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China remains a tough market to stage a comeback for world’s former top smartphone vendor Samsung
- Samsung has shifted its focus to the high-end segment of the mainland’s smartphone market, particularly with its foldable handsets
- The company has closed various production bases in China, including its last smartphone plant in Huizhou and last personal computer factory in Suzhou
Ann Caoin Seoul, South Korea
This article was first published by The Korea Times in a partnership with the South China Morning Post.
A resident of eastern Jiangsu province, 48-year-old Shen Ling used to own a number of Samsung Electronics smartphones in the 2010s, attracted by the devices’ well-designed appearance and popularity among consumers across mainland China.
“It was once an age of glory for Samsung in China, when so many of my friends were using the brand for its high-end market standing,” Shen said. “I also chose to buy a Samsung phone at that time for the same reason.”
But Samsung’s strong run in the world’s largest smartphone market took a disastrous turn in late 2016, when the company permanently halted production of its Galaxy Note 7 handset amid increased concerns about the device catching fire. That followed widespread criticism from Chinese consumers after several incidents where the handset’s battery exploded. In January 2017, the South Korean electronics giant admitted that those incidents were caused by battery manufacturing and design issues after an internal investigation.
“The harm to Samsung’s image was devastating,” Shen said. “It made me unsure if I could trust the quality of its future handsets.” Shen finally decided to switch to a Huawei Technologies smartphone in 2020.
Samsung was once the biggest smartphone vendor on the mainland, with a market share of about 20 per cent in 2013. The Korean firm ranked dead last among the market’s major handset vendors by 2018, with just a 1 per cent share and has since remained around that level.
The company’s fall in mainland China’s smartphone market was partly due to “a combination of inappropriate operations leading to a damaged reputation”, said Ivan Lam, a senior analyst for Counterpoint Research. He also indicated that major Chinese vendors – including Huawei, Xiaomi, Oppo and Vivo – rose to become strong domestic and international competitors.
But Samsung, which was unseated by Apple in terms of annual smartphone shipments worldwide for the first time in 2023, still has ambitions to return to its former glory on the mainland.
While Huawei has largely retreated from the Korean market primarily because of local consumers’ loyalty to homegrown Android handsets, Samsung is slowly trying to stage a comeback in China. Still, Samsung’s mission has become more difficult amid the mainland’s shaky post-pandemic economic recovery.
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The rise of Chinese smartphones
The rise of Chinese smartphones
“Samsung has shifted its focus to the high-end market in China, particularly with the introduction of foldable models,” Counterpoint’s Lam said. “The current strategy for Samsung in China appears to be characterised by conservatism, stability and continuity.”
Over the past few years, Samsung continued to launch new smartphone models on the mainland. It has also been working with some Chinese Big Tech companies, including Baidu and Tencent Holdings, to help step up localisation of its smartphones’ content ecosystem.
The reason Samsung did not fully leave mainland China was obvious: the country remains the world’s largest computing, smartphone, internet and semiconductor market. Continued operation in the vast market has become more important for the Korean conglomerate, as its sales have been hit hard by sluggish global consumer electronics demand.
In its earnings guidance released last week, Samsung said it expected to post its sixth straight quarter of declining operating profit. The company estimated that its operating earnings for 2023 plunged 84.9 per cent year on year to 6.54 trillion won (US$4.86 billion), while annual revenue was expected to drop 14.6 per cent to 258.16 trillion won.
Samsung profit tumbles 35% as chip weakness persists
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Samsung’s sharpened focus on the premium segment of China’s smartphone market has managed to attract a growing number of new users. Shanghai university student Cynthia Xia, for example, started using Samsung’s foldable Galaxy Z Flip 4 smartphone in 2022.
“I was totally attracted by the design and its flexibility to adopt customised settings,” Xia said. “I think no other brands are doing as well as Samsung in foldable phones.”
Still, Samsung’s outlook in the world’s second-largest economy is complicated by the ongoing US-China tech war, which has cast a shadow over the Korean firm’s supply chain network on the mainland.
Although Samsung, along with memory chip rival SK Hynix, last year secured indefinite waivers from Washington to ship advanced semiconductor-manufacturing equipment for their China plants, the tech conglomerate has been downsizing its production facilities and number of employees in the country.
Will closing last Samsung smartphone factory hurt China’s role in global value chain?
Will closing last Samsung smartphone factory hurt China’s role in global value chain?
Over the past several years, Samsung has shut down multiple production bases on the mainland, including its last smartphone plant in Huizhou, a city in southern Guangdong province, and last personal computer factory in Suzhou, a bustling metropolis in Jiangsu. The company had 17,891 employees on the mainland in 2022, which was in stark contrast to its peak of 63,316 in 2013, according to Samsung’s Sustainability Report.
The relocation of Samsung’s factories from the mainland showed how the company “strategically deprioritised the Chinese market, resulting in reduced investment in brand and channel building”, Counterpoint’s Lam said.
With Samsung’s recently launched Galaxy 24 series, which features artificial intelligence technology, all eyes are on how the company can help revive and bring change to the global smartphone market.
Still, that new handset is not expected to make a big splash on the mainland.
“None of my friends are using Samsung’s phones nowadays, so why wouldn’t I stick with domestic brands when they offer similar functionalities at lower prices?” Shen from Jiangsu said.
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