The Regionalization of the Smartphone Market

One of the more interesting things I have been observing for a few years is how the smartphone market has increasingly become extremely regionalized. It is fascinating to analyze the dynamics that have allowed the smartphone market to go global but, in doing so, open the door for local brands and local companies to be the prime beneficiaries.

This is somewhat contrary to what happened in past consumer tech segments. Usually markets were mostly made up of global brands and those same global brands dominated many markets even where they were foreign owned. The tide is now shifting with smartphones and increasingly it seems domestic brands are gaining the edge over foreign ones. I’ve been anticipating several domestic brands to pass the regional leader (Samsung) for a few quarters now and in some markets it has happened already.

One of the primary catalysts for this shift is an increase in quality combined with a decrease in cost associated with smartphones. Smartphones annually are getting faster, better, and cheaper. Local brands are able to seize opportunity with this wave. Companies will be challenged to be both global and regional simultaneously. But local vendors only need to focus on their market and adapt to the rapid changes in their local domain. By integrating more tightly with regionally specific services than foreign brands are, as well as doing more to uniquely address the needs of their market, local vendors are positioned well going forward.

Xaomi Owns China, For Now

Xiaomi has been on a tear gaining significant quarterly market share in China. Their own company reports and several analyst firms have confirmed Xiaomi is not only in the top five vendors by volume in Q2 2014 but they have also passed Samsung as the leading smartphone vendor by quarterly volume in China.

Screen Shot 2014-08-12 at 9.43.46 PM

China is still the wild wild west when it comes to the smartphone market. The order can easily change, and change quickly, but one thing I believe will remain is it will be local vendors from China who will own the region.

India is Wide Open

India is about to ramp up in smartphone volume. India will be the second largest smartphone market before too long — 2016 by most estimates. The estimates for smartphone shipments in India in 2013 are about 44m. Estimates for 2014 are about 70m. Not bad annual numbers but considering China shipped 100m smartphones for the first time in Q2 2014, the potential ramp for India is massive and is just getting started. India still ships quite a large number of featurephones. That is why a data point from Counterpoint Research’s latest market monitor stands out. Counterpoint states Micromax, a local Indian branded handset maker, has passed Samsung to be the leading handset vendor in Q2 2014. Note this includes total volume of both featurephones and smartphones. But since India is still a large featurephone market, this data point is significant. As you can see from the chart below, Samsung is still the leader in smartphones in India, but the trends suggest soon Micromax will pass Samsung in smartphones as well.

Screen Shot 2014-08-12 at 9.42.44 PM

It is worth pointing out again that relative volumes are key to remember. Where China has typically averaged in the 85-90m range of quarterly smartphone shipments, India averages 13m approximately per quarter. I make this point to show how large the ramp in India still has to go and how that ramp, and the opportunities enclosed within it, could alter the OEM landscape in India dramatically over the next few years.

Apple Owns the USA

It should come as no surprise Apple is the dominant OEM in the US. But it fits our theme of domestic OEMs ruling their region.

Screen Shot 2014-08-05 at 10.51.46 PM

Here comScore gives us insight into US OEM marketshare. I don’t need to say much on this chart, except that watch how much it will change when the new iPhones come out.

A Big Markets

A potential implication of this is that a vendor strategy could be to control the big markets. It is unclear how Xiaomi can succeed outside of China and if they can ultimately compete with regional brands like Micromax in India. However, Xiaomi could have a healthy and sustainable business just within its home market. The same is true of Micromax. Perhaps the same is true of Apple. But there are local brands in Russia, Philippines, Brazil, and even Africa. Could the smartphone world be made up of many different regional players, each competing uniquely in their region and holding off foreign brands from expanding into their territories? This is something I’m very interested to watch.

Published by

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

79 thoughts on “The Regionalization of the Smartphone Market”

  1. The globals have Cortana, Siri, Google Now. How these Personal Assistants fare in India is a key to their domination. In India the situation is very complex, these Personal Assistants have to support at least three languages and culture behind them. As an example, I speak Gujarati at home, go to see Hindi Bollywood movies and my science, engineering and business language is English. On top of that some phone companies offer smartphones in some circles and some do not. Currently smartphones in India are mostly English with a few of them supporting Indic languages. So the situation in India will be fun to watch.

  2. This is the best thing that could happen to future technology, and with the New Android One Initiative this trend is just a beginning.

