73%.
- High-end buyers shook themselves off rising costs, driving the segment up 26% year-over-year.
- 5G smartphones under $200 are up 25% year-over-year.
Source: Counterpoint
Many major brands saw significant declines during the quarter. Although Realme continued to maintain its position as the number one brand, shipments fell 37% year-over-year and its market share fell to 17.3% due to limited product launches and weak demand for smartphones. The brand was able to maintain its number one position, thanks to the popularity of its C55 model, which was also the best-selling model in the market in the second quarter of 2023, and the C53 model, which was snapped up overnight at Lazada. Samsung's shipments in the second quarter of 2023 fell 26% year-over-year, again due to fewer models launched and limited promotions in the budget segment.
In the second quarter of 2023, Xiaomi surpassed OPPO in third place in the Philippines. Thanks to the positive response to the Note 12 series, the brand grew by 19% year-over-year. Xiaomi also held its annual fan festival in April, offering promotions, especially the newly launched Note 12 series and popular 12C models, further fueling its growth.
OPPO and vivo shipments fell 34% and 43%, respectively. Both brands participate in the June payday promotion, but the offer is more limited to older models to clear inventory. Infinix recorded marginal growth of about 3%, but its market share increased to 9.7%, making it into the top five brands in the quarter. Its cheap version of the Hot 30 series performs well, while the Note 30 series gets good reviews as a decent gaming phone.
TECNO performed well during the quarter, with shipments up 73% year-over-year, driven by fast, sequential model launches. The new Spark Go and Spark 10 series perform particularly well due to their competitive pricing.
Smartphone shipments priced below $200 and $200-$399 declined 22% and 16%, respectively, year-over-year due to constrained consumer spending. The $400-$599 segment saw an even bigger drop of 54% because major brands like Samsung and Realme launched fewer products.
However, the premium segment ($>600) grew 26% year-over-year and was the only segment to see year-over-year growth. Apple still leads this area with a 43% share. Powermac, the brand's official reseller, expanded its Apple Premium Partnership store to offer Apple customers an enhanced experience as well as offers and promotions. Other offers offered by retailers mainly revolve around 0% installment payments and iPhone bundle offers.
During the quarter, all price segments of 5G smartphones declined, except for the sub-$200 segment, which grew 25% year-over-year due to the launch of Infinix Zero 5G and Note 30 and TECON's Spark 10 series 5G editions. Telecom operators are struggling to keep up with operators like Globe Telecom, which recently rolled out 5G services at an additional 66 sites. However, 5G infrastructure development in the Philippines remains slow, mainly concentrated in urban areas such as Metro Manila, Cebu and Davao.
forecast
India: Recovery may begin in the second half of the year
While Q2 average selling price growth in the Indian market has stagnated, the premiumization trend is likely to continue as emerging markets drive a new chapter in its growth, with mid-range brands targeting the premium segment and premium brands aiming to sell more higher-priced models. As a result, global smartphone revenue and operating profit will recover from the second half of 2023.
Indonesia: boosted in the second half of the year
Counter expects Indonesia's continued macroeconomic recovery in the second half of 2023 to boost the smartphone market. Senior analyst Febriman Abdillah said: "Prices have become more important given the current macroeconomic environment, where commodity prices are rising. Offering incentives to consumers, such as discounts, bundled offers, bonuses, and trade-in programs, can be an option to keep the market attractive. These incentives may even be relevant to the mid-range and high-end segments. ”
At the brand level, Xiaomi's new move to cut prices this year may attract consumers and help the brand grow. As Infinix grows in popularity in the market, it is likely to grow further.
Philippines: Demand is likely to increase
Inflationary pressures in the Philippines have been declining, which has brought some relief to consumers. While we may see another quarter of year-over-year decline, demand is likely to increase, especially in the case of online and offline channel promotions. With Apple and Samsung launching high-end models in the next quarter, the high-end market is expected to perform well as well.
brief summary
Although the global smartphone market has declined significantly, the three emerging markets in India and Southeast Asia have not declined much, and they have different characteristics, especially the high-end market has performed well, and demand in the second half of 2023 is likely to increase, boosting market confidence.