Samsung opened its first office in China in 1985 in Beijing - an era in which it was all but

inconceivable that Apple and Samsung would end up in one of the world's most intense
corporate grudge matches. Like other South Korean chaebols, Samsung was a first mover in
China, using the market primarily as a base to produce electronics for the world. (In contrast,
Apple's big push in China came only recently, with the advent of the smartphone age roughly
five years ago.)
The early entry gave Samsung an undeniable edge, and it adapted fast to a rapidly changing
environment. By the mid-1990s, with the economy booming, Samsung made the strategic
decision to treat the Chinese market not just as a production base, but to start marketing to China
higher-priced electronics, said Nomura researcher Choi Chang-hee, who wrote a history of
Samsung's experience in China.
Aside from selling via the distribution outlets of the three major telecom carriers, Samsung also
has a strong retail presence through its partners Gome Electrical Appliances and Suning
Commerce Group, as well as its own "Experience" stores and small retailers all over the
country.
Over the last two decades, Samsung has also taken pains to build relationships with Chinese
government officials and -perhaps more critically - the three major telecom carriers.
Hence, it came as a big shock, and left the management very confused, when the sales of
Samsung smartphones plummeted in early 2015.
Company History
Samsung Electronics was established in 1969. It began producing other home appliances,
including washing machines, refrigerators, color televisions and microwave ovens. During the
1980s, it expanded its business lines to personal computers (1983), semiconductors, and
telecommunication networks and devices (1988). Samsung was losing money in its appliance
business during the mid-1990s, as it had not managed to improve the quality and image of its
products. Moreover, the Asian financial crisis of late 1997 deteriorated the situation further,
causing profits to drop from $194 million in 1996 to $87 million in 1997.
To cope with its difficulties, Samsung launched a bold restructuring initiative in 1997 which
initiative aimed to restructure the company in accordance with “global standards.”
In 1983, Samsung initiated its mobile telecommunications business, which it hoped would
become the company’s future growth engine. In 1988, Samsung developed its first mobile phone
(or “hand phone” in Korea), the SH-100.
Since then the company has come a long way. They reported a record overall sales and net
income in 2010. The company’s three primary strategies are to solidify its market leadership by
focusing on product differenciation, identify business that will sustain growth over the next 5-10
years, prepare management to anticipate and respond to business risks during times of global
market uncertainty.

Sales of the company’s smartphone line rose by 23% from 2009 to 2010. Their strategy of
supporting products with software has paid off in increased sales and market share.
The company produces a large number of chips used for their own smartphones. This helps them
develop memory products that use less power making them more user friendly. The company has
formed a number of alliances to help increase its market dominance. Its partnership with IBM
allows them to share chip making technology. In 2009 they invented SSD which is the
technology of choice for storage in smart devices all over. The company is alwayss investing in
other industries to diversify its product offerings, internal hardware components and further
development of current technologies. These purchases are a part of the company’s goal to inject
about $1 billion into its strategy to grow.
Revenues for the industry is expected to grow by 2.1% from 2014-2019. In September, 2013 its
quarterly revenue was $188.37 billion with a net profit margin of 11.5% while Apple’s revenue
was $37.47% with a 20.04% profit margin.
One of Samsung’s major global branding strategies is Olympic sponsorship. In 1996, Samsung
was an unofficial sponsor of the Atlanta 1996 Olympics, having sponsored the Samsung Expo in
the Pavilion of the Main Stadium. Samsung has shown its products – such as its monitors, TVs,
mobile phones, etc. – through product placements in many Hollywood movies. And for the
popular movie ‘Matrix: Reloaded,’ Samsung actively participated in developing the “Matrix
Phone.”
Samsung Smartphones in China
2008-2009 was when the post iPhone smartphone era began. At this point, Samsung was well
behind the curve in smartphone. iPhone entered the Chinese market in 2009. Samsung already
had its portfolio of smartphones. However, its smartphones didn’t have any distinct branding to
separate Samsung’s devices from the rest of the other generic phones in the market, let alone
Apple’s iPhone. However, in 2009 Samsung decided that it in order to distinguish it’s product
from the other product in the market, it would need to create a new brand for its upcoming
flagship phones. And in order to compete with Apple’s iPhone, Samsung decided to launch its
own high end smartphone. Samsung, therefore launched Galaxy. By 2010, Galaxy S was
introduced to the Chinese market. Galaxy S had the hardware specs that rivaled the iPhone.
Moreover, the fact that it used android operating system meant that it offered the customers with
a greater degree of customizability and less restriction in utility. By fall 2011, Samsung noticed
the need for Chinese consumers to use larger screens and as a result came out with the Galaxy
note, the first so-called phablet. Compared with most phones the Galaxy Note was massive.
There was an initial scare that the phone may have been too large. Although, the Galaxy Note
started of poorly, especially in the US market, it had seen significant sales in the Asian market,
primarily because of China. By the end of 2012, Samsung’s profit had increased by about 76%
and Samsung was the only company other than Apple who were making any profits.

