Fierce competition takes heavy toll on smartphone market

Fierce competition takes heavy toll on smartphone market

Thailand's smartphone industry is expected to see more consolidation over the next few years. PATTARACHAI PREECHAPANICH
Thailand's smartphone industry is expected to see more consolidation over the next few years. PATTARACHAI PREECHAPANICH

Thailand's increasingly crowded smartphone market has wreaked havoc on handset companies' profit last year, with Japan's Sharp Corp becoming the latest victim to be quietly forced out of the market.

Chinese handset maker ZTE Corporation, meanwhile, disputed rumours that the company has decided to pull out of the Thai smartphone market due to stiff competition.

However, industry veterans believed more intense competition is around the corner this year.

Sharp confirmed that the company is now inactive in the Thai smartphone market without providing a reason after resuming its presence here just one month ago through Commtiva Technology, a Taiwan-based distributor of wireless communication products.

Oran Rungsereechaitrakul, former marketing manager of Commtiva (Thailand), said the company had just been verbally informed by its parent firm Commtiva that the group stopped selling Sharp mobile phones from Dec 30 last year.

Lorna Liang, country manager for device of ZTE Thailand, said the company remains strongly committed to the Thai market despite facing fierce competition.

"We are continuing business as usual. We have set long-term strategic plans to expand our presence in Thailand after entering the country less than two years ago," she said.

ZTE will still focus on the smartphone segment priced 3,000-7,000 baht apiece, where it has a particularly strong presence in Thailand, through distribution channels with mobile operators and retail shops.

ZTE will roll out 2-3 smartphone models by March.

Ms Liang also threatened to take legal action against those who spread or publish rumours regarding the company's alleged business closure before checking with the company, saying spreading false information will cause consumers to lose trust and confidence in the company.

According to internal reports by Huawei and Oppo, Samsung is clearly dominating the local smartphone market with a 40% share, followed by Apple with an estimated share of less than 15%, with Chinese brands Oppo and Huawei having a 12% and 8% market share, respectively.

The growth of Oppo was particularly impressive as it rose quickly to become the third largest smartphone brand in Thailand in terms of sales volume for 2016.

Consumers in this massive market are rapidly being won over by Chinese and household brands that incorporate much of the functionality of an Apple iPhone or Samsung Galaxy, but at a fraction of the price.

Handset makers are also facing an undeniable shift in consumption trends in the digital lifestyle age.

Samsung stayed on top of Thailand's smartphone market last year, despite being battered by the Galaxy Note7 recall and increased competition from China.

The Korean company recalled the Note7 in September last year after reports of overheating lithium-ion batteries. Replacement phones also ran into similar problems, leading the company to halt production of the smartphone in October.

Samsung will continue facing stiff competition from Apple in the high-end smartphone market, while simultaneously facing pressure at the lower-end from Chinese makers.

Overall, the Thai handset market grew by only 2% to 22 million units in 2016 -- the smartphone industry's slowest growth rate for a year.

Chinese brands Oppo, Huawei and Vivo posted strong growth rates in sales even as Samsung and Apple saw their volumes drop. Other smaller players and newcomers like Asustek, Motorola, Lenovo, ZTE and France's Wiko will pose competition to the giants this year, which would need to take measures to survive in the market.

Taiwan's HTC has already been forced out of the Thai smartphone market, while Sony and LG announced they will sell selective models here.

Pairoj Thavornsapanant, assistant managing director of TG Cellular World, a leading mobile distributor, said product design and quality as well as strong sales and distribution networks are becoming critical for smartphone companies to succeed and survive in the country's mature market.

"Consumer acceptance of a smartphone brand is another vital factor in business success," he said, adding that consumer acceptance is expected to take 3-5 years.

Leo Zhao, sales director of Oppo (Thailand), said the local smartphone market has already reached a mature stage as the smartphone has become a must-have device in the digital era.

Thailand's smartphone market is expected to grow at the same pace as last year's 2-3% to reach 25 million units in 2017, he said.

Mr Zhao said the handset replacement cycle will be faster with Thais expected to replace their mobile phones every 10 months this year, compared with 12-15 months in 2016, because consumers take advantage more quickly of smartphone advances.

The middle to high-end markets will continue growing faster than the entry smartphone market because consumers prefer superior user experience, faster connection and high-end specifications.

High-end smartphones priced over 15,000 baht accounted for 6% of total sales in 2016, up from 3.5% in 2015.

Entry level smartphones priced below 4,000 baht made up 40% of total sales last year, down from 50% in 2015.

"Thailand's smartphone industry will see more consolidation over the next few years and there will be less than 10 survivors in the local market," said Mr Zhao.

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