The Hardest Time Is Yet To Come For Samsung In The Chinese Smartphone Market

摘要: Although Samsung remains one of the biggest smartphone maker around the world, it has already been kicked out of the top five smartphone maker list in terms of sales in China. In addition, it is reported that Apple is to release iPhone 7 this year and achieve several major breakthroughs in terms of appearance and performance, so Samsung might be going to have a pretty hard time then.

(Chinese Version)

It is reported that Samsung is to release Galaxy S7 and S7 Edge in Barcelona on Feb,21th, 2016. Some media agency revealed that the two new models would be priced at 700 euros and 800 euros respectively. It’s not surprising that the price of Samsung’s high-end smartphone models is as high as Apple’s iPhone. What’s really surprising is that Galaxy didn’t change its strategy even after all the previous three generation of products didn’t live up the expectation.

Although Samsung remains one of the biggest smartphone maker around the world, it has already been kicked out of the top five smartphone maker list in terms of sales in China. This is not surprising considering its arrogance in the past. However, it seems that there isn’t a market around the world as big as China is for Samsung to make up for the loss of the Chinese market.

Statistics from Canaccord Genuity suggest that Samsung accounted for 23.96% of the total sales in the global market, while Apple ranked the second and accounted for 17.2% in 2015. However, Apple still accounted for 90% of the total revenue in the global market, while Samsung took up most of the rest 10%. So Apple and Samsung remain the two biggest smartphone makers in the world.

However, in the background of the slowdown in the global smartphone market, both Apple and Samsung are having a difficult time. Although the sales of iPhone hit new record, Apple’s sales expectation for the next financial quarter has already dropped a great deal. This is also true for Samsung. As a matter of fact, such trend appears as early as the first quarter of 2014. However, Samsung failed to make any change.

In the wave of smartphone replacement, Samsung managed to surpass Nokia and become the number one smartphone maker in the Chinese market for several years. However, after Apple carried out its own big screen iPhone models, Samsung’s competitiveness has shrunk a great deal. In addition, Samsung has to face the increasing competition from Chinese smartphone makers, so gradually it was kicked out of the top five smartphone maker list in China.

While Apple treated China as one of its key markets, expedited the speed to open new Apple Store across China, its CEO Cook has also visited China and showed its willingness to interact with Chinese consumers for several times, Samsung has been sticking to its old strategy for a long time: focusing on low, mid and high-end at the same time. Of course, such strategy proved to be very successful for a while, yet in the face of increasing competition from Apple and from other Chinese smartphone makers, Samsung will be demonstrating to the world a family enterprise’s management system that is too rigid and hidebound

The most impressive strategy of Samsung is to start making big-screen smartphones. Although Samsung managed to lead the trend with its Galaxy Note series, it didn’t achieve any other breakthrough later on. Although Samsung tried to compete with Apple by releasing new high-end smartphone models shortly before Apple did for several times, the sales of Galaxy Note and Galaxy S was far from satisfactory.

At the same time, Samsung fails to dominate the low-end market since it’s unwilling to care about the needs and user experience of consumers in this market. That’s why Chinese smartphone makers managed to grab half of this market from Samsung, since many Chinese consumers would buy a smartphone made by Chinese smartphone makers when it is time to replace their old smartphones, believing that the RAM, CPU of Samsung’s smartphone models of the same price are poorer than those made by Chinese smartphone makers.

When I asked a friend who used two generation of Galaxy Note but turned to Google Nexus recently why he gave up Samsung, he said that there were so much difference between high and mid-end models, and the price dropped so quickly. It’s natural for the price of smartphones to drop a little bit as time goes by, but it seems that the price of Samsung’s smartphone models dropped too much and too swiftly compared to iPhone.

Chinese consumers might not care if a smartphone is too expensive, but if they can show off with it. Samsung’s big-screen smartphone models used to be very popular among Chinese consumers. In addition, Samsung’s W series, which is commonly priced at over 10,000 RMB, were so popular among wealthy Chinese and civil servants in third-tier cities. So Samsung did once know what Chinese prefer. But I doubt if Chinese consumers are still willing to use flip smartphones today.

In comparison, although iPhone is quite popular among Chinese consumers, few people would feel ashamed of using iPhone, just as every other people around him do. In 2013, the market share of Samsung and Apple reached 31% and 15% respectively, yet in 2015, in the face of the fierce competition from Chinese smartphone makers, Apple still accounted for 13.4% share of the market, while Samsung’s market share has already dropped to less than 8%.

1. Although the market share of Samsung in terms of sales is 7% higher than that of Apple, Apple accounted for 91% of the total revenue in the global smartphone market. The biggest competitiveness of Apple lies in its special user experience and brand value. Samsung has always grabbed consumers’ attention by the unique appearance of its smartphones, yet it seems that its latest model Galaxy S Edge isn’t as well-accepted as before. If Samsung failed to achieve any breakthrough in terms of technologies, appearance and applications, then it could be really hard for Samsung to keep its advantage in the high-end smartphone market.

2. Low-end smartphones may help smartphone manufacturers make their sales figure look better, they can’t bring much revenue to them. Although Chinese smartphone makers such as Xiaomi and Meizu compete so fiercely for the market share in the low-end smartphone market, they didn’t make much profit out of it. As the growth of the Chinese smartphone market is slowing down, the competition will get even fiercer. Although Samsung ranked the first in the global market owing to the sales of its low-end smartphone models, it couldn’t make much profit out of it.

3. According to the latest financial report of Samsung, its operating revenue dropped for the first time during the past five quarters. Due to the shrinking demand for IT products globally, it is likely that Samsung is to cut its investment in chips and semiconductors, which is certainly going to affect its smartphone business.

4. To boost sales and counter Apple’s influence in the high-end smartphone market, Samsung lowered the price of its smartphone models from time to time in the past two years. Although Apple announced recently that its sales was expected to drop in the first quarter of 2016, which is known as the slack season of IT products, Samsung still chose to release its new smartphone models now and boost sales by lowering the price.

5. After fierce competition in the low-end market, Chinese smartphone makers have started to enter the mid and high-end market. Since Apple’s iPhone is the dominant smartphone model there, Chinese smartphone makers have nothing to do but eye on the market share of Samsung.

The Chinese smartphone market is important because the sales in this market accounted for 45% of the total sales in the global market, and because 7 of the top 10 smartphone makers (in terms of sales) are based in China. To survive in the Chinese smartphone market, Samsung has got to become more down-to-earth and do in China and Chinese do. After all, Samsung is at an advantage with its overwhelming participation in the entire industry chain, so it should have outperformed its rivals who relied on contractors a great deal.

Apple is a great example for Samsung to learn from: meeting the needs of Chinese consumers, expanding offline marketing channels, adding functions that Chinese smartphone makers couldn’t afford to include in their smartphone models, allowing users to delete pre-installed apps, releasing smartphone models in the mid-end smartphone market, etc.

In addition, since Samsung has been investing in IoT, wearable products, VR, etc., it is likely that Samsung’s sales is to be boosted with the introduction of these new technologies. Still, the most important thing for Samsung to do in the long run is shift its strategy in time. It is reported that Apple is to release iPhone 7 this year and achieve several major breakthroughs in terms of appearance and performance, so Samsung might be going to have a pretty hard time then.

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[The article is published and edited with authorization from the author @Wen Gengmiao, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.




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