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Chitchat Triple Lens Camera Phone Coming - Huawei P20 Pro
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BUSINESS TRENDSSamsung's hopes for reviving Galaxy in China are under threat
Huawei, Xiaomi and Oppo match global leader with affordable, feature-rich devices
COCO LIU, Nikkei staff writerAugust 23, 2018 23:38 JST
For Sean Lin, who recently broke his iPhone 6 Plus, deciding what to buy next required about as much time as taking a selfie.
The 33-year-old marketing specialist in Guangzhou said he chose a smartphone that costs only two-thirds as much as the Apple device, yet performs just as well. Its Leica camera makes him stand out among selfie enthusiasts. More importantly, the phone helps him fit in with friends in his social circle.
What Lin bought was Huawei's Mate 9.
"Many friends of mine use Huawei phones and they all speak highly of the devices," Lin said. "In the past, buying a Chinese brand was considered a sign of being cheap or poor, but now we no longer think that way. In fact, having a smartphone from Huawei has become a status symbol in China," he said.
Lin is hardly alone, and the trend bodes ill for top global smartphone maker Samsung Electronics and its ability to reverse its decline in the world's biggest smartphone market and compete with Chinese rivals in other countries.
Last year, nearly 91 million Chinese -- equivalent to the population of France, Portugal and Greece combined -- bought Huawei brand smartphones, according to market researcher IDC. In a country where people used to give Samsung Galaxy phones and iPhones as wedding gifts, their choices have now expanded to include domestic brands.
In fact, for every five smartphones sold in China in the three months through June, only one did not come from the country's four big brands of Huawei, Xiaomi, Oppo and Vivo, according to Hong Kong-based Counterpoint Technology Market Research.
While Apple still held a market share of 9% in the world's largest smartphone market, Counterpoint's latest report served as a fresh reminder that Samsung has lost ground. Analysts say improved quality, better market access and an ability to connect with Chinese customers have helped Huawei, Xiaomi, Oppo and Vivo compete with the South Korean giant on all fronts, squeezing Samsung's market share in China from nearly 15% to less than 1% in just four years.
Analysts say much of the Chinese brands' success started with companies beating Samsung out of their home market, a development partly caused by the South Korean giant itself.
Back in 2016, the Samsung Note 7, designed to outperform the iPhone, turned into a safety hazard as batteries in some of the devices caught fire. The company was slow to start a recall in China despite the fact that the fires were reported worldwide. The affair hurt Samsung's sales in the country. According to a 2016 survey by Penguin Intelligence, more than half of 20,000 participants said their impression about Samsung soured after the recall, and only one out of two Samsung users in China said they would reconsider purchasing its devices. Among non-Samsung users, that figure was 13%.
A long diplomatic spat between Beijing and Seoul over a U.S. missile shield in South Korea added to Samsung's image problem, delaying a comeback.
As Chinese customers increasingly turned their backs on the South Korean company, local rivals rushed to fill the vacuum.
Samsung CEO Koh Dong-jin is aware of the challenge that lies ahead for the company in China. If the lukewarm response to the new Galaxy Note 9 received at its Aug. 9 launch event in New York is any indication, that challenge may have just gotten tougher. Speaking to South Korean journalists a day after the event, Koh expressed his determination. "We will never give up on the Chinese market because of its huge size," Koh said. "We must recover, and we will show what we are capable of."
Liang Yaguang, an analyst with Kantar Worldpanel, sees a hard road ahead for the company. "It is going to be quite difficult for Samsung to fight back anytime soon," Liang said. "The biggest challenge facing Samsung is that its chief competitors are local companies with a better understanding of China. Besides that, Chinese customers will also likely support Chinese brands."
Whether Samsung can make a comeback in China in the long run is unclear. But Huawei, Xiaomi and their peers have expanded the battlefield abroad, competing with Samsung and Apple in markets from Southeast Asia to India to Europe. Beijing-based Xiaomi, for instance, overtook Samsung in smartphone shipments to India during the last quarter of 2017 and has held the lead since, according to IDC.
