If a story begins with the opening line “once upon a time”, most readers make a couple of early assumptions. One: that the events being depicted happened in the days of yore. And two: that the tale is going to be make-believe.
In South Korea, the equivalent opening is “back when tigers used to smoke”. The origins of the phrase are disputed but seem to stem from the role the predator plays in local folklore. And for Samsung Electronics it must sometimes feel as if tigers were smoking when its phones were last popular with Chinese customers. The tale of its smartphone sales is a sorry one, with a chastening decline for its flagship Galaxy brand after the mid-2010s, particularly in the low-end and mid-range segments, where customers are the most price-sensitive. Within the space of a few years, its market share in Chinese smartphone sales fell from 20% to just 1% in 2018, mostly at the hands of Chinese rivals Huawei, Xiaomi, Oppo and Vivo.
The story of Samsung’s decline draws on ancient rivalries and modern geopolitics. But as we reported in WiC343, many of its local users were also incensed when it recalled its Galaxy Note 7 range in 10 countries but excluded China from the list in the autumn of 2016. Samsung explained that Chinese customers didn’t need to be concerned about a product fault (some of the phones were exploding) because a different manufacturer was responsible for the local batteries in their market. But consumers were still furious and the anger still lingers. As one domestic zimeiti blogger recently wrote: “Chinese Note 7 users were ignored when they asked for compensation. Consumers were disgusted by Samsung’s double standards.”
Then came South Korea’s decision to install an anti-missile shield called the Terminal High Altitude Defence System (THAAD) at the request of the Pentagon in Washington. This led to an angry response from Beijing and a series of unofficial boycotts of South Korean companies, goods and entertainment stars in 2017.
But that was then. Samsung is hoping that the approaching Year of the Tiger marks an auspicious time to regain lost ground in China. Indeed, its new global strategy is titled TIGER, an acronym that denotes its Chinese sales priorities: True number one across all categories; Improve market share; Gap to close with Apple at the premium end; Expand sales of ancillary products; and Record year.
In late 2021 Samsung set up a new Chinese sales team under CEO Han Jong-hee. In January it announced a strategic agreement with JD.com, which will sell Samsung phones across its platforms. Samsung also believes that it has an ace up its sleeve in foldable mobile phones. Since launching the Galaxy Fold in 2019, it has built up a formidable market share in the category, accounting for 93% of shipments worldwide in the third quarter, according to DSCC, a supply chain consultancy.
Overall, Samsung was the world’s leading smartphone vendor from June to September last year with 20% share, according to Counterpoint Research. Apple ranked second on 14%, with Xiaomi on 13%, followed by Vivo and OPPO on 10% each.
But can it restore its former status in China? There are two trends which may help Samsung to do better at the premium end of the Chinese market. As we reported in WiC569, Apple’s smartphone sales have flourished there as consumers upgrade to more expensive choices, notwithstanding Sino-US political tensions. In October, the Californian tech icon retook the top spot in sales of smartphones for the first time since 2015.
There are also the problems at Huawei, which has seen its market share implode since Washington blocked access to advanced semiconductors. Huawei has also released a foldable phone, the P50 Pocket. However, domestic tech website Wired Insights points out that the brand deploys 4G not 5G technology, as well as an inferior colourless polyimide (CPI) screen, compared to Samsung’s superior ultra thin glass (UTG) version.
The Chinese versions of Samsung’s Fold 3 and Flip 3 phones both deploy 5G too.
Samsung still has newer competitors to contend with. As the aforementioned zimeiti ‘Cute Comments’ has highlighted, gone are the days when “consumers purchased Samsung phones because they looked down on domestic operators and weren’t keen to donate their kidneys to pay for phones from Apple”.
Local brands now offer much worthier competition, including in the foldable format. After Samsung licenced its UTG display technology to OPPO last year, the Guangdong-based brand released its first foldable phone, the Find N, in December, for instance. Local review sites note how the fold in the screen’s design is less visible than Samsung’s own product.
Then there’s Honor, now a Shenzhen government-owned brand, following its sale by Huawei in 2020. On January 18, it also launched its first foldable phone, the Magic V. Tech website ZDnet says the Magic V has the highest specs of the lot, supported by Qualcomm’s Snapdragon 8 generation 1 processor. The phone is being sold to shoppers for Rmb9,999, more than similar models from OPPO and Samsung, which retail in the Rmb7,000 to Rmb8,000 range.
China’s Digital Finance website wonders whether local consumers have forgotten that Samsung even has a mobile phone brand. But new boss Han Jong-hee – former head of Samsung’s TV business – has a broader remit beyond smartphones, with responsibilities for visual display, digital appliances, health and medical equipment and networks businesses.
In South Korea, the last known tiger was shot a century ago. In China, a man was jailed in 2009 for killing one of the few surviving tigers in the wild, which was living close to the border with Laos. Yet while Samsung’s Chinese smartphones sales look like a similarly endangered species, its overall business in China has shown more resilience. Nearly half of Samsung’s NAND flash memory chip production is based in Xi’an. Chinese consumers may yet give the Samsung smartphone story a happy ever after – all the more so if the company makes a bold show of investing further in the country.
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