Xi’an may be best known internationally as home to the Terracotta Warriors, but it’s less well known that the city is also home to some of Samsung’s biggest overseas investments. In late March the South Korean tech giant broke ground on its second semiconductor foundry there. The $7 billion investment, expected to be completed within three years, will double the Korean giant’s output of NAND flash memory.
These are the chips that are essential to smartphones. However, Samsung’s leading market position in these chips is not mirrored in Chinese usage of the smartphones that Samsung puts them in.
While Samsung dominates the Android-based mobile handset market in most parts of the world, it lags behind domestic rivals like Huawei, Oppo, Vivo and Xiaomi in the world’s largest smartphone market.
As Chinese firms churn out ever better phones with more innovative functions – and at very competitive prices – they are fast eroding Samsung’s edge. “A few years ago, Samsung was the leader in China’s handset market. But it has now been relegated to the boy that carries other people’s shoes,” says 51Touch, a news portal focused on the smartphone industry.
According to Strategy Analytics, Samsung’s Chinese market share slipped from 20% five years ago to just 0.8% in the fourth quarter of last year. The South China Morning Post also reports that no Samsung model has made the top-10 bestselling phone list in the past two years.
Moreover news surfaced this week that the company will close its Shenzhen plant to move its smartphone production base to Vietnam. The move suggests that the electronics giant is shifting its manufacturing business out of China where the smartphone market continues to slow, points out Lanjing TMT.
It is hardly coincidental that Huawei’s rapid rise has coincided with Samsung’s decline. “Amongst all the domestic brands, Huawei poses the biggest threat to Samsung. That’s because Huawei has since displaced Samsung in the higher-end corporate market. Its splashy commercials have also made an impact amongst consumers. Before long, Samsung will quickly slip into oblivion,” telecoms analyst Sun Qi predicted to Jiemian, a news portal.
The Chinese and Korean tech titans are battling it out not only in the marketplace but also in courtrooms. Last year, Huawei filed a lawsuit in Shenzhen claiming that Samsung had infringed two of its patents. In January, the Intermediate People’s Court of Shenzhen barred Samsung affiliates from manufacturing and selling any phones in China that use two of Huawei’s standard-essential patents (SEPs) which the judgment said were “essential” to the 4G LTE standard. Samsung is said to be appealing.
But apart from the intensifying competition and legal issues, many of Samsung’s problems in China are of its own making. Many Chinese consumers have complained that its system features are “not in line with Chinese aesthetics and usage habits”. For instance, although its phone camera takes high quality images, the company has not kept up with local demand for beautifying enhancement software used in selfies.
Others claim Samsung phones are simply not durable enough. Jiemian says many consumers are annoyed that their handsets become sluggish after only six months.
The troubled Galaxy Note 7 product line, along with the political fallout between Beijing and Seoul over the latter’s support for a US anti-missile defence system – which saw Beijing encourage the boycotting of South Korean products – was “the straw that broke the camel’s back,” reckons Jiemian.
But don’t write-off Samsung just yet. In an effort to resuscitate its fortunes in the China market, the electronics giant has tapped young actor Jing Boran to endorse the new Galaxy S9 model. The new handset features enhanced video and audio applications designed for social media savvy Chinese consumers. It is also mulling a release of a more affordable version of the handset, called the Galaxy S9 Mini, to target consumers in the mid-market segment, says Global Times.
“Even if Samsung’s mobile phones look defeated at the moment, the situation could be only temporary. It is very possible that once the giant wakes up, it will stage a comeback,” forecasts 51Touch.
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