IDC Thailand: 2015 ICT Spending Growth will be Weaker than Usual...But Analyst Firm Points to Signs of Recovery and a New Era of Thai ICT by 2016
22 Jul 2015
Bangkok, 15 July 2015 – Thailand’s spending on Information and Communications Technology (ICT) is expected to show a weak annual growth of 3.8% in 2015 caused by moderating consumer spending and lackluster investment from businesses. This was revealed in IDC Thailand's ICT Spending Review 2015 based on comprehensive data across 11 different ICT markets tracked and forecasted in IDC Tracker® programs. The review includes spending on telecommunications, client devices, enterprise software, enterprise computing, IT services, and IT peripherals.
Still, Thailand remains the second largest buyer of ICT products and services in the ASEAN region, despite having to overcome serious economic and political problems in the past years. In 2015, Thai public and private organizations as well as consumers are expected to spend as much as US$20.7 billion in total on the aforementioned ICT markets.
Michael Araneta, country manager for IDC Thailand states, “2015 is relatively tough for Thai ICT. The growth of ICT spending has always been 3-8 percentage points above GDP growth, but this year, the gap is likely to be less than one percent. However, 2015 marks some permanent shifts in trends of the overall ICT market, especially in the adoption of Third Platform technologies like cloud, mobility and Big Data analytics. We expect a gradual recovery in 2016, but the coming year will see the start of a new era of IT, presenting ICT stakeholders with new contexts and challenges.”
Key findings of the report are as follows:
- In 2015, ICT expenditure is expected to be 7% of GDP. IDC’s 2015 forecast puts ICT spending on par with the agricultural sector. Of this amount, telecommunications services represents 45.5% while IT contributes to the rest at 54.5%. IT growth in 2015 is expected to be flat at 1.9% mainly due to structural changes and weak domestic demand. Telecom services, on the other hand, will see a healthy growth rate of 6.2% as both consumers and businesses continue to shift their communications spending into higher-value data services.
- Smartphone spending has been the main growth engine for consumer ICT spending. IDC’s study shows that the smartphone segment makes up almost 1/3 of consumer ICT spending and that the total amount spent on smartphones has been growing at two-digit rates for years. However, this growth will significantly slow down to single digits going forward.
“As smartphone penetration rate exceeds 50% of the total population and the price of handsets have become more affordable, the future growth rate is expected to decelerate,” says Jarit Sidhu, lead analyst for IDC Thailand. “But make no mistake, the smartphone market is still robust, with around 20 million units being bought per year,” Jarit says.
- More first-time consumers of other ICT products and services are expected down the line. “The affordability and flexible use of smartphones have made it the most popular smart connected device in history. Smartphone penetration is on course to reach 70% by the end of 2017,” adds Jarit. “For millions of people, the smartphone is their first internet-capable device. The emergence of this newly IT-literate and IT-enabled population unleashes immense opportunity for providers of services and applications.”
- The next innovative revolution is needed to sustain growth in the consumer ICT. IDC notes that growth in smartphone purchases is waning, alongside a contracting market for tablets. Consumers are craving for the next revolution, similar to that of the smartphone phenomenon which exploded eight years ago. Unfortunately, the supposedly next-big-thing today such as wearables are not gaining enough traction yet, mostly owing to limited use cases.
“Wearables are closest to being the next consumer’s hit, but there is no clear reason why the broader market would want it now,” says Jarit. “We expect that its time will come by the end of 2016.”
- 4G will be an enabler for the Digital Economy. Thailand telecom spending, driven by the high usage of mobile data, is forecasted to grow by 6.2% and 6.5% in 2015 and 2016 respectively. The commercial launch of 4G networks will be crucial to the growth of not only Thailand telecommunications sector but also the overall economy.
- There is little doubt that 4G networks will be an important foundation for the digital economy. The sheer speed of 4G can improve productivity, drive innovation, facilitate new services and eventually create new businesses,” says Jarit. “The Digital Economy relies on better broadband infrastructure so the impact will be far-reaching.”
IDC anticipates that strong demand for 4G will create critical mass adoption of mobile data services. Should the 4G auction take place within 2015, the significant uptake of 4G adoption can be seen as soon as the second half of 2016.
- Consumers have led the ICT market, but things are changing soon. Consumer spending has contributed at least 65% of ICT spending, but this portion is expected to decline in the long run. Commercial ICT, on the other hand, is building momentum as companies adopt 3rd Platform technologies in order to stay relevant and competitive. The segment is projected to register a 6.1% growth in 2015, a recovery from 4.4% last year. This is due to still-healthy demand for IT services and enterprise software.
The financial services sector continues to lead the adoption of next-generation technologies, led by some hefty investments on next-generation datacenter technologies, virtualization projects, all supposedly leading into greater use of cloud within the sector by 2016.
- The Digital Economy Master Plan is more than welcome, but it will only drive significant ICT growth by end-2016. If done right, the Master Plan has the potential to transform both the Thai economy and ICT sector. However, IDC expects the impact to materialize only by the second half of 2016 onwards.
“There are certain areas where we expect to reap early benefits in the next 12 months. These are primarily large-scale, infrastructure-related ICT products and services supporting government and large enterprises,” says Satianporn Suvansupa, market analyst at IDC Thailand. “The effects will trickle down to other areas eventually. Consumers will be among the last to feel the consequences, yet they are the critical mass that will keep the momentum going.”
IDC believes that the real game-changing part of Digital Economy lies in the emergence of new digital entrepreneurs. Satianporn continues, “With a better ICT ecosystem, we have a real chance of becoming a regional hotbed for innovative startups. Think of the next tech giant being started in Thailand.”
For more information about IDC Thailand's ICT Spending Review, please contact Phawadee Pongsupan at +662 645 2370 or firstname.lastname@example.org. To set up an interview with the lead analysts, please contact Sasithorn Sae-iao at +662 645 2370 or email@example.com.
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