In the vast tapestry of the global population, most would easily identify the top three countries: India, China, and the United StatesYet, a less familiar name among the populous nations is Indonesia, which boasts a staggering population of 280 millionWith nearly five million new births each year and roughly half of its population under 30, Indonesia is more than just a demographic giant; it is also rapidly evolving economically, forecasting a GDP growth of 5.0% for the whole of 2024. This burgeoning youth demographic and an accelerating economy position Indonesia as a primary destination for numerous domestic brands aiming to expand internationally.

Enter the race various brands have initiated in this vast archipelago, from popular bubble tea brands like Mixue Ice City to coffee chains such as Kudi Coffee and food brands like Taier Sliced FishChinese tech companies have also taken a keen interest, particularly in the mobile phone sector where growth is surging

The recent Counterpoint Research report dated November 14 revealed that by the third quarter of 2024, Chinese smartphone manufacturers dominated the Indonesian market with over a 70% market share, pushing industry stalwart Samsung to fourth placeXiaomi emerged as the leader with a 19% market share, followed closely by OPPO at 18% and vivo at 17%. Samsung occupied the fourth spot, while brands like realme and Transsion held the fifth and sixth positions, respectively.

This remarkable market share signifies that Chinese mobile brands have successfully navigated past the challenging initial phases and established a solid foundational presence in IndonesiaThe next strategic goal for these companies is to venture into more premium market segments, akin to what established brands like Apple and Samsung have done.

The hunt for high-end market share in Indonesia is proving to be a fierce battleground

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Recently, Honor, a brand that has been traditionally rooted in other markets, announced its ambitious entry into Indonesia"Our entry into Indonesia is not a spontaneous decision," remarked Honor's South Pacific President Li Jing"While 80% of the market is focused on low-end products (priced under $200), we see significant potential in the mid to high-end segment which constitutes roughly 15% of the market—about five million devices—mostly dominated by Apple and SamsungWe are keen to compete in this space." Li's words underscore the strategic insight Honor brings as it attempts to carve out its niche in a competitive field.

Yet, the challenge of positioning itself in Indonesia's high-end smartphone market is formidableWith an average monthly income slightly above 2000 yuan, many consumers gravitate towards smartphones priced around a thousand yuanNevertheless, Indonesia stands on the cusp of a consumption upgrade

Forecasts from the International Monetary Fund suggest that by 2028, Indonesia's contribution to global economic growth will climb to fourth place, and the middle-class market will expand exponentially.

For many brands venturing into high-end territories, the primary battleground has been their home market of ChinaHowever, brands such as OPPO are pivoting their strategies towards Southeast Asia, including Indonesia, as the next frontier for premium market penetrationOPPO’s Asia Pacific President, Shi Shuai, has previously noted that they already have substantial footholds in various price segments, particularly around 30% share in multiple rangesThe key gap identified, he explained, is in devices priced at over $800, which is where OPPO is now directing its focus.

Unlike other domestic brands that have established themselves in the Indonesian market, Honor enters as a relative newcomer without established infrastructure, factories, or comprehensive channel strategies in place yet.

However, Honor's entry is informed by success in neighboring Southeast Asian markets: In Malaysia, for instance, where Honor has rapidly ascended to become the third-largest brand by market share, trailing only Apple and Samsung within a short span of three years

Meanwhile, Honor's rapid growth in Singapore is noteworthy, alongside a global shipment growth rate of 17% year-on-year in the first three quarters of 2024, with overseas sales rising by an impressive 126% in the same period.

"We possess a wealth of retail experience that will underlie our strategies and long-term success in Indonesia," Li stated, revealing plans for regional strategic teams to bolster their operations across Malaysia, Singapore, and IndonesiaThe intention is to leverage profits from established markets to fuel growth in Indonesia.

Yet, venturing into a new market is not devoid of hurdlesAccording to market research firm Canalys, all smartphone brands in Indonesia will launch flagship models in 2024. In contrast, companies like OPPO and Samsung have managed to rise above competitors by making significant investments in high-end experiential stores essential for enhancing brand recognition

Competing in the premium market demands substantial investment in localization and advertising, which are vital for survivalMoreover, to meet Indonesia's TKDN regulations—mandating 35-40% local content—Honor faces challenges that could escalate operational costs and impact profitability.

As part of its long-term commitment to Indonesia, Honor plans to launch over ten brand experience stores in its inaugural year, with strategic collaboration already inked with Erajaya, the largest mobile device and electronics retailer in Indonesia"Erajaya boasts over 2,000 diverse store formats, and we aim to cover around 300 to 500 locations by our first year," Li elaborated.

To gain a foothold in the high-end market, nuanced product positioning will be criticalHonor is gearing up to unveil approximately 30 product models in 2025, spanning a range of categories including smartphones, tablets, laptops, and wearables, with an inclusion of foldable phones

"Indonesia is a market ripe with potentialWe will kickstart sales of our initial product batch in the first quarter, comprising mid to high-end devices across categoriesIn low-end competition, we aren’t chasing short-term sales or market share; instead, we’re focused on long-term growthOver the next three years, we aspire to be one of the top three value leaders in Indonesia's mid to high-end sector," Li asserted.

A notable void now exists in Indonesia's high-end market, particularly regarding industry giants Apple and SamsungYet Apple faces its own set of challenges in this region; its iPhone 16 series is currently banned due to not meeting the Indonesian government's local component requirements of at least 40%. This situation creates an opening that competitors like Honor aim to capture.

Interestingly, Indonesia’s ban on various smartphone models, not just Apple's, is rooted in its TKDN policy aimed at bolstering local manufacturing capabilities

Since 2015, the country has gradually steered towards local assembly of devices, and this push has extended to high-end smartphones as well.

Despite the complexities surrounding market entry and operational compliance, Li notes unequivocally that Honor's Indonesian strategy is not merely a reaction to Apple's recent challenges"Our venture into Indonesia has been in the works for quite some time, and the Apple situation is but a coincidental developmentOur strategy is rooted in focusing on the mid to high-end segments, prioritizing consumers and retail to genuinely strengthen our brand and product valueOne day, Apple will return, and I firmly believe that with our strategic resolve and clarity, Honor will one day stand shoulder to shoulder with Apple in this competitive sphere."

As to local production, Li revealed that Honor currently aims to collaborate with established, competent local factories