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Smartphone market In Australia to reach 90% penetration by 2020

There are nearly 19.3 million smartphone users in Australia, which is about 80 per cent of the total population. Also, nearly every one under 50 uses mobile to go online with a 90 per cent penetration rates.

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Definition / Scope

Mobile phones are handheld wireless device that are used to make and receive calls. Today's phones are not merely used for communication purpose but many other purposes such as web browser, games, cameras, navigation systems, etc. A mobile phone with advanced features similar to a computer is called a smartphone, while a regular mobile phone is known as feature phone.

Market Overview

Australia is one of the leading global adopters of the smartphone and 88 per cent of Australians now own one, with market growth being driven by older generations.

Telsyte estimates 4.8 million smartphones were sold in the second half of 2017, up 6 per cent from 2H 2016. Android devices made up 55 per cent of all units sold, mainly due to 2017 being a “replacement year” for Android users. There are now some 19.3 million smartphones users in Australia, with 8.6 million using iPhones and 10.3 million on Android.

Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet


Market Risks

  • Apple and Samsung dominates the Australian smartphone industry. Nokia, Sony, Huawei and HTC combined represent less than 10 per cent of the market, raising questions as to whether or not they will persist in such competitive and relatively small market.
  • One of the risks for smartphone vendors is that despite the continuous innovation from supplier's side the innovation may remain unnoticeable or valued by customers.

Top Market Opportunities

  • 60 per cent of the Australians watch internet videos daily and 36 per cent of those are on smartphones. Overall, 23 per cent of internet users watch online videos to learn something new. Videos are effective in being convincing which can create a loyal following for any brand.
  • The spread of smartphones and mobile devices is helping to increase the number of contacts between brands and consumers, by giving consumers new opportunities to connect to media content wherever they are and at an time in the day.
  • The amount of money spent on internet ads going to mobile ads has outstripped the amount spent on desktop ads. Mobile advertising expenditure in Australia has grown by 33 per cent on 2016 to a total of $2.6 billion in the year 2017.
  • The conflict between Facebook and Google to become the more popular Virtual Reality (VR) platform on phones will drive down prices and make headsets more affordable, opening up mobile VR to mass adoption, which will in turn present opportunities for branded content and in-stream advertising.
  • Brands have the opportunity to use mobile platform to communicate to consumers during shopping, socializing and travelling as well as when at their desk.

Market Drivers

Addiction

Australians are becoming addicted to their smartphones. 35 per cent of Australians check their phones within five minutes of waking up in the morning, with 70 per cent using phones during meal times with family and friends. The addiction to smartphone use has become so strong that many have developed dangerous habits of texting while driving.

Nomophobia

Nomophobia is an irrational fear of being without a mobile phone. This is one of the main driver for mobile industry in Australia. The commonness of smartphone separation anxiety and the related condition of fear of being offline, is especially prevalent among millennial.

Purpose

A lot of Australian consumers use smartphones for communication purposes, for instance: voice calls, emails, social networks, instant messaging apps or video calls. Most Australians aged between 18 and 25 use photo social media apps such as Facebook, Instagram or Snapchat. Mobile applications to play games were the most popular among smartphones apps in Australia.

Market Restraints

  • Excessive use of headphones affecting the hearing ability of users is a major limitation that restricts the market growth.
  • Competition among mobile manufacturers has been intense in recent years, but in Australia it appears to be a clear two-horse race. Apple and Samsung dominates the market, discouraging other small manufacturers.

Industry Challenges

  • The average cost of a smartphone in Australia has increased by more than 30 per cent since 2015. One reason for this increment is Australian smartphone users are now looking for models that have more internal storage, which generally cost more. Internal storage is now ranked the fourth most important feature when choosing a smartphone, which was sixth most important in 2016.
  • Due to higher investments in smartphones, the average replacement cycle for devices is now closer to three years than the previous two years. Furthermore, 44 per cent of smartphone users say the number one reason for not buying a new device that their smartphone is “still in good condition”.
  • Technical change and new product escalation have made mobile industry extremely dynamic, even if market shares are highly concentrated in the hands of very few companies.

Technology Trends

  • Biometrics and mobile payments are quickly gaining grip with mobile consumers and being incorporated into many authentication and payment processes. One in three Australians has a fingerprint scanner on their smartphones now.
  • More than three quarters of Australians now have a 4G connection, with peak headline speeds edging near 100 Mbit/s across parts of the country.
  • Apps has been the most disruptive innovations of the last decade. Apps are fueling smartphones penetration rates and becoming a key part of the mobile economy. App leads the way when it comes to playing games, streaming music, social networking and navigation.
  • A number of innovations have become prominent in the past few years that leverage mobile devices and connectivity to make payments simpler and valuable, these include digital wallets to automated machine-to-machine payments.

