Samsung and Lenovo stumble in China's smartphone market

CHONGQING -- Samsung Electronics and the Lenovo Group -- big names around the world -- are being cut down to size in certain Chinese markets.

Samsung, recently crowned Asia's most valuable brand, holds 1% of China's smartphone market. Lenovo has even less.

"Chinese brands today have functions as good as those on Samsung smartphones," said a sales clerk at a smartphone shop in Beijing. "Few customers these days specifically look for Samsung products. And those who used to buy Samsung handsets appear to have shifted to Huawei."

It was not long ago that the South Korean brand played a key role in popularizing smartphones in China. While Chinese went on a smartphone-buying binge from 2012 through 2014, Samsung shipped more units than any other maker. In the peak year of 2013, the South Korean company controlled more than 20% of the market.

But that piece of pie kept getting eaten into, especially by Chinese players like Huawei Technologies and Xiaomi.

Some of the damage was self-inflicted. Samsung tarnished its brand image a year ago when it released phones that were prone to catching fire or exploding. Eventually, the fires forced Samsung to terminate its flagship model, but not before many Chinese consumers had grown wary of the brand.

There was also collateral damage -- from North Korea's repeated missile and nuclear tests. South Korea reacted by installing a land-based anti-missile defense system developed by the U.S. China, feeling encroached upon because the system's radar can reach beyond North Korea, retaliated against South Korea economically.

In the April-June quarter, Samsung's share of China's smartphone market stood at 1.6%.

The South Korean company is also struggling to sell flat-panel TVs in China. According to IHS Markit, a London-headquartered consultancy, Samsung in 2016 was the world's No. 1 TV seller, controlling over 20% of the market. In China, however, Samsung was No. 9, with a 3% share. Hisense, Skyworth and other Chinese brands, meanwhile, are gaining share.

Perhaps it's too late

Lenovo's smartphones are also in trouble in China -- despite the company's buoyant personal computer sales.

At its peak in 2013, the Chinese company had a 14% slice of its home country's smartphone market, the second largest. Now its market share is difficult to see. "As Oppo and Vivo rolled out stylish, inexpensive models, customers began leaving Lenovo," said an executive at a smartphone distributor in Beijing.

Lenovo in 2014 bought Motorola's smartphone business from Google only to suffer brand integration struggles. Those problems led the company to record a net loss for the April-June period.

"We are very confident of turning around our mobile business" in the latter half of the fiscal year, Lenovo Chairman and CEO Yang Yuanqing said in August. Lenovo hopes to regain its share with new high-end models under the Motorola brand.

But it might be too late. The buying binge is over, and China's smartphone market is contracting. According to Beijing-based Sigmaintell Consulting, Chinese smartphone shipments in the April-June quarter fell 6.6% on the year to 112 million units. The consultancy's full-year projection suggests a 3.4% decline.

As the market shrinks, fights for bigger slices of the pie will surely intensify.

Source: Samsung and Lenovo stumble in China's smartphone market