Rise of mid-range smartphones

The smartphone industry has been battered by Covid-19, but one bright spot is the strong demand for mid-range models

The half-time report for the smartphone industry makes for grim reading.

Market research firm IDC said last week that global smartphone shipments will drop by 18.2 per cent in the first half of this year.

This forecast comes on the heels of another grim set of statistics from IDC - smartphone industry sales declined by 11.7 per cent to 275.8 million units in the first three months of this year, compared with the same period last year. This is the industry's biggest year-on-year quarterly fall.

But Xiaomi and Vivo, which sell more affordable phones, have seen increased sales in the first quarter. Xiaomi saw gains of 6.1 per cent and Vivo 7 per cent, boosted mainly by sales in India.

IDC predicts smartphone sales for the whole of this year will slump by 11.9 per cent from last year.

With the world in the throes of the Covid-19 pandemic, which has caused countries to impose lockdowns, leading to rising unemployment and a worsening economic outlook, many consumers are not buying new smartphones unless their current ones are broken.

Mr Bryan Ma, vice-president of devices research at IDC, says: "With consumers unsure of where their next pay cheque is coming from, some would try to stretch the life of their existing phones, while others might opt for a cheaper 'good enough' phone."

MID-RANGE PHONES IN FOCUS

An example of a "good enough" phone is the Apple iPhone SE, which was launched in late April at the peak of the pandemic. Starting at $649, it is the most affordable iPhone since its predecessor in 2016.

It was also the most widely searched smartphone in South-east Asia, with 673,000 searches between March and April on price comparison website iPrice.

Other more affordable smartphones were also on the radar of Singapore users of the iPrice platform.

The website says there was a 178 per cent increase in searches by Singapore users for entry-level and mid-range models in April, compared with March. In comparison, premium smartphones saw a 44 per cent rise in search activity in the same period.

"We believe that Singaporeans were searching high and low for mid-range smartphones during the circuit breaker period," says iPrice.

Ms Lee Kay Ling, 27, who works in digital advertising, bought an Oppo Reno3 Pro smartphone for $749 last weekend. She says: "A new flagship phone will easily set me back $1,500 or more. I don't think the extra features justify the price, when phones that cost half as much can do the job just as well."

The gap between mid-range and flagship smartphones has narrowed in recent years. Mid-range smartphones, which range between $300 and $800, now often come with features typically found in top phones, such as multiple rear cameras, an Oled screen and an indisplay fingerprint sensor.

"Samsung and Chinese smartphone-makers have been aggressive in penetrating the latest technologies into mid-range and even lower-tier smartphones," says Ms Flora Tang, research analyst at market research firm Counterpoint Research.

Even 5G connectivity, now found only in flagship smartphones, is expected to appear in mid-range models by the end of the year, says Mr Ma.

But while the hardware of mid-range smartphones has become more competitive with that of high-end models, top phones are still king when it comes to camera performance, which increasingly relies on software to make a difference.

Operations manager Kwang Xuan Qing, 32, who bought the flagship iPhone 11 Pro Max earlier this year, says: "My biggest consideration for a smartphone is the camera. And the ones in mid-range phones just do not cut it for me."

Users like Mr Kwang are unlikely to shift to a mid-range model, say analysts.

Mr Jin Shengtao, research analyst at market research firm Canalys, says: "Singaporeans would rather hold on to their existing smartphones for a longer time, as it tends to be painful to downgrade to a less premium brand or model."

Echoing this sentiment is Ms Sahiba Puri, senior analyst at market research firm Euromonitor International: "While purchasing may be stalled for a while, demand for premium phones is expected to resurface as the economy reopens."

She expects the smartphone market in Singapore to shrink by 3 per cent to 2.7 million units, compared with the previous year, due to supply constraints and retail shutdowns as a result of the Covid-19 outbreak.

ONLINE RETAIL RISING

The nationwide lockdowns are also pushing the smartphone market to shift sales from brick-and-mortar stores to online platforms.

According to the Singapore Department of Statistics, online retail made up 70.6 per cent of all sales for computer and telecommunications equipment in April, up from 41.2 per cent in March. Singapore implemented its circuit breaker measures, which closed non-essential businesses, on April 7.

Counterpoint Research analyst Sujeong Lim says first-time online shoppers may continue using online retail platforms in the future after seeing the benefits - prices are lower and it is less time-consuming to buy online.

Another knock-on effect of Covid-19 is the conversion of smartphone holdouts to smartphone users.

Those still using a feature phone may be convinced to switch after seeing the need for a smartphone during a lockdown to access essential services such as food and grocery deliveries, says Mr Varun Mishra, research analyst at Counterpoint Research.

However, the increase in the number of employees working from home may lead to consumers in general buying fewer mobile devices, as they prioritise devices such as computers and monitors over smartphones, say analysts.

"After all, if one is already at home, then one would likely use a PC anyway," says Mr Ma.

This trend, says Mr Ryan Reith, programme vice-president at IDC, will result in smartphone-makers pricing their upcoming 5G models even more aggressively than expected prior to the pandemic.

A version of this article appeared in the print edition of The Straits Times on June 10, 2020, with the headline 'Rise of mid-range smartphones'. Print Edition | Subscribe