While being the uncontested leader in 2014, by 2020, Samsung had lost China entirely. From an 18% market share of the Chinese mobile phone market in 2014 to a measly 2% in 2018, by 2020, Samsung had virtually disappeared from the Chinese mainland market. What went wrong, and why should you care?
China maps our future mobile market.
You should care about Samsung's adventures in China because it's a fantastic story about tech global marketing and corporate strategy (or lack thereof).
More than 1.2 billion Chinese consumers are subscribed to a mobile service (about 83% of the population). It's a market where massive governmental investments push 5G, IoT devices are rising faster than any other market, and mobile platforms are often the default mode for shopping. But it's not only a massive tech-oriented market; it's, more importantly, a very mature market. Most projections indicate that China will "only" add up to 60 million new mobile subscribers by 2025.
In that regard, China is a fantastic template for business strategists. Like it did for many years, it maps out the future of our US and European markets (even regarding tech regulation and quenching monopolies' footprints–but this is another story).
What happens there matters for the rest of us.
What went wrong with Samsung
Samsung lost China within just a few years. From 2013 to 2019, Samsung went down in a rapid spiral of miscalculations, cultural lack of strategic awareness, and, above all, plain tone-deafness to the local market.
Here's the short version:
- Samsung is using Android and heavily relies on the Google app store worldwide. But Google exited China at the turn of 2010, and Chinese consumers no longer have access to this app store. Granted that you can consider WeChat as a de facto mobile OS in China, Samsung never cared enough to build a decent alternative store. Why bother? It's only the most significant market on the planet.
- Most Samsung execs in China were Korean. Not a big surprise in a culture that, like in Japan, only trusts in its own. This largely explains why they struggled to connect with the needs of the Chinese markets. But worse, as expats, they were all living in Tier I cities, with only a vague understanding (if at all) of the reality of Tier III or IV cities in rural China.
- An example of the tone-deaf culture of Samsung is the lack of beauty filters to enhance selfies taken with Samsung's otherwise impressive mobile phone cameras. It might seem detailed, but it's anything but in a highly online social market like China.
- In 2017, following the worldwide quality issues with the Galaxy Note 7 batteries catching fire, Samsung recalled the units sold to fix them. All of them? Yes. Except, of course, in China! Given the Chinese consumers' natural defiance, lack of trust, and their own extreme national pride, this was eventually the most significant nail in Samsung's market share coffin.
- And lastly, instead of doubling down in its commitment to fighting in the Chinese market (5G? Anyone?), Samsung lost China by cutting its losses and disinvesting its local consumer electronic devices factories in 2018. This, again didn't fly well in the Chinese public opinion at all. If you're in China, you demonstrate your willingness to invest for the long haul or get rapidly busted.
I often repeat that culture's a bitch, don't I? Whether it's your corporate culture or your local consumers' culture, you ignore it at your own risk. When you miss both, you enter a particular kind of business hell.
Samsung's lack of focus
Furthermore, Chinese very own mobile manufacturers didn't stay put while Samsung was trying to sort its mess. A dozen national companies ended up slicing the market with three different strategic approaches.
Xiaomi, the process-driven company
After some back and forth with flagship retail stores, Xiaomi shifted its focus to a no-store / pure online sales platform across China. With good enough quality and affordable prices, the goal was to be the default phone for consumers ranging from rural to young urban. There are no frills, just reliable technology to get on WeChat and get things done.
Samsung? They never developed a horizontal online presence strong enough to address the Chinese market that way — try in your own country to get advice online through their website and despair.
Oppo and Vivo, the customer-driven companies
Oppo and Vivo, on the other hand, understanding they wouldn't be as powerful as Xiaomi at addressing China in a very horizontal way, went vertical on the countryside and Tier III to IV cities. Call it low-cost if you want, but it's not that simple, and both companies didn't make the mistake of just fighting on price. They really cared about this part of the market and carved a precise identity in the western part of China, where they became difficult to displace. Contrary to Xiaomi, they didn't balk, for example, at investing in a widespread retail presence (even if sometimes just meant small corner shops and an army of small distributors).
Samsung? While selling a wide range of devices ranging from entry-level devices to flagship phones on par with premium brands, they never really committed to one part or another. And Chinese consumers are susceptible to brand values. Who are you? What are you selling to us? Pure functionality? Aspirational lifestyle? Being 'A Galaxy For Everyone' is not a clear value proposition for anyone.
Apple and Huawei, the future-driven companies
Lastly, Apple and Huawei seized the premium spot in Tier I and II cities. Big names, big stores, big prices, big ecosystem, big value, big brands. You don't just buy a phone; you spend the afternoon in a luxury mall in a Huawei store.
Samsung? Well, given the lack of consideration for the Chinese market in 2017, a range of products spreading in all directions, and a lack of decisiveness playing a specific role in China, they couldn't really fight on the premium segment. Sure they have some amazing technologies (and generally try to beat Apple at introducing new things in the market — which Chinese consumers absolutely love in principle), but where's the ecosystem? Where are the apps? Where is the Chinese-only exclusive content?
The default Samsung strategy
In the end, Samsung lost China for many different reasons. The core one is a corporate culture that is incapable of focus. Flagship phones? Yes, but with a thin commitment to this part of the market while you chase low-end sales. Accessible technology? Yes, but not enough commitment to developing a warm and extensive online services platform. Chasing the last millions of new mobile phone owners in China? Yes, when do they visit Shanghai once a year… If they visit Shanghai.
If anything, Samsung is the poster child of these companies where no one can renounce market options, and everyone is trying to push in all directions while not achieving much in the end. Why? Because all these opposite directional pulls cancel each other.
There's a precise description of such companies that want to be premium yet economically accessible, customer-driven, and super-efficient at processing everything. They are the stuck-in-the-middle corporations. Without strategic focus, they end up being run in default mode by their CFO.
Is Samsung dead?
Since I was introducing this article by reminding you how much China maps our future tech markets, it would be fair to ask if Samsunwg's demise in China indicates its future worldwide demise as well?
I don't think so.
I'm anything but optimistic for Samsung, mind you. But I also how they reacted in India after losing China (which is still the world's largest mobile market!). In India, where many Chinese companies are aggressively pushing in, Samsung now managed to focus on being the Nokia of old. Their strategy seems to show off their flagship phones (because they can) and essentially sell low-end mobiles with fair localization and some modicum of cultural awareness.
As for Q1, 2021, they've held their 20% market share quite well in India. Lessons learned? Maybe. But even in India, Samsung is under an ongoing squeeze between Xiaomi (26%), Vivo (16%), and Oppo (11%). And worse, I would bet they don't see them coming in the US or Europe yet.
So we'll see where all this goes (remember Nokia mobile market was wiped off in 2013 while being the #1 mobile phone seller on the planet — in units sold and with zero margins).
But if anything, Samsung should be a lesson for the rest of us in the energy sector, the car industry, or aerospace. China doesn't just map the future of the mobile market. Pay attention. Now.