Samsung's primacy is tested in China - MarketWatch
Bloomberg SHANGHAI — Samsung Electronics Co. 's attempt to stay on top of the fast-changing smartphone business will depend on winning back people like He Wenzong.
The 30-year-old apparel-company employee and Shanghai resident last year traded his Galaxy S3 phone, one of Samsung's most successful products, for a handset made by Beijing-based upstart Xiaomi Inc., which a few months ago displaced Samsung as China's No. 1 smartphone seller.
Xiaomi's phone offers better software and services, Mr. He says, at a fraction of a new Samsung's price. "To me, it looks like it's the same quality, but one costs 2,000 yuan ($327) and the other is 3,500 yuan," says Mr. He. "So why would I pick Samsung?"
Across China — and around the globe — other people are starting to feel the same way. Samsung has lost its top position for mobile-phone sales in India, and research firms that track smartphone shipments say it is in danger of being toppled in Thailand and the Philippines. Though Samsung is still the No. 1 smartphone maker globally, it has been losing market share in recent quarters.
In China, where Samsung 005930, -0.18% SSNLF, -4.36% gets 18% of its total sales, more than half of which is from the mobile-phone division, the company is parachuting in executives and outside consultants to assess the problem and figure out how to fix it, according to people with knowledge of the moves. The company is lowering prices for its existing handsets by up to 20%, considering a new marketing strategy in the country, and preparing to roll out a new, cheaper line of smartphones for emerging markets, the people said.
The steps are part of a larger attempt to shore up the mobile-phone division, which accounts for around 60% of Samsung's operating profit.
On Thursday, the company is expected to report that operating profit for the quarter ended in September has fallen by about 60% from a year earlier, following a 20% decline in the quarter before, largely because of what the company acknowledged was "increased competition" in China.
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