Why is Samsung struggling in the Chinese market?

Daniel Chiang, Taipei; Vyra Wu, DIGITIMES Asia 0

Credit: AFP

Samsung Electronics has reclaimed the top position in the global smartphone market in the first quarter of 2024, driven by the strong performance of its Galaxy S24 series. However, despite its global success, the South Korean tech giant continues to struggle in the Chinese market.

According to IDC, Samsung shipped 60.1 million smartphones in Q1, capturing 20.8% of the market, while Apple shipped 50.1 million units, holding a 17.3% share. This marks a significant shift, with Samsung overtaking Apple to regain its market leader status.

The Galaxy S24 series, Samsung's first foray into AI-powered smartphones, has been central to its marketing efforts in China. The company introduced a "12GB RAM" basic model of the Galaxy S24 exclusively for the Chinese market, integrated with Baidu's AI "Ernie Bot" to enhance localization. Despite these efforts, Samsung's market share in China remained stagnant. Counterpoint Research reported that Samsung's share in China's smartphone market was only 0.7% in February 2024, a slight decrease from January's 0.8%.

Credit: AFP

Credit: AFP

In contrast, Chinese brands continue to dominate. Vivo led the market with an 18% share, followed by Honor at 16% and Xiaomi at 15%. Apple's performance in early 2024 was disappointing, and Samsung's AI-driven strategy failed to make a significant impact.

Samsung's position in China has eroded significantly since 2014, when it held an 18% market share. Various events, including the 2016 THAAD missile defense deployment controversy and the patriotic consumer movement amid US-China tensions in 2020, have damaged its standing.

By 2023, Samsung's market share had dwindled to 1.67%. The Galaxy Note 7 explosion incidents further eroded consumer trust, with numerous complaints about display quality and refund processes still visible on Sina's consumer reporting platform.

China smartphone market share trend(%)

China smartphone marketshare trend(%)

Source: StatCounter, DIGITIMES, May 2024

Analysts point to the high price of the Galaxy S24 series as a key factor in its lackluster reception. Priced at CNY10,199, the Galaxy S24 Ultra is more expensive than Apple's top-tier iPhone 14 Pro Max, which retails for CNY9,999. Given Apple's premium positioning, Samsung's even higher pricing faced criticism amid economic uncertainty in China.

The on-device AI features of the Galaxy S24 series, while enhancing convenience, have not provided a compelling enough differentiator. Features like real-time call translation and generative editing, available through various apps, failed to attract significant consumer interest.

The competitive landscape in China's AI smartphone market is intense. Vivo's X100 series, Oppo's Find X7 with "AndesGPT," Xiaomi's 14 Ultra with "Xiaomi AISP," and Honor's Magic 6 Pro with a 7-billion-parameter "Magic Model" offer advanced AI functionalities, overshadowing Samsung's offerings.

Samsung's foldable phones, once a differentiator, have also lost ground. IDC data shows that Samsung's share in China's foldable phone market was only 5.9% in Q1 2024, ranking fifth behind Huawei (44.1%), Honor (26.7%), Vivo (12.6%), and Oppo (9%). The Chinese market's robust supply chain supports high production volumes, with DSCC forecasting that Huawei will surpass Samsung in global foldable phone shipments in the first half of 2024.

China's foldable smartphone market

China's foldable smartphone market

Source: IDC, DIGITIMES, May 2024

To counter the fierce competition, Samsung's mobile division is considering expanding its foldable lineup to include a higher-end "Ultra" model and a more affordable "FE (Fan Edition)" variant. The budget model would reduce costs by downgrading processor, display, and battery specs while maintaining flagship camera quality, aiming for a 20-40% lower price point.

Improving the notorious "crease" in foldable displays is a top priority. Samsung Display plans to launch new foldable products in 2024 with advanced technology to significantly reduce creasing, using hybrid displays that combine the benefits of hard and flexible panels.

The high-end Fold6 Ultra, projected to be priced around $1,800, will feature Qualcomm's Snapdragon 8 Gen3 processor, a titanium frame, Corning Gorilla Armor display coating, and a high-performance camera. Whether it can significantly improve crease issues and address long-standing battery capacity complaints will be closely watched.

In the global market, Samsung's AI and foldable phones have propelled its resurgence. However, in China, the battle for market share remains fierce and far from won.