Samsung:Challenging Chinese Mainland Smartphone Makers
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South Korea’s largest electronics and chemicals chaebol as well as a business conglomerate―samsung has thrown down the gauntlet in the face of a mounting threat from chinese mainland smart phone makers which have been cutting their prices to boost competitiveness.
Samsung Cutting Prices in China
Generally， it’s no surprise that Chinese manufacturers in nearly every segment of the market rely on providing similar products for considerably lower prices.
It has been the way of Chinese products for a long time now and it is applied in the smart phone arena quite easily when China has become a major smart phone provider just a few years ago.
It is no doubt that 2014 was a refresh year for Chinese smart phone manufacturers， and because of this we witnessed the market share of big companies like Samsung fall like a rock.
South Korea’s largest electronics and chemicals chaebol as well as a business conglomerate―Samsung has thrown down the gauntlet in the face of a mounting threat from Chinese mainland smart phone makers which have been cutting their prices to boost competitiveness.
Samsung originally ranked the 1st place in almost every market in the world， but now it ranks the 5th place in Chinese market.
Samsung isn’t satisfied with this and is working on a strategy that’s aimed to get them back up there in those rankings.
That seems to explain Samsung’s latest move in China， where they’re cutting the prices of the Galaxy S6 and Galaxy S6 Edge.
Samsung has slashed the prices of its flagship mobile phone models Galaxy S6 and the curved-screen S6 Edge to maintain sales growth following the group’s poor second-quarter results， which saw its net profit decreased by 8%. Both models were launched only in March this year.
That equates to a 800 Yuan （$129） cut in price for both phones， which isn’t actually quite the same percentage for both devices.
This takes the 32GB Galaxy S6 down from 5，288 Yuan （$850） to 4，448 Yuan （$722）， and the 32GB Galaxy S6 Edge down from 6，088 Yuan （$979） to 5，288 Yuan （$850）.
These price cutting come only four months after the initial launch of both devices and have created an important landmark in the world of smart phone pricing.
It remains to be seen whether or not this is enough to jump Samsung up in the rankings or if the South Korean tech giant needs to further cut prices on its most popular models.
Fiercer Competition in China
The biggest problem is not just from random Chinese startups undercutting Samsung’s business model， a problem that’s certainly there， but from rivals like LG， Huawei and Lenovo who have tried to increase their market share in the same time period.
Both Huawei and Lenovo are Chinese based companies that specialize in less expensive smart phones that provide comparable performance and features to Samsung’s phones， though maybe a cheaper build or other concessions that consumers are finding to be less important.
At the end of the day many Chinese smart phones have become good enough for consumers， especially at sub-$200 price points off contract and unlocked， and many consumers are paying attention on those companies rather than the big flashy flagships.
Experts said that Samsung’s move will make its rivals having their profit margins squeezed.
According to experts， Samsung’s price cuts will hit Huawei’s high-end smart phone sales in Europe and Motorola’s sales in the US.
The mobile phone market has grown more competitive as mainland manufacturers go after mid-tier and high-end customers， while global brand names trim prices.
However， experts do not believe the mainland smart phone market to be seriously impacted in the short term， while experts believe that Samsung’s discounts would squeeze the market share of mainland phone makers.
Hong Kong-listed Lenovo Group Ltd， Coolpad Group Ltd and TCL Communication Technology Holdings Ltd， which are seeking open-channel smart phone sales， will come under pressure and face fiercer competition from Samsung， said experts.
However， major mainland smart phone makers like Shenzhen-based ZTE Co and Huawei Technologies Co Ltd， which enjoy stable relations with telecom operators， are less vulnerable to Samsung’s challenge， said experts.
Open-channel smart phone manu- facturers may see their sales increase when mainland mobile phone operators further cut their cash subsidies.
According to experts， although there’s concern that Samsung’s price cuts will hit mainland smart phone makers， its goal is not to crush its competitors， but to decrease inventory. Experts said the price cutting for the Galaxy S6 and S6 Edge models did not come as a surprise as their sales have been disappointing while competition in the market heats up.
There could be more mergers and acquisitions to come. But the profit margins of mainland phone makers are quite thin， especially for those whose sales are focused on the lower-end market， experts said. Another issue is that there aren’t many assets left in the market for sale. They need to be faster than their peers.
Xiaomi is Stealing Samsung’s Thunder
Mainland smart phone makers have been doing quite well in improving product quality. The latest smart phone versions of Xiaomi and Huawei are quite nice.
Chinese mobile making upstart Xiaomi is stealing Samsung’s thunder by launching a pair of phablet smart phones on the same day Samsung is due to unbox phablet-sized updates to its Galaxy Note and Galaxy S6 Edge devices ― with Samsung press events taking place in New York and London.
It is noted that Xiaomi has announced the 799 RMB （$125） Redmi Note 2， and the 999 RMB （$155） Redmi Note 2 Prime. And with price-tags like those Samsung must be turning titanium gray at the prospect of Xiaomi taking its devices to the U.S. ― something which has not happened yet， but which Xiaomi’s international VP （and ex-Googler） Hugo Barra has hinted it’s looking to do in the next year or two.
International expansion is certainly a top priority for the company this year as it looks to hit ambitious sales targets. So far， Samsung has to contend with Xiaomi lording it over China’s smart phone market ― a kingpin position Samsung used to occupy. Analyst IDC pegged Xiaomi as the world’s third largest smart phone maker last fall ― behind Samsung and Apple.
Xiaomi is obviously looking to capitalize on this shift by continuing to give users the things Samsung has taken away.
It said the update brings improved performance and battery-saving tweaks， as well as expanding the personalization options available to users with “colorful themes”.
It’s not quite up there with Samsung’s massive electronic sprawl yet， but the ambition to dislodge the Korean giant’s grip on the consumer electronics market is obvious.
Experts said there are two ways for mainland smart phone makers to move up the value chain ― hiring talents from other companies to improve phone features， and snapping up technologies by acquiring competitors.
As the smart phone market saturates on the mainland， all the major players face decelerating growth. The market is maturing and potentially even declining.
As a result， smart phone makers need to look elsewhere， by expanding to developed countries or other emerging markets. They have to gain a reasonable market share and manage costs conservatively at the same time， experts said.