Tuesday, Sep 23, 2014

How Samsung is beating Apple in China

Written by Reuters | Guangzhou (china) | Posted: July 26, 2013 11:52 am

Apple Chief Executive Tim Cook believes that “over the arc of time” China is a huge opportunity for his pathbreaking company. But time looks to be on the side of rival Samsung Electronics Co Ltd,which has been around far longer and penetrated much deeper into the world’s most populous country.

Apple Inc this week said its revenue in Greater China,which also includes Hong Kong and Taiwan,slumped 43 per cent to $4.65 billion from the previous quarter. That was also 14 per cent lower from the year-ago quarter. Sales were weighed down by a sharp drop in revenues from Hong Kong. “It’s not totally clear why that occurred,” Cook said on a conference call with analysts.

Neither is it totally clear what Apple’s strategy is to deal with Samsung – not to mention a host of smaller,nimbler Chinese challengers.

Today,in the war for what both sides acknowledge is the 21st century’s most important market,Samsung is whipping its American rival. The South Korean giant now has a 19 per cent share of the $80 billion smartphone market in China,a market expected to surge to $117 billion by 2017,according to International Data Corp (IDC). That’s 10 percentage points ahead of Apple,which has fallen to 5th in terms of China market share.

Cook said Apple planned to double the number of its retail stores over the next two years – it currently has 8 flagship stores in China and 3 in Hong Kong. But,he added,Apple will invest in distribution “very cautiously because we want to do it with great quality.”

Samsung,with a longer history in China,now has three times the number of retail stores as Apple,and has been more aggressive in courting consumers and creating partnerships with phone operators. It also appears to be in better position,over an arc of time,to fend off the growing assault of homegrown competitors such as Lenovo Group Ltd,Huawei Technologies Co Ltd and ZTE Corp,former company executives,analysts and industry sources say.

VARIED MODELS

Samsung’s history and corporate culture could hardly be more different than Apple’s,the iconic Silicon Valley start-up founded by Steve Jobs and Steve Wozniak in 1976. Lee Byung-Chull started Samsung in 1938 as a noodle and sugar maker. It grew over the decades into an industrial powerhouse,or chaebol as Koreans call the family owned conglomerates that dominate the nation’s economy and are run with military-like discipline.

Apple,by contrast,became the epitome of Californian cool,an image the company revels in. That hip image translates in China – its stores are routinely packed – but hasn’t been enough to overcome the more entrenched Samsung.

A stuffy electronics bazaar in the southern Chinese city of Shenzhen illustrates part of the reason why.

Samsung Galaxys and Apple iPhones of different generations sit side by side,glinting under bright display lights as vendors call out to get customers’ attention. With its varied models,Samsung smartphones outnumber iPhones at least four to one.

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.

And those models,analysts say,are loaded continued…

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