    Google should help India, Nigeria, Brazil, Australia, build a strong regional brand to compete with the Apple and Samsung of the world in their own market to reduce their dependency on foreign technology.

    1. I think it is much more risky going to bed with Google than relying on Samsung. That is unless, by “foreign technology”, you are only referring to hardware and not software/services.

      Look at how the great firewall has benefitted China’s Internet technology whereas Google dominates worldwide. That’s one good way to nurture a domestic software/services market.

      1. I understand your point but you have to consider that the regional market often have Local need that can best be serve by Local service provider on top on Android than a Global company such as Google who rely on scale to operate,

        Having the equivalent of Xiaomi, in many region is also a win for Google who much prefer to deal with a small/medium android partner than let say Apple, Microsoft or even a giant like Samsung.

        I do believe that even without the the great firewall China’s Internet technology would still thrive because of Language, cultural proximity and Local need.

        1. I understand your belief and I do think that it applies to a certain extent. However, the fact that Google is dominant everywhere except China still remains. And the reason why China is different is pretty unambiguous. And the void has been filled in with numerous app stores, Baidu in search, interesting browsers, etc.

          India on the other hand, for all it’s superb software engineers, hasn’t been able to nurture domestic companies that can rival Google at its core.

          1. Lack of funding and infrastructure development is the primary reason India hasn’t been able to nurture a domestic technology companies,

          2. OK. I understand your argument but I don’t think that it is the key.

            Just let me say that when Japan recovered from WWII and started to become an industrial power, the domestic industry benefited hugely from a very favorable exchange rate and high tariffs. There were also strict regulations on the amount of Yen you could spend abroad, etc. That enables domestic industries to grow up till the point that they could take on the US.

            In the Internet economy, Google offers stuff globally for free (in fact, it is subsidized by the huge Ad earnings that Google makes in the US). This makes exchange rates and tariffs ineffective. Low cost of labour in emerging countries is not an advantage against Google. Simply put, emerging countries cannot leverage their advantages against Google and other subsidized Internet services. It’s much harder for emerging countries to beat Google, etc. than it was for Japan to beat Detroit.

            A company like Google that has huge pockets and that dumps its products into emerging countries, is potentially a huge problem for domestic industries. Emerging countries have to be able to compete on price to stand a chance.

          3. you are right to some extent
            i do believe that goverment of those regional country need to
            introduce law to protect their own company from well fund giant like
            google, Apple, samsung, facebook, microsotf etc..

            however Google money and their free service haven’t prevented a lot of
            startup such as Facebook, Twitter, Box, WhatsApp, instagram, evernote,
            etc.. from becoming what they are today in their own backyard.

            there are no reason for a small startup to try to compete with google
            core service when they can be doing a better job building great app
            that can complement google offering on top of Android.

            Google doesn’t need to be on every android phone everywhere to be very
            the mobile industry is huge enough to sustain a lot of player from
            many region including those whose offering can become a huge threat to
            the giants

          4. The typical trajectory for an emerging industrial power is to copy. Japan, Korea and China all copied. Hard to see how you can win without copying.

          5. You’re right
            There’s nothing other than funding and infrastructures stoping the indiens, Brazilian, Nigerians from creating they own local version of whatsApp instagram evernote, PayPal, ebay, Twitter, candy crush cyanogenmod, etc in their own language with their own cultural touch and be successful.

          6. which is also true for a lot of a lot of well funded statup from the silicon valley area.

          7. To that list you can add Germany, France and to some degree the USA, though they also recived massive investment from the UK after the little dispute of 1812 had been put aside.

  3. What about Europe, and what about Latin America? I would be very interested in seeing similar charts for these areas.

    From what I’ve read, Apple is a very aspirational brand in China, where people are apparently extremely status-conscious. Is this different in India, or is the difference explained more by distribution models, or technical factors, or other cultural factors? What about the rest of Asia?

    An iPhone isn’t rationally a status symbol in North America, but it certainly is in China. Is China unique in the degree to which this is important?

  4. The mid to low end might be regionalizing but I don’t think the high end is. Or not yet. Apple owns the high end pretty much everywhere on the planet. The question is, can Apple hang on to that lofty and profitable perch even as incomes in the third world rise and smart phone owners start to move upmarket? Here’s a hopeful sign, the manufacturers that rule the luxury car market are the same the world over.

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