Samsung, the "Western Expedition" again

Image source @ Visual China

Text | Intelligent Relativity, author | Alex Chiang

Have you ever lived through the era of "Samsung Dominance"?

For a long time in the past, Samsung mobile phones in the Chinese market were "highlight" like existence, and around 2010, they were evenly divided into the Chinese mobile phone market with the iPhone 4. Nowadays, in addition to some technical controls and niche consumer groups, it may be difficult for ordinary domestic consumers to think of the "Samsung" brand when purchasing mobile phones.

After several years of becoming an insignificant "others" in China's mobile phone market, Samsung has recently made frequent moves and is planning to return to the Chinese market.

Samsung has set up a new China team to cover mobile phones and home devices, reporting directly to Samsung Vice Chairman Han Zhongxi. The official name of this department, the "China Business Innovation Team", represents a new height for Samsung to attach importance to the Chinese market.

On February 9, Samsung released the Galaxy S22 series at the same time, a series of offline marketing promotion activities are rapidly launched across the country. At the Beijing Winter Olympics, Samsung brushed a wave of presence fiercely, and distributed a gift package worth more than 10,000 yuan to each athlete, including a new folding screen 5G mobile phone. According to rough statistics, the cost of this gift alone reached nearly 30 million yuan.

In fact, this is not the first time that Samsung has announced that it wants to return to the Chinese market. As early as the 2019 Galaxy S10 series China conference, former president of Samsung Electronics Greater China, Quan Guixian, appeared in Tang costumes, and repeatedly reiterated his "return to the Chinese market" in the interview. But the point is not when Samsung will claim to return to the Chinese market, but how?

This time, can Samsung succeed?

01 Why is Samsung "targeting" the domestic market again?

Under the premise of losing the huge market in China, Samsung's smartphone sales in the world can still dominate the list.

According to the data released by IDC, in 2021, Samsung will continue to rank first in the world with a shipment of 272 million units and a market share of 20.1%, ranking first in North America, Russia, India, Europe, Africa, Southeast Asia and other regions. Since reaching the top in 2012, Samsung has topped the global mobile phone market for ten consecutive years.

Even if the Chinese market is lost, the days of Samsung mobile phones do not seem to be sad, in many regional mobile phone markets, Samsung still maintains a strong competitiveness. In the case that its smartphone global basic disk is solid, and it still occupies the first place in the global market share, what is the reason for Samsung to raise the banner and intend to enter the Chinese market again? Or further, why did Samsung announce its return to the Chinese market at this time?

"Intelligent Relativity" believes that Samsung's intention may be to use its folding screen mobile phone as a breakthrough point to enter the Chinese market again. Some industry practitioners said that 2022 will become the "year of outbreak" of folding screen mobile phones. From the perspective of the market situation, major mobile phone manufacturers have also begun to attack the folding screen market, and the war has intensified.

At the spring 2021 conference, Xiaomi released the first folding screen mobile phone MIX FOLD, and it is expected to release a new model after the iteration in 2022. From December 2021 to January 2022, OPPO Find N, Huawei P50 Pocket, and Honor Magic V were launched.

"Compared with hinges, there are two kinds of folding screen mobile phones on the market, one is Samsung and the other is the other." On the folding screen track, Samsung is in a leading position both in terms of technology and market share. According to the 2021 folding market survey report released by DSCC, a total of 4.25 million folding screen mobile phones were shipped worldwide in the fourth quarter of last year, and Samsung shipped 4.1 million units itself, with an overall market share of 96%. For the whole year of 2021, Samsung shipped 7 million units, with a market share of 87%.

Folding screen mobile phone is still a high threshold of entry in the field, from design to process have high requirements, screen, hinge and battery and other components of the upgrade, but also need a very deep foundation, which has become the key reason for Samsung to occupy the industry leading position in the field of folding screen.

For example, the Samsung Galaxy Z Fold2 5G uses an ultra-thin flexible glass (UTG) material cover, with high hardness, thin thickness, strong light transmittance and other characteristics, in addition to the hinge design also uses multi-angle spin-stop folding technology, and this year Huawei and Xiaomi released two folding screens, do not support this operation.

Samsung's current technical advantages at the folding screen mobile phone level, and in the case of relatively backward technology in domestic mobile phone manufacturers, may become a very important breakthrough for its return to the Chinese market.

In terms of time, 2022 at Samsung is a very important point in time. The high price of folding screens often means higher profit levels, which attracts major mobile phone manufacturers to pour in and increase investment in research and development in this field. In the case of other mobile phone manufacturers rushing to catch up, how long Samsung's current technological advantages can be maintained may be an unknown, and it is also the reason why Samsung is eager to "enter" the Chinese market again at this time.

According to the data released by the market research company Strategy Analytics, the profit margin of the iPhone stand-alone machine is 60.5%, taking the iPhone12 as an example, after splitting, it was found that the manufacturing cost of the mobile phone priced at 6299 yuan was less than 2500 yuan, and the hardware value was not as high as xiaomi 10. During the same period, the stand-alone profit margin of Samsung mobile phones was about 32.6%.

To a large extent, mobile phone revenue, or more accurate profit margins, is more important than simple mobile phone shipments. Although Samsung's market share of shipments ranks first, its profit level is only half of Apple's, and although Samsung ranked first in shipments in 2021, its iPhone shipments came to the first place in the fourth quarter of 2021. It can be seen that whether it is for the purpose of expanding shipments or improving the level of stand-alone profits, Samsung must be "looking at the tiger" for the Chinese market at this time.

02 Lost, can I get it back?

Compared with Samsung's brilliant record in the global market, its performance in the Chinese market is much inferior.

