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Apple's is Entering Indonesia in 2017, one of the Top Emerging Markets with a Massive Growing Middle Class

1aa Indonesian smartphone market

 

On Friday Patently Apple posted a report titled "Apple to Begin iPhone Sales in the Republic of Indonesia in 2017," wherein we noted that Samsung's 26% market share in Indonesia would be challenged by Apple next year. Then later on Friday a new report by IDC was published which indicated that Samsung's market share had actually climbed to 32% in Q3 with Oppo quickly gaining ground with 16.7% market share as noted below.

 

2af X88 INDONESIAN SMARTPHONE MARKET SHARE Q3 2016

It's the Middle Class Stupid

 

In May of this year Patently Apple posted a report titled "As India's Middle Class Grows, Apple's Brand is Gaining Traction in a Country Swimming in Cheap Phones." I noted in the report that at present, the middle class in India is only about 22% - so there's a lot of growth in the middle class. It's the middle class that like to own brand names and so as their middle class grows, Apple will do better.

 

Days earlier Tim Cook told Jim Cramer in an interview that "the expansion of middle class occurring in China is unlike anything that has ever occurred in the history of the world, thus he remains optimistic in that region."

 

This is the key to Apple moving into any new market. If the middle class is on the rise, Apple will make the investment to enter that particular market.

 

So where is Indonesia's middle class within the top emerging markets? As noted below Indonesia ranks third behind China and India but ahead of the Philippines and Nigeria.

 

3af XX 88 Indonesia, #3 middle class potential

 

According to a major report published last year, Indonesia has the world's fourth largest middle class with 17.3 million households as of 2014, behind the USA at 25.3 million, India at 74 million, and China at 112 million. The report further forcasted that Indonesia's middle class would rapidly grow to 20 million by 2030.

 

At present, the current smartphone players in the top five chart are seemingly focused on the lower to mid-end of the market with prices in the $250-$300 and the $100-$200 tiers, none of which Apple participates in. Smartphones like the Samsung Galaxy J7 ($230), Oppo F1s ($235) and the ASUS Zenphone Selfie ($315 aprox) are the hot sellers. All three of these smartphones offer a 5.5" 1080p display at prices lower than Apple's entry 4" iPhone SE which starts at $400 with half the storage. 

 

Whether Apple will sit and cherry pick the very high end of the market or decide to aim a little lower at the beginning when they enter these emerging markets to build good will and strengthen their brand is unknown at this time.

 

One thing to keep in mind is that the median income in the US is $31,000, $29,500 in Canada, with the UK at $21,000 and Russia at $11,000. By 2030 both India and Indonesia will have their median income climb to $11,300 up from $6,300 in 2014.

 

So even though Indonesia will have a huge middle class by 2030 that will be in that nice sweet spot for Apple's higher end models, Apple is entering this market next year and may need to deliver a smartphone that's a little more competitive than it is today to make their mark. Will Apple try to close the price and feature gap in their 2017 smartphone line-up? Only time will tell.

 

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