"Chinese smartphone companies have definitely risen to the top," said Wang Xi, an analyst with IDC. Industry statistics show that of nearly 1.5 billion handsets shipped globally last year, about 358 million, or 24.5%, were made by Huawei, Xiaomi and Oppo. Back in 2013, Huawei and Lenovo Group were the only two Chinese names ranking among the world's top five smartphone vendors, with a combined market share of 9.3%.
Although Chinese smartphone makers lag behind their Western rivals in the quality of hardware, analysts say they have managed to win over customers with better software. For instance, almost every smartphone produced by Chinese companies has a pre-installed application that can filter out suspicious calls and protect users from potential phone scammers. Similar apps were once almost nonexistent in Samsung and Apple devices, although they have since followed Chinese rivals' lead in this area.
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Some Chinese smartphone companies have also built up their presence by tapping into markets outside Samsung's reach. Oppo and Vivo, two subsidiaries of Chinese group BBK Electronics, have sold tens of millions of smartphones each year largely by approaching Chinese villagers. Their newest customers include Liu Anxue, a rural entrepreneur from the village of Yujin, in northwestern China. Liu, disappointed by the performance of domestic brand LeTV, saw Samsung as an ideal replacement. But after a quick search, he changed his mind.
"Almost every town in my county has a place selling Oppo or Vivo, but Samsung dealers here are few and far between," Liu said. Although he could have ordered a Samsung smartphone online, the busy businessman said he simply did not want to wait. So he bought a Vivo instead.
But a wide distribution network is not the only reason Chinese smartphone makers have surpassed Apple and Samsung in domestic sales. Improved technology has also played a role.
Xu Peng, an online seller in Shaanxi Province, knows this from firsthand experience. Seeking better quality, the 27-year-old first switched from a Chinese brand to Apple, only to reverse her choice for the same reason.
"My iPhone's battery ran out really fast, so when Oppo introduced a new phone with a flash-charging feature last year, it immediately caught my eye," Xu said, referring to a patented device developed by the Chinese smartphone company that promises two hours of talk time with just a five-minute charge.
So far, the Oppo phone's performance has surpassed her expectations, Xu said.
"I think the quality of Chinese smartphones now is as good as Apple's," she said. "Perhaps Apple has some powerful features, but for ordinary Chinese, we just want to play mobile games or surf online. I don't really see a big difference between Chinese brands and Western ones in those functions."
And more Chinese advances are expected. Oppo has partnered with Stanford University to study how to apply artificial intelligence to smartphones. In February, Huawei announced that it would invest $800 million this year in research and development for 5G, or fifth-generation, high-speed wireless networks -- widely seen as the future of telecommunications.
But despite the rising prominence of Chinese smartphone companies, analysts say the race for the global market leadership is still on. "In the era of 3G, Samsung was the king and few had heard of Huawei, not to mention Xiaomi and Oppo," said Flora Tang, an analyst of Counterpoint. "In the days of 4G, Chinese smartphone makers have already dominated the world. No one knows what the future will hold in the world with 5G technology."
Samsung's Koh, who spearheads the company's smartphone business, made it clear that he wants a future with China.
"We are reforming our organization in China," he told the journalists in New York. "We are taking steps such as dispatching new people, reforming retail networks and opening new shops. We are seeing some positive signals and we are confident of seeing a recovery next year."
The stamps accumulating in Koh's passport suggests how serious he is about winning back Chinese consumers. "I visit China every month to keep a close eye on the market," he said.
But up until now, Chinese customers like Lin, the marketing specialist in Guangzhou, remains unconvinced. When asked whether he would return to Apple or Samsung, Lin seemed surprised by the question. "Huawei and Xiaomi are good alternatives. Why should I go back?" he replied.
Nikkei staff writer Kim Jaewon contributed to this report.
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Maybe soon.. Huawei phones will be operating on iOS..than its good
If you run this forum on an Android phone you are shit.
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