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Friday, March 29, 2024

How a Filipino company built a smartphone brand

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Starmobile, a Filipino-owned smartphone and tablet manufacturer, started its operations from a single room in Pasig City in 2011, just when Filipinos began to replace their feature phones with smartphones.

Star Telecom Alliance Resources Inc., the full name of the company, decided to outsource the manufacturing operations to China, but adopted a Filipino brand to appeal to local consumers.  The strategy has paid off.

Starmobile president Ulysses Lao says the concept for smart devices is developed in Pasig City, but the manufacturing process takes place in China, where technology and parts are available. “We have a group here that develops the phones, test the phones.  That’s why based on feedback from clients, our quality and return rate is way below that of the industry,” Lao says.  Starmobile now sells around 50,000 smartphones in the Philippines a month, he says.

Starmobile president Ulysses Lao

“We have been growing leaps and bounds.  Just looking at our office space, when we started, we started with a room.  After a year, it was one floor.  Now we have 250 employees who are occupying a whole building of six to seven floors.  We are in Kapitolyo [Pasig], which is the center, in terms of distribution,” Lao says in an interview.

Starmobile has a wide range of products, from feature phones called Uno, tablets under the name Engage and entry-level Play smartphones to feature devices called Jump, mid-range Up series and high-performance Knight smartphones.

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It teams up with mobile service providers to offer free SIMs and ‘instantly connected’ phones and tablets.

“Majority or 40 percent of our sales are here in NCR [National Capital Region], but we are available nationwide,” says Lao.

Lao says the company has been operating on a profit since it opened for business in 2011, by creating a niche in the market. “Since the first year, we were already making money.  Our phone is on the high-end side.  We are not competing against other local brands where the margin is small.  So our phones have better margins than the other local brands,” he says.

“We were just lucky that when we started Starmobile, the trend was from feature phone to smartphone.  So we focused on the smartphones.  That’s why when it comes to the smartphones and gadgets, we are ahead of other local brands,” says Lao.

He says Starmobile’s business strategy focuses on good user experience. “We are focusing on lifestyle.  We don’t want to compete with other brands in terms of specs and price.  We feel that the consumer should enjoy the phone.  The user experience is more important than the specs and the price.  We would like to give value for money to the consumer,” he says.

He says while labor cost in China has risen substantially over the past several years, the company has kept its expenses manageable. “We try to keep our overhead low,” he says.

Sales, he says, have been rising over the past four years, putting the company on track to double or even treble its market share. “Our sales in 2015 are better than the previous year’s.  It is an improvement of around 40 percent up from 2014.  Offhand, the number of units sold should be around 50,000 units a month.  We are talking about smartphones only.  We don’t count feature phones in our portfolio.  In our product portfolio, smartphones should be around 70 to 80 percent of total.  Unlike other local brands, we concentrated on smartphones since the start,” says Lao.

Lao says Starmobile tapped both the traditional stores and electronic commerce to reach out to Filipino consumers.  “Ever since we started, we are actually the first local cell phone brand to deal with Lazada,”says Lao, referring to the country’s leading e-commerce platform.

“Basically, there are some phones where we give special discounts through Lazada.  Aside from that, we sometimes give vouchers.  If you buy from Lazada, it is cheaper.  It is cheapest to buy Starmobile phone in Lazada,” he says.

5.5-inch Full HD Starmobile KNIGHT X

Lao says the partnership with Lazada will continue in the coming years, as more Filipinos buy products online.  “Definitely, online is the way to go in the next few years,” he says.  “But we also need stores to showcase the products.  People may touch and feel the phone and then they decide to buy or not.”

“These people will go to the store, touch and feel, think about it and if they decide to buy, they can order through Lazada.  They might be able to get a better deal through Lazada,” says Lao. “We have been talking to Lazada.  We will be doing more projects with them. If we have special new phones, most probably we will launch in Lazada first, before we offer them to the public.

Lao says Starmobile has been on an expansion mode and hired IT executive Jerry Manus as chief operating officer.  “He joined us to head the operations of the company,” says Lao, referring to Manus, a former top executive of Nokia and Apple in the Indochina region.

Lao says Starmobile, the youngest player, currently accounts for around 3 percent to 4 percent of the mobile phone market in the Philippines.  “In the next few years, we hope we can increase it by a few percentage points every year.  If we get 8 to 10 percent of the market, we will be very happy, maybe in the next three to five years.”

There is a possibility that Starmobile will expand to other Southeast Asian countries such as Indonesia, according to Lao.  “For now, we would like to concentrate on the Philippine market first.  I think there is a lot of room of growth for us.  Once we are able to handle the situation here, expanding overseas is definitely a part of the plan of Starmobile,” he says.

“Right now, all phones are made in China.  Locally, we have our own product development department where we have some proprietary software.  There is also a possibility or talks of hopefully, doing something locally,” Lao says, referring to possible assembly operations of smartphones in the Philippines.

This is because the cost of operation in China is now more expensive.  “Labor cost in China is double or triple our labor cost.  Local manufacturing is a possibility.  I think Filipinos are capable.  On top of that, it will become a true Filipino phone.  If it is done here, we assemble it here, we sell it here.  The challenge is in terms of supply.  If we look at logistics and everything, it is something possible.  I think within five years, that is very possible,” he says.

Lao says Starmobile is currently doing a feasibility study on local production, through a facility located in an export processing zone, which can avail of tax incentives.  “Let us wait for the election.  If we do that, we will have to inject more investments,” he says.

Lao says competition among local and international players has been intensifying, but Starmobile is expected to keep its advantage over other players.  

“Right now, inside the industry, we call it elimination round.  There will be a lot of brands that will come in, but there will also be a lot of brands that will be fading out.  For us, we look at ourselves first.  We don’t compete with others in the sense that we feel our products are of value in terms of user experience.  I think, because of that, the millennials are wise enough to choose a better product,” he says.

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