The global middle class is poised to explode over the next couple of decades and with it the demand for the transformative technologies that connect individuals to each other, to communities, and to knowledge resources across the world.

The Organization for Economic Co-operation and Development (OECD) is forecasting a growth in the global middle class from 1.8 billion in 2009 to 4.9 billion in 2030. This demographic, economically, holds the greatest purchasing power, accounting for 60% to 70% of all consumer purchases globally and 80% to 90% in more industrialized regions such as Europe, Japan, and North America. These regions have higher middle class incomes due to advanced skilled manufacturing and services. Since the mid-1950’s, these skills have been increasingly outsourced to regions with lower labor costs. This served to increase household income in emerging economies, such as Brazil, Russia, India, and China, giving consumers in these regions more disposable income than ever before.

The Rise of the Super-mid Market will Shadow the Rise of the Global Middle Class

This surging, historic rise of the global middle class, combined technological advancements that are on the cusp of allowing consumers to be constantly connected to everyone and everything, has led to the evolution of a new market structure: The Super-mid Market. First identified and named by MediaTek’s CMO Johan Lodenius, the Super-mid Market represents a sea change in global access to technology. The ‘mid’ refers to the surge in the middle range of electronics products, both in volume and variety, that will hit the market between now and 2030; and, the ‘super’ reflects the unprecedented volume of products that will appear in this category. The Super-mid Market therefore is the new market structure for the electronics industry: An abundance of affordable, middle-tier devices with top-tier technology that will connect and enable the vast majority of consumers in the rising global middle class – some of whose first experience with electronics will be through smartphones and the Internet of Things (IoT).

The rising global middle class is a reflection of economic shifts happening at both ends of the population spectrum and the result is a new electronics market structure. It is not simply due to the emergence of new economies but also encompasses efficiencies driving greater economic strength in mature economies, creating a more inclusive and flatter world.

This globalization is also changing the dynamics of the middle class. Particularly in Europe, Japan, and the United States, the industrialized middle class is both growing in number yet falling as a percentage of the global middle class. By contrast, developing regions, including Africa, Asia, Latin America, and the Middle East are growing dramatically from just 5% in 1980 to 46% in 2010 and are predicted to account for 79% or higher in 2030 and beyond. This also has an impact on perception, where a broader range of people in industrialized countries perceive themselves to be members of the middle class at both ends of the income range. In the Unites States, 56% of people earning between US$100,000-$199,000, and 22% of people earning less than US$30,000 consider themselves middle class . The result is a greater spread in purchasing power across both developed and developing regions, which is driving a more inclusive marketplace.

The Super-mid Market Will Drive Prices Down and Device Diversity Up

The electronics industry is on the verge of one of the most significant inflection points in its history, driven by the emergence of a new global middle class and the rapid transition to a connected society filled with a myriad of solutions, all enabled by mobile and wireless technology. This transformative technology has had a significant impact on society at all levels, enabling easy access to services such as banking and basic medical services, as well as allowing many regions to leap over the physical and financial limitations of installing complex infrastructures to facilitate this change. In addition, the shift to smartphones and tablets is empowering new and inclusive consumer segments with powerful and connected mobile computing platforms. As more and more middle class people around the globe gain access to information and knowledge resources, though Super-mid devices, they will have the same ability to affect change personally, regionally, and globally as anyone else. As the barriers to entry fall, individual empowerment will rise, creating a more informed society.

Even so, a middle class household with a daily income of US$10/day is unlikely to be able to afford to spend US$400 – the equivalent of almost two month’s wages – on a smartphone. Therefore, in order to create a more inclusive marketplace, the price points for many popular consumer devices will need to decline significantly to be affordable for these new consumers. Despite lower price points, the potential growth for the electronics industry in developing markets is still tremendous. The growth in annual smartphone shipments alone is projected to increase from just under a billion units in 2013 to over 2.2 billion units by 2030.

This surge extends far beyond smartphones and includes televisions and home entertainment products, navigation units, home appliances, white goods, and many more. Instead of creating technology and then selling it into a particular market, successful companies wanting to take advantage of the Super-mid Market will have to reverse traditional production practices and start with the consumer needs within a region and then work backwards to create technology that fits the demand and price point.

The Super-mid Market Will Reorder Technology Production on All Levels

The rise of the Super-mid Market points to a bold new direction for the technology industry, one that is increasingly competitive and focused on higher performance, lower power consumption, increased integration, and lower cost. While technical expertise can further advancements in all four areas, it must also be managed in a world with lower profit margins than in the PC or earlier mobile eras.

As with previous market inflection points, the companies that will survive and thrive in the IoT era will be those that can adapt quickly with new technologies, new business models, and a business structure that will support the lower price points and margins that will be associated with products that serve the needs and demands of nearly 5 billion middle class people who demand high-performance products and 24/7 access all at a low cost.

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