Despite expectations that the Southeast Asia 5G market was set for a prosperous year, recent reports have suggested the opposite, with demand for handsets falling in recent months. Inflation has been blamed for the slowdown, but could this loss of interest carry long-term ramifications for the Asian 5G market?
News of a slowdown has come from a recent report released by the technology research organization Canalys. The findings highlighted that demand for 5G smartphones was at a standstill, with research analyst Chiew Le Xuan noting that “5G devices experienced their first sequential decline to 18% of overall smartphone shipments.”
Notably, the report stated that the deployment of 5G in developing Southeast Asian markets had been “abysmal,” which may be another factor that’s impacted growth.
As the data shows, smartphone shipments across Southeast Asia fell 12 and 7 percent, respectively, across the opening two quarters of 2022 as macroeconomic issues conspired to undo much of the growth experienced in 2020 and early 2021.
Worryingly for the 5G market, this falling demand has led to consumers seeking out other qualities within the handsets they purchase. More cost-effective, practical aspects of smartphones, like battery life, storage, processor speed, and camera quality, have grown in popularity as the constraints of inflation have prompted more buyers to look at longer-lasting devices.
“Practical uses of 5G have yet to be seen, and is especially unnecessary for low-mid devices when 4G speeds are sufficient in day-to-day usage,” Chiew said.
Despite the slowdown, the 2022 Ericsson Mobility Report had anticipated that 5G subscriptions within Southeast Asia and Oceania would double within the year, from approximately 15 million at the end of 2021 to 30 million users. The report went on to suggest that global 5G subscriptions would go on to surpass 4.4 billion by 2027.
Given that the report was published in June 2022, it’s likely to have taken the ongoing rise of inflation globally into account, but it’s possible that Ericsson looked to the region’s commercial efforts in promoting 5G as a key indicator for growth. Canalys’ findings point to a more cautious market intent on avoiding what consumers deem an impractical investment.
Inflation Interrupts 5G Rollout
Further reports suggest that smartphone shipments are set to shrink by 6.5 percent on a global scale in 2022, owing to the emergence of record-breaking inflation rates across a wide range of economies.
Analysts at IDC anticipate that the sales of smartphones will drop year-on-year to $1.27 billion as a result of consumers avoiding more costlier purchases in the wake of the cost of living crisis. This has been further exacerbated by the war in Ukraine, which has seen energy prices throughout Europe and beyond soar.
“The supply constraints pulling down on the market since last year have eased and the industry has shifted to a demand-constrained market,” explained IDC research director Nabila Popal.
“High inventory in channels and low demand with no signs of immediate recovery has OEMs panicking and cutting their orders drastically for 2022,” Popal added. “The events of the last twelve months have shaved 150 million units off the market for 2022 from our forecast in the second quarter of 2021.”
Although Asia has performed better than many Western economies in terms of inflation rates, Japan and China, the world’s two largest smartphone markets, reached a 40-year high of 9.1 percent and a 24-month high of 2.7 percent, respectively, this summer.
In Europe, the range of 5G-ready smartphones that are available for purchase have reached unprecedented levels as marketing for the new generation of connectivity has been ramped up.
However, the impact of the war in Ukraine has seen forecasts for shipments to Central and Eastern Europe fall by 17.4 percent. With more consumers favoring more pragmatic handsets in the Asia Pacific region, forecasts for shipments have been scaled back to a drop of 4.5 percent, down from an expected growth of 3 percent. Furthermore, shipments in China are set to fall some 12.5 percent.
Smartphone Services Remain a Long-Term Play
Despite consumer weariness, the IDC anticipates exponential growth to occur among 5G enterprise solutions in a move that’s likely to see consumer adoption grow over a more long-term time frame.
As a whole, Asia/Pacific 5G enterprise services are set to attain a collective value of $8 billion by 2026, buoyed by a compound annual growth rate (CAGR) of 137 percent.
“It will take the telecom industry three to five years to fully develop 5G enterprise services, and equally the same amount of time for leading enterprises to conduct proofs of concept and trials before committing their business operations to depend on 5G,” said Bill Rojas, IDC Asia/Pacific Adjunct Research Director.
“But, the early trend is that private networking has received the most attention in all markets in the region due to the potential benefits for industries. Network slicing will be deployed initially in factories, warehouses, and Smart Airports, but eventually in outdoor settings such as Smart Ports, Smart Stadiums, Smart Campuses, and transportation hubs.”
Accommodation of 5G services is continuing to expand across Asian nations, including South Asian countries like India, which recently saw the telecommunications arm of Reliance Industries confirm that it plans to launch 5G services throughout major cities over the coming months, before expanding nationwide by 2023.
With this in mind, there’s little doubt about the eventual growth of 5G connectivity. Although consumers in Southeast Asia have become significantly more cautious about the handsets they purchase in 2022, it’s likely that we will see the continued emergence of the technology lead to more widespread adoption as the decade progresses.