Pricing Trends

Consumers have showed their desire for smartphones and their willingness to pay more of them is growing. The smartphones price is rising past the average computer price. The bigger phones are becoming the norm and high-end handsets are treated like status symbols. The world's largest smartphone makers are setting sky rocketing price for their phones fueled by greater expectations, more advanced technology and demands for significant improvements every year.

In the case of the leading smartphone manufacturers, a top model Apple iPhone costs $580 or 46 per cent more today than it would have in 2014. The iPhone X is currently the most expensive phone in Australia priced at $1829. Samsung's top model Galaxy Note has risen by more than $110 every year on average, since the launch of its Note Edge in 2014.

Regulatory Trends

  • The Minister for Communications, Information Technology and the Arts has welcomed the introduction of inter-carrier IMEI blocking on all GSM networks, which is a world first initiative for Australia.
  • Suppliers of mobile phones and the associated equipment must ensure the phone and associated equipment complies with telecommunications regulations, electromagnetic energy regulations, electromagnetic compatibility regulations and radio communications regulations.
  • The obligations for all telecommunication items and mobile phones are mentioned in the Telecommunications (Labeling Notice for Customer Equipment and Customer Cabling) Instrument 2015.

Other Key Market Trends

  • Many new models were introduced in 2017. Some of the major product launches were Apple’s new iPhone X, iPhone 8 and iPhone 8 Plus models and Samsung’s new galaxy S9 and S9+.
  • The top three Android vendors in H2 2017 were Samsung, OPPO and Huawei. The iPhone8, 8 Plus, and 7 were the most popular iPhone models in 2H 2017.
  • In Australia, time spent with mobile internet has increased two-fold from 2013 (50.9 minutes) to 2016 (104.7 minutes) and is expected to rise to 130.9 minutes in 2019.

Market Size and Forecast

  • Android had continued its lead, with 55 per cent of all phones sold in 2017 using this operating system. Despite the launch of the iPhone X in the same year, Apple could not overtake its rival. This was due to the iPhone X’s surprisingly high price tag putting customer off. In the second half of 2017- when the X was released- the iPhones 8, 8 Plus and 7 were the best-selling handsets for Apple.
  • The Telsyte Australian Smartphone and Wearable Devices Market Study 2018 found overall year-on-year smartphones sales were up 11 per cent with 9.2 million units sold.
  • Though it was estimated that smartphones users will reach 16.69 million in 2017, Telsyte suggests that there are already 19.3 million smartphone users in Australia.
Smartphone mkt.PNGSmartphone users.PNG

Market Outlook

  • According to Deloitte’s 2018 Technology, Media and Telecommunications Predictions report, Australia will exceed global trends, with smartphone penetration in Australia expected to surpass 90 per cent by the end of 2018 while the rest of the world will take until 2023.

Technology Roadmap

  • The Internet of Things will ensure the incorporation of smartphones into day to day life. As voice assistant such as Siri and Google Assistant grow smarter and understand natural language and context, search and content discovery will be driven by voice rather than by typed keywords.
  • Australia is a world leader in the 4G and 5G mobile market ecosystem. 5G represents the next evolution in mobile technologies. It is expected to support immense increase in data rates at 1Gb/s and higher and reduce latency and enable networks to connect a vast number of devices.

Competitive Landscape

Mobile phone base station antennas on towers and buildings are spread throughout Australia’s populated areas, most of them being located in New South Wales, followed by Victoria and Queensland. While choosing a mobile operator, Australians not only pay attention to monthly costs, but also to the quality and coverage of the network. Telstra is the largest telecommunications company in Australia which owns most of the mobile phone towers in Australia in 2017. Further, it also holds by far the largest retail market share for all mobile phones.

Key Market Players

In terms of smartphone brands, Apple and Samsung are clearly leading. As of April 2018, Apple and Samsung accounted for more than 75 per cent of all smartphones sold in Australia. Nearly all of the smartphone subscribers in Australia use the iOS or Android operating systems on their smartphone. An estimated 2.06 million smart phones were shipped in the second quarter of 2017 in Australia. Apple was the most successful single vendor, with a 37 per cent share of the market. While Android has the larger share of the market, that is split between multiple vendors. The top three Android manufacturers are Samsung, OPPO and Huawei, none of which have as large a market share on their own as Apple does.

The below statistic depicts the smart phone market in Australia according to vendor’s market share from the first quarter of 2014 to the second quarter of 2017.

Vendors.PNGMs.PNG

Strategic Conclusion

Smartphones are becoming increasingly popular in Australia. Australians have adopted smartphones into everyday culture faster than consumers in many other developed countries. Australia continues to be one of the leading smartphone markets globally, with penetration at 83 per cent in 2016 and forecast to increase to 89 per cent in 2019.

Further Reading


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