Smartphones are Under-Hyped, and Why it Matters

According to a CNN report in February 2011, smartphones passed a critical milestone in the year 2010. It was the first year that smartphone shipments exceeded shipments for personal computers.

Despite this major milestone, there was more to come. A year later, in February 2012, research firm International Data Corporation (IDC) reported that shipment for smartphones had further increased by an astounding 61.3% from the previous year to reach 491.7 million units globally.

In light of this tremendous growth, a high profile Silicon Valley venture capitalist, Marc Andreessen, made a remarkable statement in an interview on May 2012. He quipped that despite the rise, smartphones were in fact “under-hyped”.

Mr. Andreessen’s firm is well known for its early investment in internet giantsas such as Facebook Inc and Twitter Inc.  He explained his statement in a conversation with Wired magazine:

“We have never lived in a time with the opportunity to put a computer in the pocket of 5 billion people,” Andreessen says. “Practically everyone is going to have a general purpose computer in their pocket, it’s so easy to underestimate that, that has got to be the really, really big one.”

Under-hyped in Singapore? 

The proliferation of smartphones in Singapore is hard to miss whenever you step into an MRT or bus. According to research outfit Nielsen, Singapore has among the highest smartphone penetrations in Asia at 87%. This deep smartphone penetration has not gone unnoticed by a few listed companies in Singapore.

Take ComfortDelgro Corporation Limited (SGX: C52) for instance. The company’s bus subsidiary SBS Transit Ltd. (SGX:S61) launched its Intelligent Route Information System (iris) app on 11 April 2011. By the end of 2013, ComfortDelgro reported that the iris app (together with other apps) collectively received an average of five million queries a day for the next bus arrival timings. This was a two-and-a-half fold increase from two million daily hits in 2012.

Furthermore, ComfortDelgro’s Taxi Booking app registered a total of 2.13 million downloads, and recorded 13.3 million app bookings for 2013. This made up 41% of its total bookings received. Considering the population of Singapore is 5.4 million, all these are stunning statistics.

Threat or opportunity?

The reason why ComfortDelgro is acting proactively might be because its taxi operations is facing emerging threats. In July this year, local newspaper site myPaper reported that US technology company Uber began offering taxi rides that were at least 20% cheaper than current taxi rates. At the moment, it would appear that ComfortDelgro is large enough to hold its own, but what about other Singapore listed companies which may be facing looming threats from smartphone powered services?

For that, the chief executive officer for Starhub Ltd. (SGX:CC3) Tan Tong Hai might have the best advice for Singaporean incumbents:

“I think it is very important to embrace what people would term as disruptive technology. I have seen too many times — when you try to defend what you have, you end up losing everything. I am always mindful that while we have a thriving Pay-TV model, we have to experiment [with] the new TV.

I think the key word is experiment. We ought to experiment and not to fear. 

Because sometimes we fear that it may cannibalize your existing business. There is something we ought to learn that is to practice cannibalism because I think you’ll rather practice cannibalism on your own than to see your competitor eating up your business.

Similarly, Starhub is not free of threats in video content streaming through the internet on smart devices. In this case, Starhub is looking to enhance the capabilities of its traditional set-up boxes. Beside this, Mr. Tan also quipped about the need to “put the content to all the [smart] devices that you can think off” as the younger generation may prefer to watch content with an on-demand basis. Time will tell if Starhub is able to fend off its threats.

Foolish bottom line

The smartphone revolution may indeed be “under-hyped” at the moment. In a 2014 report from another venture capitalist Kleiner Perkins, total smartphone users globally was 1.6 billion versus total mobile phone users of 5.2 billion. In other words, it is possible that we are just less than one third of the way through this trend.

As Foolish investors, it is hard predict where this massive trend will ultimately lead to but at the same time, it is possible to ask whether the companies we, as shareholders, own would be affected by this trend.

If so, we should ask the right questions on how the incumbent would respond to it. Its future survival might just hinge on its answer.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.