Samsung takes lead on Apple:

The 3rd quarter of 2013 saw Samsung’s market share in smartphone’s rise from 14% to 21%.
Samsung was already the market leader in smartphones. Their closest competitors were Lenovo,
with 13% market share, followed by Apple whose market share had dropped to about 6% from
8% the year earlier. Apple ‘s revenue in Greater China, which also includes Hong Kong and
Taiwan, slumped 43 percent to $4.65 billion from the previous quarter. That was also 14 percent
lower from the year-ago quarter. Surprisingly, the management of Apple themselves weren’t sure
as to why there revenue and market share had decreased.
Apple take lead on Samsung:
Samsung, already being a market leader of smartphones, was seen to have even more potential.
However, by the second quarter of 2015, market share of Samsung had shrunk to 50% primarily
in the face of fierce competitor rivalry. Samsung had dropped from being the largest market
share holder to the 5 th largest market shareholder. One of the primary reason for this was the
introduction of Apple’s iPhone 6s. Apple had already realized that the Chinese customers wanted
even bigger screen. Moreover, customers themselves prefer newer devices. With already a
stagnated smartphone market, Samsung’s market share seems to be decreasing even more, where
as its global rivals and local rivals start to gain more market share. Samsung’s market share was
being squeezed by Apple and Chinese local vendors at both end of the market. With the new
iPhone 6 plus, Apple is basically taking back the market share that they had lost to Samsung due
to Samsung’s release of the phablets. Chinese smartphone makers were taking away Samsung’s
market share in the lower end by improving design and quality and charging much less for it. For
example, in 2014 consumers could get a Xiami Mi5 for around 1000 Yuans where as the
Samsung Galaxy J5, with similar specifications cost around 3000 yuans.
.
Rank Vendor Market Share (1 st
Quarter 2015

Market Share (2 nd
Quarter 2014

Year on Year
Growth
1 Apple 14.5% 8.7% 62.1%
2 Xiaomi 13.7% 9.2% 42.3%
3 Huawei 11.4% 7.8% 38.7%
4 Samsung 9.7% 19.9% -53%
5 Lenovo 8.3% 10.2% -22.1%
6 Others 42.2% 44.3% -8,8%
Total 100 100 -4.3

We can clearly see from the diagram how drastically the market share of Samsung and its
competitors changed in the last 5 quarters. Apple had seen a huge jump from 8.7% in the first
quarter of 2014 where as Samsung had seen a drop from 19.9% in the first quarter to 9.7% in the
first quarter of 2015.
Strength of Samsung in China
Targeting market from either end:
It caters to both the lower and the higher end of the market. As of 2013, it was actually leading in
both markets. Average wage of Chinese customers was $640 in 2013. Many users looking to
upgrade from feature phones to smartphones could not afford Apple and that’s where Samsung
came in. Moreover, by bracketing the market with multiple models, Samsung bred deep
relationships with customers, many of whom, traded up to more expensive models as they get
older. Playing high and low also positioned Samsung to fend off the intensifying competition
from Chinese firms such as Lenovo and Huawei and literally hundreds of smaller local players.
Varied Model:
While Apple releases only one smartphone a year, priced at the premium end of the market,
Samsung brings out multiple models annually with different specifications and at different price
points in China. Moreover, the Chinese love features. Apple has a lot of restrictions in that they
require everything to be run with respect to apple iStore where as android provides a lot of
flexibility.
Retail Presence:
Samsung was a first mover in China, using the market primarily as a base to produce electronics
for the world. In contrast, Apple's big push in China came only recently, with the advent of the
smartphone age roughly five years ago. The early entry gave Samsung an undeniable edge, and it
adapted fast to a rapidly changing environment. Apple works through the same channels, but its
relatively late entry means it has a significantly smaller presence. Samsung, for example, has
more than 200 official distributors and resellers in Guangzhou province, while Apple lists 95.
In the first three months of 2014, Samsung shipped over 20 million smartphones in China, giving
it a 20% share of the market, double its closest rival at the time- Lenovo.
However, in the three months to the end of March 2015, the company sold less than half that
number of smartphones (9.6 billion) seeing its market share slip to just 9.7% which now makes it
the fourth largest smartphone maker in China.
Appe was the big winner in the first quarter of 2015, with sales of 61.2 million iPhones during
the quarter
Smartphone Industry in China
China is home to 675 million unique mobile users - almost half of the country's population - who
are responsible for some 1.3 billion mobile subscriptions. The number of subscriptions is rising
at around 8 per cent year-on-year, with an average of three new subscribers every second
attributing to an annual growth of 94 million.
As the amount of people in China buying new smartphones plateaus and matures into an upgrade
market, homegrown brands including Huawei, Xiomi and Lenovo will pursue Western markets
more aggressively, according to Ben Wood of CCS Insight.
Smartphone sales in China, the world's biggest market, have fallen for the first time as the
country's authorities attempt to restore investor confidence in the rapidly cooling economy.
Sales fell 4 per cent year-on-year during the second quarter of 2015, according to research from
Gartner. The fall contributed to the slowest worldwide growth since 2013, with around 330
million units sold globally during the second quarter, a year-on-year increase of 13.5 per cent.
Chinese economic uncertainty coupled with an increasingly saturated smartphone market caused
the downturn.
China is the biggest country for smartphone sales, representing 30 per cent of total sales of
smartphones in the second quarter of 2015. China has reached saturation — its phone market is
essentially driven by replacement, with fewer first-time buyers. Beyond the lower-end phone
segment, the appeal of premium smartphones will be key for vendors to attract upgrades and to
maintain or grow their market share in China.