According to the "2021 China Smartphone Market Report" released by CINNO Research, a third-party data research agency, the overall sales performance of China's smartphone market in 2021 reached 314 million units. Among them, vivo, OPPO and Apple respectively won the top three in the sales ranking of the smartphone market in 2021. Samsung, which won the sales championship in the global market, has become a "nothers" in the shipment ranking of the mobile phone market in the Chinese market.

In the past few years when Samsung "disappeared" in the Chinese market, other mobile phone manufacturers have been "attacking the city" and taking advantage of this opportunity to consolidate the construction of sales channels. As the growth of the smartphone market slows down, expanding the offline market is crucial for domestic mobile phone sales.

According to relevant data, in October last year, Xiaomi has achieved the scale of 10,000 millet homes, increasing the county-level market coverage rate to 80%, and in 2020, OPPO's offline sales points have exceeded 200,000, Huawei's number of retail experience stores in China in 2020 is also more than 10,000, and after-sales service points cover more than 97% of the country's prefectures and cities and more than 70% of counties.

At present, Samsung's offline channel network has lagged far behind domestic mobile phone manufacturers. According to the official website, Samsung has only more than 700 authorized stores in the country, and in terms of geographical distribution, the vast majority of Samsung's more than 700 authorized stores in China are distributed in first- and second-tier cities, and most of them are authorized experience stores, and there are not many flagship stores. One result of this situation is that it is difficult for Samsung to sink to third- and fourth-tier cities and county seats.

In addition, Samsung's dealer system relies too much on large chain dealers such as Suning and Gome, and once the interests of dealers are violated, dealers are likely to have a "collective anti-water" situation. Therefore, Samsung's sales channels are too narrow, which is not conducive to boosting mobile phone sales.

Judging from Samsung's trend, the purpose of entering the Chinese market again is still relatively clear - to impact the high-end mobile phone market with a folding screen, and more accurately, Samsung can only take the high-end market as a breakthrough.

Previously, the sales system of Samsung mobile phones in the Chinese market has maintained an excessively high price, or more precisely, the situation of high prices and low allocation of Samsung's low-end mobile phones is more serious. Until now, the price of Samsung mid-range models in China is still not low, such as the Samsung A series A52 and F52 equipped with Qualcomm 750G, in the price range of 1999-2500 yuan, and consumers can choose domestic Android models in this price range not only enough, but also more full.

For Samsung, which is trying to return to the domestic market, the low-end market may no longer be the level that Samsung needs to focus on breaking through. First, domestic consumers can choose from a wide range of low-end price Android mobile phones, in the past few years of Samsung's withdrawal from the Chinese market, domestic mobile phone manufacturers have firmly occupied this level of the market; second, the low-end models with lower profit levels obviously cannot bring more revenue to Samsung, and the increase in revenue depends more on the sales of high-end models.

In the folding screen mobile phone price level, in December 2021 Huawei released the first vertical folding screen mobile phone P50 Pocket initial price of 8988 yuan, the recently exposed vivo new folding screen mobile phone X Flod starting price or more than 10,000 yuan, last December released OPPOFindN folding screen flagship starting price of 7699 yuan. The upcoming Samsung Galaxy Z Flip3 Bespoke starts at $8,399.

It can be seen that at the price level of folding screen mobile phones, the price of Samsung is not high compared with similar products of domestic manufacturers, on the one hand, Samsung has the ability of the whole industry chain and can reduce the price to a large extent. On the other hand, it may also indicate that Samsung is making changes and no longer maintaining a "high" selling price system in China as before.

"Intelligent Relativity" believes that there is no obvious price difference (or even a medium price) with other similar products, and at least in the current situation of technical advantages, folding screen mobile phones may really provide help for Samsung to return to the Chinese market.

Previously, Samsung has always been full of "superiority" over Chinese consumers, from the consistent high-priced sales, to the official attitude of the Note 7 battery explosion door, to the various differential treatment of Chinese consumers and European and American consumers, all reflecting Samsung's failure at the level of China's localization strategy.

Samsung, which has once again entered the Chinese market, seems to be making changes. Last December, Samsung made its biggest high-level personnel change since 2017, merging the consumer electronics and mobile communications divisions of the three major business units, after Han Zhongxi, the head of the electronic imaging display business, was promoted to vice chairman and CEO to lead the newly merged consumer electronics and mobile communications business group. Han Jong-hee is a leader in TV research and development and has contributed to the continuous growth of Samsung TV sales.

The "China Market Innovation Group" was established based on Han Zhongxi's intentions, which is mainly responsible for Chinese mainland brand building and sales agent strategy in China. Judging from the recent trends, Samsung has given the Chinese market a higher weight than in the past, and for China's re-attack, it is not only limited to the mobile phone business, but also competes with domestic local brands in the fields of television and home appliances.

For this re-entry into the Chinese mobile phone market, "Intelligent Relativity" believes that Samsung still has some opportunities. It's just that this "opportunity" is no longer the same as before 2014, given by the times, but more depends on Samsung's own efforts.

Reference Articles:

"Samsung mobile phone wants to return to China", the world of finance;

"Samsung mobile phone annual sales of 275 million units, won the world's first for 10 consecutive years, but in the Chinese market failed badly", digital leprechaun;

"Folding Screen Leads the Battle, Samsung Fights China Again", Capital Detective;

"Interpreting the causes and consequences of Samsung's gradual loss of the Chinese market, is it disdainful of China, or is it eliminated?" " Excellent evaluation of technology;

"Samsung returns to China, the new official is still three fires away", new knowledge of science and technology;

"Samsung mobile phone Chinese market backwater war: set up an innovation group, rely on the folding screen to compete with Huawei, millet? " Times Weekly.