Samsung’s market share in China is just 0.6%. Apart from a few niche models, the world’s largest phone maker basically doesn’t sell phones in the world’s largest phone market anymore. And in 2019, it also pulled the plug on its last smartphone manufacturing plant in the country once known as the factory of the world as well.
The absence of Samsung phones from China is particularly striking not only because it is completely unparalleled as Samsung has consistently been in the top three in every major market except for China for almost a decade now, but also because just a few years ago, the Koreans were the clear leaders in China too with a peak market share of almost 20%. China was Samsung’s market to lose and they lost it quite thoroughly.
Samsung electronics opened its first manufacturing facility in China in 1992, four days before Beijing and Seoul even officially established diplomatic relations.
The company was eager to enter China and like most foreign players at the time, it first viewed the country as a manufacturing hub with cheap labor used to make products primarily before export.
It didn’t take long however for China’s rising middle class to catch the attention of the Korean giant and by the mid-90s, Samsung started viewing the country as a major consumer market which it had to approach seriously.
Samsung was an early entrant in China, first with home appliances, and then with phones, bringing models like the A288 to China for example which afforded them some early success.
With its vast global device portfolio, the backing of Korean pop cultural icons beloved across Asia, as well as a few local celebrities hired for promotion, the Korean giants phones quickly took off and by 2013, Samsung seemed to be on track to win the Chinese smartphone market just as it did in most international ones too.
But then, in 2014, their shares started collapsing. In just two years, they dropped out of top five completely and by 2018, they practically became irrelevant. Samsung still sells a few phones in the country and they still have massive manufacturing plants open there too although primarily for components now, but the company smartphone sales never recovered and two years ago, it had also closed down its last smartphone factory in China. The same one that had opened in 1992 with the establishment on diplomatic relations.
A faster and more complete collapse from market leader to basically irrelevance is hard to imagine and it really raises the question of what went wrong? Well, the first thought many people have when they hear of a foreign company quickly collapsing in China, especially for tech companies, is to think about politics as the main source of trouble. But it didn’t seem like this contributed to Samsung’s larger problem in China.
Sure, the Chinese government has outright banned or quietly strangled many foreign tech companies like Facebook or Google in the country in the past and Korea and China as nations have had a long difficult history that definitely influences consumer preferences as well but either of these factors is not enough to explain the sudden and complete collapse of Samsung.
There are no major news reports of Samsung outright getting kicked out of the country or seriously bullied and traditionally hardware makers manufacturing inside China employing thousands of local workers and creating massive supply chain ecosystems locally, haven’t actually received much pushback in the past.
Apple, Dell, HP, and many others are doing just fine in China. Samsung had and still has many joint ventures there. State media basically gave them a standing salute as they exited, saying ”local companies should learn from the Koreans for being such great champs,” and the city of Huizhou for example was pretty devastated that a massive part of its economy was suddenly gone when Samsung decided to close its plant there.
And it’s a similar picture with consumer preferences too. While it’s suspicious that the only other major country where Samsung doesn’t have at least double digit market share is Japan which like China also had difficult relationships with Korea, but it isn’t enough of an explanation either as Samsung did just fine in China before 2013 and many of its other businesses such as TVs continued to do well in the country until today.
China was a politically sensitive country for Samsung for sure, but politics alone definitely wasn’t the main cause for their downfall, instead it was mainly business.
A closer inspection of market share figures actually gives us our first hints. See, Samsung’s decline started in 2013 and therefore was especially remarkable to observers outside of China.
The company was far from alone in its collapse. Looking at the detailed leaders boards in China in 2013, companies like ZTE, Lenovo, and Coolpad, next to Samsung and in the other categories there were players like HTC, Meizu, and more many of which had significant shares in the country at the time as well.
And of all of those top players, every single one, except for Huawei and Apple imploded right alongside with Samsung as they were collectively washed away by the tidal wave that was the rise of OPPO, Vivo, and Xiaomi, who were not only fierce competitors, but also companies who fundamentally changed how the Chinese smartphone market worked.
See, before the rise of the big five in China (Xiaomi, OPPO, Vivo, Huawei, Apple), the country was a relatively homogenous smartphone market not too different from other developing countries and that allowed Samsung’s broad global portfolio and generalist strategy to thrive there.
But the new entrants essentially split this market into three very distinct pieces, none of which Samsung actually felt at home in.
Xiaomi of course came first and asked, what if we just sold phones online instead of in physical stores and did so for half as much as the competition. We now take Xiaomi’s approach for granted but back then, it caught almost everyone off-guard and it catapulted Xiaomi to the number one spot in the country before most companies even had the time to react.