Competitors
Chinese smartphone makers grabbed market share from Samsung by improving the design and
quality of their products, an industry analyst said. Many devices sell for less than 1,000 yuan. For
1,500 yuan a consumer could get a Xiaomi model called the Mi 3 that has similar specifications
as the Samsung Galaxy S5, but which costs about 3,000 yuan.
Chinese smartphone makers, such as Xiaomi, were also trying to improve the Android operating
system and provide more apps so users had a better experience, improvements Samsung was not
making, the analyst said.
Samsung usually sets the price of its phone high and then brings it down, one of its dealers said.
He mentioned the Galaxy Note 3, the price of which was slashed by 500 yuan within a week of it
launch, something that would annoy people who bought the device early.
Chinese smartphone makers take a different approach: They start out with low prices, and
months later unveil upgraded versions of the phones for the same price, a strategy that seems to
agree with Chinese consumers.

Apple
Considering the market size and its potential, China is one of the largest market for Apple. The
company reported $16.1 billion in revenue from “greater China” — which includes mainland
China, Hong Kong and Taiwan — in its first fiscal quarter of 2015, up 70 percent from the same
period a year ago. Apple sold 74.5 million iPhones in the quarter, as many as 12 million more
than expected.
For years, Apple rivals like Samsung offered large-screen smartphones. Although the bigger
phones sold well in China, Apple held off on releasing a similar model, and the country remained
a weak spot. But In the currently matured market like China, where the completion is increasing
day by day, Apple did something phenomenal that attracted the customers who switched from an
Android device. The lauch of iphone 6 and iphone 6s attracted the market as China wanted
bigger iPhones. As most people don’t have TVs at their home, they wanted a smartphone that
can do almost everything, which the iphone 6 successfully did.
Apple is building brand equity in china. People love iphone here as it is a premium product
which is also considered as a status symbol. Apple is a way for the Chinese people to connect
globally with a unique product. Therefore, people are willing to buy a premium phone that offers
better quality along with the better status symbol.
To The Chinese also love big, beautiful flagship stores, where they can touch the products and
try them out. To catch up on that, Apple has announced a goal of 40 stores in China by the
middle of 2016, about twice the current number.
Huawei
Huawei is ahead of its domestic competitors in terms of scale, technology, and supply chain
integration. It has been on a drive to expand outside of its domestic market. Huawei has shifted
to producing more upscale phones, such as the new Mate 9, after years focusing primarily on
low-cost handsets. Now it sees its best opportunity yet to gain traction in the more lucrative high-
end segment. It plans to surpass Apple as the second-biggest smartphone player in the world in
three years and leapfrog Samsung by 2021.
Xiaomi
By selling high-end handsets at bargain prices, the company has attracted a strong following in
China and grown rapidly. Although the firm was founded less than six years ago, it's now the
fifth-largest seller of handsets in the world. Xiaomi was one of the first vendors that rode on e-
commerce wave and disrupted the market by selling its phones online through its flash sales.
That kicked off another trend as other vendors soon tried to follow suit and created their own
online brands and sold their phones through their own websites and that of e-tailers.

Apple overtook Xiaomi as the top manufacturer in China with the Chinese startup having
dominated sales in its home territory in 2014.
The reason for Xiaomi's decline according to IDC (International Data Corporation) is "strong
competition from other vendors in the low to mid-range segment of the market" - an area where
Xiaomi had seen huge growth in the last couple of years.
Xiaomi has begun 2015 by focusing on India, launching the Mi 4i in New Delhi, and with the
Chinese market becoming saturated, this is something more and more companies will be doing
this year, according to IDC.
Others
In their home market, Chinese brands benefited from increasing subsidies for 4G smartphones
from domestic telecom operators, while also gaining ground in foreign markets. Both OPPO and
Vivo have managed to make high-quality devices with low prices, an attractive offering for users
in China who mainly buy phones out of contract. These companies are posing serious challenges
to the likes of Huawei and Apple. Back in the earlier years when vendors depended on operator
subsidy to grow, Oppo was clear in its direction and focused on expanding its offline channels. It
also had key strengths such as its VOOC fast-charging technology and in the elegant design of its
phones. This, coupled with its aggressive marketing tactics, helped it succeed in the market
Samsung started off with a strong strategy to capture every part of the market grabbing a huge
chunk of Apple’s market. With the economic downturn and entry of newer cheaper brands in the
market the once leader now is falling behind. What can Samsung do to regain their place in the
market?

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