Why aren't Samsung smartphones selling in China?

By Baek Byung-yeul

Samsung Electronics is having a harder time selling its smartphones in China as more consumers there turn to iPhones or domestically produced products, industry analysts said Sunday.

To cope with falling demand in the world's second-largest economy, Samsung decided to close one of its two plants in the mainland and shift focus to Vietnam, India and other emerging markets.

The Korean tech giant offers consumers the latest in Android smartphone technology in its head-to-head competition with the iPhone.

While Apple is still enjoying its status as a premium brand, Samsung's smartphone is being threatened by fast-growing Chinese companies such as Huawei, Oppo and Vivo, who claim to have narrowed the technological gap between them and Samsung.

A series of disasters -- the exploding Galaxy Note 7 fiasco and the Chinese embargo following the THAAD crisis -- has made it harder for Samsung to operate in China.

The company attempted to regain consumer trust after the recall of Note 7 smartphones in 2016 but couldn't overcome the remaining anti-Korean sentiment among Chinese consumers over Seoul's deployment of a U.S. THAAD missile system in March 2017.

Samsung once had the largest share in the market with about 19 percent in China, where more than 400 million smartphones are sold every year, but the figure plunged to 0.7 percent as of the third quarter in 2018 with just 700,000 devices sold, according to market researcher Strategy Analytics.

Amid sluggish sales in China, Samsung said it decided to shut down one of its two smartphone factories there. A Samsung official confirmed Thursday it has informed 2,000 employees at its Tianjin factory that the firm plans to shut down the plant by the end of this year.

The move is to respond to the rising labor costs in China as Samsung has been putting its focus on emerging markets such as Vietnam and India. Samsung constructed the world's largest smartphone factory in Nodia, India in July 2018 and about half of its smartphones are manufactured in Vietnam.

Analyzing why Chinese consumers are less interested in Samsung smartphones, an analyst said the firm lost its value as a premium brand to Huawei.

“Chinese people don't think Samsung offers consumers a premium experience any more. They instead buy Huawei smartphones to experience the latest Android smartphone technology,” said IT columnist Ham Young-min.

“As recently as three to four years ago, Samsung established itself as a premium smartphone brand, offering the latest in smartphone technology. While many Chinese smartphone users are still purchasing Apple's iPhones, thinking they have something special in their hands, those who bought Galaxy phones in the past are now opening their wallets for Huawei.”

Ham pointed out Samsung has been losing its shares both in the premium-and budget-smartphone markets, failing to come to the table with special features that can catch the attention of consumers.

“Samsung is said it will adopt an in-display fingerprint scanner to its upcoming premium smartphone, the Galaxy S10, in early 2019, but Chinese makers have already launched smartphones offering the same feature,” Ham said.

“Also, a Chinese firm launched a foldable smartphone earlier than Samsung. Though there have been quality issues, Chinese people feel proud that their nation's companies are now leading the industry in terms of technology,” he added.

The rise of Chinese manufacturers may lead Samsung to lose its status as the world's largest smartphone maker. In the global market, Samsung is expected to sell less than 300 million smartphones in 2018, as Strategy Analytics reported the firm will likely only reach 298.5 million. This will be the first time for the firm to fail to reach the 300 million mark since 2012.

To increase its presence in China, Samsung unveiled the Galaxy A8s for Chinese consumers Dec. 10. The most notable feature of the Galaxy A8 is that Samsung adopted its latest punch-hole display technology called Infinity O. As the firm made an O-shaped hole on the front for a camera, the 6.4-inch smartphone offers fully-bezel-less display.

The new features are in line with what the firm's mobile chief Koh Dong-jin stated -- that Samsung will add more innovative technologies to its mid-range smartphones to attract the attention of consumers in emerging markets.

Powered by Snapdragon 710 chipset with either 6GB or 8GB RAM and 128 GB storage, the Galaxy A8 features three cameras on the back with a 3,300 mAh battery. While the price is not fixed yet, the phone is scheduled to be sold in China starting Dec. 21.

Samsung expects the punch-hole display will emerge as a new trend in smartphone design. A few hours after Samsung's announcement, Huawei also teased the Honor View 20 smartphone which also has a punch-hole display on the front. The Huawei phone will be available in January 2019.