Some did end up countering Xiaomi eventually like Huawei did by creating its online focused brand for example, but most others and especially Samsung who at the time was unwilling to completely rework its global device portfolio and business model just for China, simply had no good answer to this rising threat and Xiaomi basically ran away with online and price conscious consumers.
Suddenly, consumers had many more choices and Samsung was slow to respond and didn’t offer a competitively priced device for until the A series in 2018. It took Samsung basically five years to react.
Anyways, at the same time, OPPO and Vivo bit off another massive chunk of the market for themselves by initially focusing almost exclusively on rural areas and less prominent cities. Selling phones in the vast and complex Chinese countryside at the time required being on the ground locally and in China when you deal with that market, you have to invest enormously in the distribution points and they just don’t have the relationships as the OPPOs, Vivo and previously Huawei had.
Samsung China, whose entire upper management at the time consisted of mostly of Korean expats, simply wasn’t well suited for going toe-to-toe with the locals in this environment so rural consumers simply got picked from their hands by scrappy locals like OPPO and Vivo and that meant that all that was left for Samsung were offline sales in the so-called tier 1 and tier 2 cities where the more affluent consumers lived.
Not a bad market by itself of course but 2014 was also a disastrous year for Samsung’s premium ambitions in the country.
Not only did Apple sign its first major carrier deal in the country just a year before, giving it great distribution, it had also released its first big iPhone which big screen obsessed Chinese consumers went crazy for.
Huawei also released their first really competitive flagship phone, the Mate7 and Samsung released the band-aid looking joke of a Galaxy S5, coming off its two most successful global flagship phones ever to this date, the S5 was simply a flop with Chinese city dwellers looking for a fancy flagship. And with that, Samsung also started losing the premium segments to Apple and Huawei.
In just a few years, this single country turned into three distinct markets with specialized brands focusing on each and Samsung simply didn’t adapt to do well in either. It wasn’t willing to fight Xiaomi online in a price war, its distribution wasn’t competitive enough in the countryside to take on OPPO and Vivo and its phones weren’t premium or desirable enough in the big cities where people quickly turned to Apple or Huawei instead.
Now, it is important to remember that these five wiped the floor with dozens of other brands in the country, not just Samsung. In 2020, they owned 83% of the market.
Samsung also had a few other issues beyond failing to adapt, such as poor localization. Since Google left the country in 2010, there is no play store, no Google services or apps or anything else pre-installed on Chinese phones from Google and instead the phone makers own apps and services are taking their place.
Samsung default apps and services that they half-heartedly built for a global audience, simply didn’t feel relevant to Chinese consumers who are sealed into an entirely unique internet bubble with different habits, different preferences, different language requirements, etc.
Then, to make things even worse, Samsung also had a few country-specific blunders probably the worst of which was around the Note 7, the phone that had fire issues. It was a PR nightmare everywhere around the world but in China, Samsung screwed things up even further when they decided that the Chinese Note 7s would be exempt from recalls.
Chinese customers were outraged that Samsung didn’t extend its global product recalls to China. Eventually, Samsung had to give in to enormous Chinese consumers pressure and recall all the phones, but the reputational damage was beyond repair.
All of those things added up the Note 7 crisis, the slow reaction to local competitors, the poor localization and more in a politically already difficult situation, eventually just crushed the company. It was death by a thousand cuts.
Now Samsung still holds a bit under 1% market share in the country and because of China’s scale, that still means at least a million units a year sold.
But if there’s a question of whether Samsung could make a comeback in China, it would be an expensive one.
Customers don’t really remember about Samsung phones and the reputation that we know of Samsung in the Western Europe or in the United States, ”high quality top tier phones”, Chinese customers aren’t even familiar with that rhetoric.
Consumers forget quickly and Samsung has many other global fights to focus their resources on rather than trying to rebuild its already lost China reputation. That said, the crushing defeat that they have suffered in China has at the very least taught them all the right lessons at the right time.
Once the big four Chinese players were done swallowing up their domestic market, they of course turned their attention to international markets as well and Samsung having learned from their crushing defeat in China, became probably the only Android phone maker that could withstand their expansion to global markets at least to some degree.
Looking at India in particular where Xiaomi and the various BBK brands essentially completely wiped out all of the competition as well, Samsung was able to resist and they were much more agile, adaptive, and better localized than they were in China.
They readily launched entire India specific series to meet local requirements. Their phones there are often much more aggressively priced than their international offerings. They had India-specific aesthetics and specs and they happily embraced both online sales channel to combat the likes of Xiaomi and also built out strong countrywide offline distribution and support infrastructure to fight against the likes of OPPO and Vivo.
But this time, Samsung didn’t just stick to their strategy and roll over and die when it didn’t work. They met their competitors head-on and they continued to be a major player and in Europe too the company not only remains on top of the charts but does so as the only Android brand with any significant market share left after the onslaught of the big four Chinese players.