With changes in technology and falling prices, demand for Internet services has grown rapidly in emerging market economies and smartphones have replaced personal computers in homes. Currently, smartphones outnumber personal computers in some EMEs. Meanwhile, the future of tablets depends on low income levels in some. Overall, technological leaps have accelerated Internet use in EMEs—certainly beneficial for sectors such as mobile Internet advertising and digital commerce.
Key Points
• Smart phones have gained huge market share in EME from 2010 to 2015, mainly due to strong internet demand, rising incomes and falling prices.
• In 2015, fourteen of the leading 25 EMEs had household smartphone ownership rates above 50.0%, down from 20.0% in 2010. In some markets, such as China, the penetration rate of smart phones (53.2%) in 2015 has already overtaken that of personal computers (PC), whose percentage was 48.1% in 2015.
• Meanwhile, tablets are also becoming more popular, but at a much slower pace and with huge variations in EME. The growth in household ownership of tablets in Malaysia has increased from 3.2% in 2010 to 23.7% in 2015, while in India the growth has been negligible – only 0.1% to 1.8% during the same period. A key reason this debt is rising is in many EMEs, where consumers are affluent enough to own only one device – but that’s a smartphone.
• Smart phones, especially tablets to a lesser extent, have shown unprecedented growth which is a clear case of technological leapfrog in EME as consumers have ditched PCs to access the web directly on smart phones. The consequences will be significant for manufacturers, service providers or sectors such as ecommerce and mobile internet advertising. Consumer spending on communications in EMEs will benefit from this device trend as it grew approximately 4.3% year-on-year (in constant, fixed US dollar terms) in 2015.
• The growing trend for smartphones and tablets in EME is expected to continue in the coming years, as mobile Internet subscriptions grow rapidly. By 2030, the average share of mobile Internet subscriptions among mobile phone subscriptions across all EMEs is projected to be 71.4%, compared to 41.0% in 2015. This makes low-cost smartphones and tablets attractive to the majority of price-sensitive customers in EME, they will find it worthwhile to continue to attract more consumers.
Unprecedented Growth In Smartphone Penetration In EME
As far as emerging markets are concerned, smartphones had the highest growth rate compared to other digital devices (mobile phones, PCs, laptops and tablets) between 2010 and 2015. Rising incomes have led to falling smartphone prices and rising demand for mobile internet:
• In 2010, household smart phone ownership rates were below 20.0% in most EMEs except the United Arab Emirates (UAE) and Saudi Arabia: by 2015, fourteen of the 25 major emerging countries had surpassed 50 percent smart phone penetration rates. Have taken, like China, Malaysia, Thailand, Hungary, Russia, Ukraine, Argentina, Brazil, Chile, Colombia, Saudi Arabia, South Africa, UAE And Turkey.
• It was observed that in Turkey, the growth in household smart phone ownership/ownership increased from 18.8% in 2010 to 68.6% in 2015, the highest increase among all EMEs. The growth in smartphone ownership in households during this period was highest in the UAE, followed by Saudi Arabia;
• According to 2015 data, the UAE had the highest mobile penetration rate in terms of smart homes among emerging economies at 71.0%, ranking seventh globally. In contrast, Egypt fared worse overall, with 27.1% of households owning a smartphone in 2015, followed by India at 34.2%.
• Given this tremendous growth, household ownership of smartphones now exceeds that of PCs and laptops in some emerging countries. For example, a total of 53.2% of households in China owned a smart phone in 2015, up from only 13.2% in 2010, while PC and laptop ownership rates in the same year were 48.1% and 39.0%, respectively. Emerging Asian countries such as India, Indonesia, Vietnam, Thailand and the Philippines also have a trend in the same direction with household PC penetration rates decreasing during the period 2010–2015.
There Is A Wide Gap In Tablet Access
Compared to smartphones, which posted strong growth for all EMEs, tablets were gaining some popularity in emerging markets, but at a much slower pace. Similarly, penetration rates for tablets vary significantly between EMEs:
• UAE and Malaysia are among the leading EMEs in terms of rate and growth.
• Ownership among households using tablets in the UAE and Malaysia as of 2015 was 32.3% and 23.7% respectively, a significant increase from 5.9% and 2.3% respectively in 2010. Income levels in both countries are high enough for many households to purchase a tablet as an additional portable device.;.
• Growth in tablet ownership was also significant in China, Poland, Argentina, Colombia and Saudi Arabia over the 2010–2015 period. For example, in Argentina, the number of households owning a tablet increased from 1.1% in 2010 to 17.3% in 2015.
• In contrast, tablet penetration has been low in many emerging markets such as India, Indonesia, Vietnam, Ukraine and Peru, due to low income levels and stiff competition from “phablets” to larger-screen smartphones. In India, the percentage of households owning a tablet was only 1.8% in 2015, an increase from 0.1% in 2010.
Implications
• Growing demand for portable devices supplied with mobile internet in EME is expected to ensure further growth in the future
• Consumer spending on communications in the coming years offers great opportunities for businesses operating in this sector. By 2015, total consumer spending on communications across all EMEs grew 4.3% in constant, fixed US dollar terms in the same year, compared to 3.7% the previous year. In some emerging markets such as Vietnam and Indonesia, communications was one of the fastest growing expenditure categories in the period 2010–2015.
• The unprecedented growth of smartphones and to a lesser extent tablets in EME reinforces this fact.
• Consumers in emerging market economies are outpacing their developed country counterparts by moving directly to wireless digital devices rather than purchasing PCs. For example, in South Africa, PC access remained limited to 19.6% of households in 2015, while 60.8% of households already had a smartphone. Therefore, it should be noted that such leapfrogging trends will have meaningful implications for Internet service providers and sectors such as mobile advertising, e-commerce and app markets within EMEs;
• New developments in wireless computerized devices have greatly enhanced the improvement of the Internet.
• Features in EME. Most of these consumers previously accessed the web from their smart phones, as they had no fixed line Internet infrastructure. In 2015 alone, there were 1.7 billion Internet users from across all these EMEs – an increase of 82.3% from 2010 figures. Increased access to the Internet is a sign of improved living standards in EMEs, enabling education, information facilities and services, and even business activities.
• Greater visits via wireless digital devices will significantly boost online retail markets in EMEs. By 2015, China had already become the largest Internet retail market, far ahead of the USA. It was the second largest online ad spend market globally during the same period. In India, the value of Internet retail sales grew more than elevenfold in real terms from 2010 to 2015.
Possibilities
• Future: High annual growth rates are expected for consumption of wireless digital devices in EMEs. Due to income growth, rapid urbanization and a young population that is highly technology savvy in most emerging countries, these trends are projected to continue for many years to come. In fact, household ownership statistics for smart phones in China are expected to approach that of feature or basic mobile phones in 2030, with 84.7% of households projected to have one. It is estimated that 65.4% of households in the UAE will have a tablet by 2030;
• A close relationship will see an increase in mobile internet subscriptions. The average share of mobile Internet subscriptions, as opposed to mobile phone subscriptions, across all EMEs is projected to increase from 41.0% in 2015 to an average of 71.4% by 2030;
• But still, high tariffs remain a major obstacle to the growth of digital devices and mobile Internet services in EMEs, especially compared to infrastructure and incomes in rural areas. As of 2015, 43.0% and 42.3% of the population in Vietnam and India respectively earned less than US$2,500 per year (in constant value terms). So budget smartphone and tablet makers will still find it easier to enter this huge low-income consumer segment in EME.
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