Asean smartphone makers play to home market strengths

Lionel Messi starred in global advertisements this summer for Samsung Electronics but in Indonesia the Barcelona footballer is the face of Advan, a local brand that has taken a third of the country's handset market.

The marketing deal reflects the increasing clout of homegrown smartphone makers in Southeast Asia as they exploit local market expertise and connections. Cheap designs and the assembly processes of Chinese partners are helping them take large shares of their domestic markets from foreign rivals such as Samsung.

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Domestic producers in Indonesia, the Philippines, Thailand and Vietnam shipped a combined 6.4m smartphones in the third quarter of this year[2014], according to analysts at IDC, triple the volume a year earlier.

"The basic driving factors behind them are very much the same," says Mykola Golovko, an analyst at Euromonitor. "In some of these markets, where the distribution network can be difficult to figure out, local contacts and knowledge of the market can play a big role."

Advan launched its first smartphone early this year but has grown swiftly to capture domestic market share of 12 per cent in the third quarter, with local rivals Smartfren and Evercoss close behind, according to IDC. It estimates that Indonesian brands held 37 per cent of the country's market in the third quarter, more than quadruple the year before.

It is in remote eastern parts of the country that the local brands have done best, says Sudev Bangah, head of IDC in Indonesia. "They don't even try to compete in the top-tier cities", where consumers tend to favour high-status foreign brands, he says. But in the poorer east, "planes fly over the country and drop flyers. They say you can get on social media and it only costs $50. Samsung [does] have phones with similar features but it would be $100 and above."

Even so, the Indonesian brands are outdone by their counterparts in the Philippines, which control almost 60 per cent of that country's smartphone market. "We think and behave like Filipinos . . . we develop devices in light of the feedback we get," says Elijah Mendoza, head of product marketing at Starmobile, a smartphone maker in Manila.

For example, Mr Mendoza says Filipinos were ahead of the global trend in embracing selfies; Starmobile responded by launching phones featuring front-facing camera flashes, beating global peers to the market.

Mobiistar's flagship Knight X phone, for example, retails at 15,990 Philippine pesos ($357) - about half the price of Samsung's Galaxy S5, although both have an octa-core processor and 3GB of Ram memory, while the Knight X screen is slightly larger.

The price disparity is heightened by the fact that southeast Asian consumers often have to pay significantly more for Apple's or Samsung's high-end phones than counterparts in developed countries, says Gerard Tan, an analyst at GfK.

In the west, consumers tend to buy phones along with long-term contracts from telecoms operators that offer hefty subsidies on the handset, Mr Tan says. In contrast, phone sales in less developed Asian countries typically are made by independent retailers who do not offer subsidies.

Though most domestic producers are still struggling to win over brand-conscious elites in Southeast Asia's big cities, they are gaining ground among those with more modest incomes, millions of whom are still using old-fashioned "feature phones".

"We are a small brand starting from nowhere," says Carl Ngo Nguyen Kha, chief executive of three-year-old Mobiistar, one of the growing local brands that account for almost a third of smartphone sales in Vietnam. Founded in 2011, Mobiistar focuses on phones that can connect to 3G for a reasonable price.

Social media has helped the companies make the most of often slender marketing budgets. Mobiistar, for example, has 686,000 fans on Facebook.

Technological and software improvements have provided a further boost, says Ditaphon Chantraurai, head of product for I-Mobile, a Thai smartphone maker. Smartphones produced by I-Mobile in 2011 were error-prone and unstable - something Mr Ditaphon blamed on glitches in the basic version of Google's Android operating system, which proved a big problem for small producers without the resources to customise the platform.

But since 2012 Android's basic platform has been greatly improved, while high-performance, low-energy processors can be secured for ever lower prices, Mr Ditaphon says. I-Mobile expects to sell 2.8m smartphones this year, with its Thai market share of about 20 per cent second only to Samsung.

Companies such as Starmobile are expecting increased opportunities for sales in the region to follow from the anticipated launch next year of the Asean Economic Community, which advocates say will strengthen internal trade in Southeast Asia.

But this may be the high point for the region's nascent smartphone industry, warns Mr Golovko. There is a stern threat from Chinese producers, which are rapidly expanding their overseas footprint having seized a huge share of their domestic market, the world's biggest. Chinese brands accounted for 78 per cent of smartphones sold in the country in the third quarter, according to research by Canalys.

A further concern, Mr Golovko says, is the southeast Asian companies' heavy reliance on Chinese partners, adding that some are in effect licensing Chinese products for sale under their own brands. "That's not something that can sustain you in the long term or help you expand beyond the home market."

Bangladesh's Walton clears barriers to entering smartphone sector

Bangladeshi group Walton will next year release a smartphone with a price tag of $520 - equivalent to almost two-thirds of the nation's output per capita, writes Simon Mundy.

The bold move reflects the smartphone boom in some of Asia's poorest nations as well as the lowering of barriers to entry that have enabled small local players to dive into the industry, sometimes with significant success.

The new phone will be the flagship of Walton's range of about 15 smartphones, with the cheapest priced at around $50. Large research groups do not cover the Bangladeshi smartphone market in detail, but Walton says it is selling about 140,000 smartphones a month, giving it roughly a third of the country's market. It has also been exporting modest numbers of phones since late last year to countries including Nepal, Qatar and Saudi Arabia.

Fahim Rashid, a senior official in Walton's mobile phone division, says cheap pricing has been a key factor in the company's taking market share from global leader Samsung, its main competitor in Bangladesh.

Walton's mobile business also has enjoyed synergies with the other divisions of one of Bangladesh's biggest conglomerates. Consumers are comfortable with buying a phone from the company that produced their refrigerator, air conditioning system or motorbike, Mr Rashid says, while the group can rely on a large and tested distribution chain.

"We have our own shops all over the country," Mr Rashid says. "Samsung is an international brand; they don't know the inside of Bangladesh."

Like its peers in Southeast Asia, Walton depends on Chinese partners to design and assemble its phones, which run using Google's Android operating system. In an effort to temper this external reliance, the company is investing in in-house software development and assembling phones in Bangladesh, Mr Rashid says.

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