Samsung Electronics

Samsung’s China smartphone sales expected to be hit amid turmoil from Note 7 recall

Mainland survey finds 51.9pc of respondents plan not to buy Samsung smartphones in light of reported exploding batteries

PUBLISHED : Sunday, 25 September, 2016, 4:57pm
UPDATED : Sunday, 25 September, 2016, 10:40pm

Demand for Samsung Electronics smartphones in mainland China are expected by analysts to decline fast, as the international recall of its Galaxy Note 7 model casts a pall on the company’s sales in the world’s largest mobile phone market.

Samsung’s turmoil from its first large-scale withdrawal of a smartphone is largely predicted to benefit rivals Huawei Technologies, Oppo Electronics, Vivo, Xiaomi and Apple on the mainland, according to analysts and Chinese retailers interviewed by the South China Morning Post.

Tay Xiaohan, a senior market analyst at technology research firm IDC, said Samsung smartphone sales in the Chinese mainland “have been stagnant in the past few quarters” amid intense competition from major Chinese brands.

“The [Galaxy Note 7] global recall will further affect Samsung’s performance and reputation in China in the second half of this year,” Tay said.

She pointed out that Samsung had been off IDC’s top-five smartphone supplier ranking in the mainland since the second quarter of last year. Samsung was listed sixth last quarter, with about a 6 per cent market share.

Samsung called a halt to worldwide sales of its flagship Note 7 on September 2 amid reports of the device’s battery exploding when it is charged.

The initiative did not cover the mainland and Hong Kong, where Samsung claimed it sells Note 7 units with non-defective batteries from Chinese supplier Amperex Technology Limited.

Samsung, the biggest global smartphone vendor since the third quarter of 2012, attributed the overheating of the Note 7’s lithium battery to a manufacturing error at subsidiary Samsung SDI.

A study released last week by mobile internet consulting firm iiMedia Research showed that 51.9 per cent of 12,000 mainland survey respondents said they would not buy Samsung smartphones in light of the Note 7 exploding battery incidents.

Some 37 per cent said they would consider buying an iPhone to replace their Samsung smartphone, while 26.3 per cent said they would purchase a Huawei handset as replacement.

The Post’s informal survey of smartphone dealers in Huaqiangbei, the sprawling electronics marketplace and manufacturing hub in Shenzhen, said Note 7 sales were underwhelming even before the issue of exploding batteries became widely reported.

“The Note 7 recall has convinced many of my clients to purchase the iPhone 7. Others preferred Huawei’s P9 when choosing a domestic high-end model, “ said Tang Qi, a dealer at a shop in Huaqiangbei.

Another dealer said he had “zero sales of Note 7 last Friday, compared with two or three units a day early this month”.

The Note 7 recall has convinced many of my clients to purchase the iPhone 7. Others preferred Huawei’s P9 when choosing a domestic high-end model
Tang Qi, a dealer at a shop in Huaqiangbei

The cost of a 64-gigabyte capacity Note 7 in Huaqiangbei had dropped to between 4,900 yuan and 5,700 yuan last Thursday, compared to between 5,700 yuan and 6,100 yuan on August 31 and September 1. Prices for the 128GB iPhone 7 ranged from 5,680 yuan to 6,000 yuan.

Tarun Pathak, a senior analyst at Counterpoint Research, said the Note 7 recall will hurt Samsung’s share in the premium segment, which makes up nearly a quarter of total smartphone sales in mainland China.

“The models likely to benefit would be Apple’s iPhone 7 Plus, Huawei’s Mate series or Oppo’s R series,” Pathak said.

Neil Mawston, executive director at Strategy Analytics, forecasts Samsung to capture a 5 per cent share of China’s smartphone market in the second half of this year, down from 7 per cent a year ago.

“Samsung must clear up the mess from its Note 7 recall as quickly as possible, and look to rebuild with new products like the Galaxy S8 in 2017,” Mawston said.

Koh Dong-jin, the president of Samsung’s mobile communication business, said on September 2 that the company produced around 2.5 million Note 7 units and planned to recall all of those devices.

The United States’ Consumer Product Safety Commission reported last week that there were 92 reports of Note 7 battery overheating in the country alone, including 26 cases of burns and 55 involving property damage.