These are exciting times in Indonesia’s handset market. As smartphone prices drop and interest in entry-level devices surges, there’s a window of opportunity for local brands to carve out their spot in a market dominated by Samsung.
The incentive to participate in this race is high. Data from market research group Counterpoint shows the smartphone segment is currently growing at 30 percent annually, while overall phone unit shipments remain steady. It means that Indonesians are now willing to spend on replacing their feature phones with smartphones, and are doing so in droves. Smartphone shipments reached 9 million units in Q2 2015, the study found.
A growing long tail of local and foreign brands is competing for first-time smartphone buyers, and the figures show that local brand Evercoss is in a strong position.
In Q2 2015, for the first time, Evercoss overtook Samsung in overall handset shipments – which includes feature phones and smartphones. The two brands have been in a fairly close race in the past three quarters. However, last quarter’s win for Evercoss can be in part attributed to Samsung’s significant losses.
The bulk of Evercoss’s overall market share is carried by feature phones. Looking only at smartphones over that same period of time, Samsung’s market share is still dominant. But Evercoss is slowly closing the gap, with a little over 1 percent growth for its smartphone shipments in the previous quarter as Samsung continues to drop.
Local brands in the smartphone era
This is an interesting development to follow. If Evercoss continues to nibble away at Samsung’s spot in the smartphone segment, it would prove that local brands can take their feature phone buyers by the hand and lead them into the smartphone era without switching brands.
‘Graduating’ to an entry-level Samsung from their local brand may have been the obvious choice for Indonesians until recently, but it’s not as simple as that anymore. A multitude of devices are vying for buyers’ attention. Since there is less room to stand out in terms of hardware and design – many lower-end smartphones are manufactured in the same Chinese facilities anyway – standing out is now a matter of highlighting the right details.
Evercoss CMO Ricky Tanudibrata is well aware of this. He’s directing the move to turn his brand from a commodity into an affordable yet aspirational product. In Ricky’s words, Evercoss wants to shed the image of being the “king of feature phones” to become the “AirAsia of smartphones.” AirAsia is his role model because the low-cost airline was able to make flying an option for a larger segment of people, and is perceived as the reliable option among its low-cost competitors.
Evercoss’s strategy, Ricky tells he has been to stay true to the lower-end price segment, and to collaborate with globally recognized brands to increase its own appeal. It was one of the partners for Google’s Android One release in Indonesia. (Other local brands selling Android One versions were Mito and Nexian). Evercoss also recently cozied up with browser-maker Opera in a co-branding campaign.
So far, the strong brand recognition – due to Evercoss’s ‘king of feature phones’ status – paired with a more global positioning seems to have done decently in terms of smartphone sales. Decently, but not great.
Take another look at the Counterpoint chart: next to Evercoss, local brands Advan and Smartfren as well as Taiwanese Asus deserve mention; all three have shown strong performance in smartphone shipments last quarter. Advan has been consistently strong with a broad range of smartphones reaching from the low end into the middle segment. Smartfren stands out with its recent Cyanogen-based Andromax Q series. Asus in particular had a successful run with the introduction of its Zenfone series at the beginning of the year and shot from nothing to 8 percent market share – which is much more impressive growth than Evercoss can boast.
To be a Samsung killer, Evercoss needs to innovate
Clearly, Evercoss’s status as most likely contestant to be a Samsung-killer in Indonesia is not set in stone. Ranks fluctuate, often tied to the release of new models. What we see is a game of mimicry and differentiation in a dynamic market. Evercoss’s next move, according to Ricky, is a partnership with Intel in its soon-to-be launched new line of phones and tablets. The popular Zenfone uses the same chipset.
Following releases such as Smartfren’s affordable IDR 1,3 million (US$81) Andromax Q, which supports 4G LTE, Evercoss badly needs to launch its own 4G smartphone in the low-price segment. Ricky says the launch of such a device is in fact imminent and even showed us a prototype, without going into the specs.
A major event in the mobile market last quarter was the passing into law of a much-talked about draft regulation: the ‘local content’ rule. In an attempt to limit the import of shelf-ready devices from China and elsewhere, the Indonesian government wants 4G LTE devices sold in Indonesia to be locally produced to a certain extent. The agreed figure is 30 percent by the beginning of 2017.How local brands are coping with the ‘local content’ law
Compliance will be a challenge for foreign brands who don’t have any production facilities in Indonesia (Samsung proved its commitment by investing in factories). But it’s also a challenge for brands like Evercoss, who don’t make it a secret that a significant share of their manufacturing process takes place in China.
“Obviously we think about this,” Ricky says. But he also doesn’t seem stressed out about it. “So far, it has not been finally decided how that 30 percent will be calculated.” What’s known is that ‘local content’ is going to include a range of factors, including investment, software, and labor, not just the hardware components. Ricky seems confident that Evercoss will be able to meet the standards when the time comes.
The upcoming release and subsequent adoption of Evercoss’s Intel-powered new generation of phones and tablets is definitely something to watch. If Evercoss’s strategy to continue to upsell new devices to their existing customer base works out, and if the ‘local content’ law keeps out some newcomer brands from abroad who find it too difficult to comply, we may have ourselves a Samsung killer.