Based on a report by IDC, high-end smartphone vendors like Apple and Samsung are likely to find it more difficult in 2015 to compete in the high-end smartphone segment.
Chinese and Taiwanese smartphone vendors will continue to drive down prices with devices that have equally high-end specifications but lower prices.
According to Daniel Pang, Asean senior research manager of the client devices and mobility division of IDC Market Research (M) Sdn Bhd, while plenty of Malaysians still prefer to own a premium brand-name flagship phone, many consumers are feeling the pinch after experiencing diminished returns on their smartphone investments.
According to IDC’s Asia Pacific Mobile Phone Tracker, Chinese and Taiwanese vendors held a 46% market share of the Malaysian smartphone market across the first three quarters of 2014, compared to only 19% in the whole of 2013.
The main reason for this is that Chinese and Taiwanese vendors are producing smartphones with relatively high specifications for a fraction of the price of similarly-specified phones from the big vendors like Apple and Samsung.
For example, highly-specified smartphones like the Huawei Honor 6 were sold at just RM999, nearly half the price of similarly-specified devices from the big vendors like Sony, Samsung and LG.
Pang predicts that Chinese and Taiwanese vendors will grow their market share to 65% in Malaysia by the end of 2015.
“The market has become commoditised and we’ve come to a point where most of the phones on the market are actually good enough for our daily needs,” said Pang.
However, a price war race to the bottom is very unlikely to happen as profit per phone from even the Chinese vendors are already very low, so prices will likely hold at about this level.
Nevertheless, this still puts vendors like Samsung, Sony, LG and Microsoft in a tough position as to whether they can maintain prices and still stay competitive or to cut prices and be dragged into the price war themselves.
Pang says that instead of merely competing on price, high-end vendors need to take a page out of the playbook of Chinese makers like Xiaomi and OnePlus and come up with clever or inventive marketing techniques to make the devices stand out from every other similarly-specified smartphone out there.
In Malaysia, for example, Xiaomi’s marketing campaign generated hype and desirability by limiting sales only to their online sales channel and in limited numbers.
Of course, fancy marketing itself will have diminishing returns eventually, but Pang says that this is unlikely to happen in the near term.
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