Samsung Changes Tacks in Chinese Phone Market

Jay Yim, Nov. 13, 2019, 11:52 a.m.

Samsung is taking on the Chinese smartphone market once more despite a track record of dismal failure there.

The new strategy is to halt smartphone production in China and let agents handle sales. It hopes the launch of the 5G mobile network there this month will boost the appeal of its latest handsets. But the Korean giant must compete against formidable rivals Huawei and Xiaomi, which are now armed with cutting-edge products of their own.

China is the world's largest smartphone market, accounting for 26 percent of global sales or a staggering 366.3 million phones in the third quarter of this year.

But Samsung has painful memories. Back in 2013, it enjoyed a 19.7-percent share of China's smartphone market. But that plummeted sharply in 2016 after the flagship Galaxy Note 7 was plagued by exploding batteries, compounded by the rising prominence of Huawei and other Chinese rivals and a boycott of Korean goods. By 2018 its market share had sunk to just 0.8 percent, which fell even further to 0.6 percent in the third quarter this year.

Huawei currently dominates the home turf, paradoxically thanks to U.S. sanctions against the company early this year. Its share rose to 43.5 percent in the third quarter. Next come OPPO (17.2 percent), Vivo (18.1 percent) and Xiaomi (9.4 percent), with Apple in fifth with eight percent.

But now the market has taken a fresh turn with the launch of 5G on Nov. 1. China Mobile recently projected that the number of global 5G subscribers will rise to 1.6 billion, with China accounting for 33 percent, and Samsung does not want to be left out.

As part of its new strategy, Samsung closed down its last production plant in Huizhou, Guangdong Province in September. Instead, it decided to sell mostly low-priced models and entrusted a Chinese company with the manufacture of some 60 million handsets there, accounting for 20 percent of its total production.

Samsung said it will focus on introducing 5G smartphones and related technology in China after becoming the first company in the world to launch a 5G phone. It recently opened its first flagship store in China in Shanghai's bustling Nanjing Road. The two-story store offer a hands-on 5G experience zone and another space where customers can try out smart home appliances.

Samsung is rolling out a wide range of new products in China, unveiling the Galaxy Note 10 Plus and the affordable A90 in September and October, followed by the Galaxy Fold foldable phone last week. Next week, it will unveil the W20 foldable smartphone, which was exclusively designed for Chinese customers. Next year, it hopes to roll out six or seven new 5G phones in China.

The initial response among Chinese consumers has been positive. Samsung's share of China's 5G smartphone market rose to 29 percent in the third quarter to rank second after Vivo's 54.3 percent. The first batch of Galaxy Folds sold out in just five minutes when it hit store shelves early this month. But the real race starts now.

Huawei launched the Mate 30 5G phone early this month and is set to launch its first foldable smartphone, the Mate X, this Friday.

One industry insider said, "If Samsung fails to gain a solid foothold in China's 5G market, it will only be a matter of time before Huawei becomes the No. 1 global player."

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