Rise of mid-range smartphones amid Covid-19 lockdowns, worsening economic outlook

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 stats from IDC - smartphone 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.

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 check 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. With a starting price of $649, the iPhone SE is the most affordable iPhone since its predecessor in 2016.

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

The iPhone SE, as well as 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 to March. In comparison, premium smartphones saw a 44 per cent increase 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.

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According to IDC, while the top three smartphone makers by market share - Samsung, Huawei and Apple - saw sales dip in the first quarter of the year, fourth- and fifth-placed Xiaomi and Vivo experienced gains of 6.1 per cent and 7 per cent respectively, boosted mainly by sales of affordable smartphones in India.

Mr Juha Winter, associate director at market research firm Strategy Analytics says that consumers want "value-for-money devices with good-enough specs at affordable prices", especially with mobile operators reducing handset subsidies in recent years and countries entering recession due to the Covid-19 outbreak.

He adds that only one flagship model - the Samsung Galaxy S20+ in third spot - was in Strategy Analytics' list of the top-six bestselling Android smartphones in the first quarter of the year. Samsung's mid-range Galaxy A51 ($448) was the most popular smartphone.

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 you back by $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 usually range between $300 and $800, now often come with features typically found in the top phones, such as multiple rear cameras, Oled screens and in-display fingerprint sensors.

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

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Even 5G connectivity, which is currently 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 have 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, 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 onto their existing smartphones longer 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 to 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.

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Counterpoint Research analyst Sujeong Lim says that 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 feature phones may be convinced to switch after seeing the need for smartphones during a lockdown to access essential services such as food and grocery deliveries, says Mr Varun Mishra, research analyst at Counterpoint.

However, the increase in 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, program vice-president at IDC, will result in smartphone makers pricing their upcoming 5G models even more aggressively than expected prior to the pandemic.

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This article was first published in The Straits Times. Permission required for reproduction.