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‘New category’ of mobile internet emerges in Asia

Reuters/ AFR | July 24, 2013
Telcos, handset makers and content providers are buckling up for a bumpier ride as growth shifts to emerging markets, primarily in Asia.

‘New category’ of mobile internet emerges in Asia
That shift to low cost phones is a challenge to profit margins at the likes of Apple and Samsung which together sell half of the world's smartphones. Photo: Bloomberg

After five years of explosive growth sales of high-end smartphones have hit a plateau and the $US2 trillion industry - telecom carriers, handset makers and content providers - is buckling up for a bumpier ride as growth shifts to emerging markets, primarily in Asia.

While carrier subsidies have helped drive sales of high-end devices in mature markets, the next growth chapter will be in emerging markets where cost-conscious users demand cheaper gadgets and cheaper access to cheaper services.

This year, the number of mobile internet users in the developing world will overtake those in the developed world for the first time - growing 27 times since 2007, compared to the developed world's fourfold growth, according to estimates from the International Telecommunications Union (ITU).

"The centre of gravity in the mobile ecosystem is likely to shift from the United States and Western Europe toward Asia," Mary Ellen Gordon, director at mobile advertiser Flurry, said in an emailed interview.

That shift is a challenge to profit margins at the likes of Apple and Samsung Electronics, which together sell half of the world's smartphones.

Samsung has indicated its second-quarter operating profit will fall short of estimates as demand for high-end smartphones slows. Apple is also exploring cheaper iPhone models that come in different colours to tap the mass segment, sources have said.

Neither faces any kind of crisis. But, industry experts say, many users in mature markets who want a smartphone already have one. European smartphone shipments grew 12 per cent in January-March from a year ago, the slowest growth since IT research firm IDC started tracking the mobile market in 2004.

ASIA A DRIVING FORCE
Many of the new mobile users will be in Asia Pacific. The region will this year have more mobile internet users than Europe and the Americas combined, the ITU predicts. And there's plenty of room to grow: fewer than 23 in 100 in Asia are mobile internet users, versus 67 in Europe and 48 in the Americas.

"Asia will be the driving force of global growth for the next two decades," says Scott Lee, head of Asia at Appsnack, a division of US based digital advertising company Exponential Interactive.

The catch: much of this growth will come from users of devices that are up to 10 times cheaper than those in the developed world. Cheaper components, easy and fast access to latest versions of Google's Android operating system, reference designs from chipmakers and falling prices of the chipsets themselves are pushing this, says Frederick Wong, a portfolio manager at tech-focused eFusion Investment, who owns four smartphones.

 

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