Skepticism looms over Samsung Galaxy S8’s Chinese sales
[THE INVESTOR] Samsung Electronics is expected to see no immediate breakthrough in sluggish smartphones sales in China despite next week’s launch of the latest flagship Galaxy S8, analysts forecast on May 19.
“The Note series has been more popular in China compared with S series. So the next Note smartphone will be more key to Samsung‘s performance in China,” CK Lu, an analyst from research firm Gartner, told The Investor.
“I think the real battle will be in the fourth quarter when Apple and Samsung launch their next iPhone and Note series, respectively.”
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Samsung has been reeling from plunging smartphone sales in China, the world’s largest smartphone market where almost 400 million smartphones are sold annually.
Until 2013, the Korean tech giant topped the market with a 17.8 percent market share. But the figure has slipped to a mere 3.3 percent in the first quarter this year, according to Hong Kong-based research firm Counterpoint Technology Market Research.
The company seemed to be gaining a fresh momentum with the Galaxy Note 7 that hit the market in September last year. But the ill-fated bigger-screen phone was withdrawn from the market due to fire-prone faulty batteries.
Analysts point out that more fundamentally reduced subsidies for Samsung phones and a lack of distribution channels both online and offline have been driving down its sales figures in recent years.
Local telecom carriers used to offer generous subsidies for Samsung phones with aims to check Apple’s growing dominance in the market. But subsidies have been drastically cut with Chinese brands increasingly expanding their presence on their home turf.
“Better design, enhanced quality, and aggressive branding are some of the reasons for the increasing popularity of smartphones produced by Chinese firms,” said Kevin Wang, an analyst from research firm IHS Markit, adding “The companies also work very well with local distributors.”
Korean analysts say, however, that the S8’s Chinese performance would not pose a serious threat to Samsung’s overall smartphone business, calling the Chinese woes “nothing new.”
“Samsung saw its market share in China drop over the past several years due to emerging smartphone firms, such as Oppo and Vivo, so challenges by the Chinese companies in the market are nothing new and will not be a great risk,” said Kim Rok-ho, an analyst from Hana Financial Investment.
Despite its struggles in the Chinese market, Samsung’s mobile business division earned 2.07 trillion won worldwide in the first quarter this year, up 47 percent on-year. The operating profit is forecast to surpass 3 trillion won (US$2.66 billion), according to market reports.
Eugene Investment & Securities maintains its initial target shipment of the S8 at 60 million, the highest since the S4 posted 70 million shipments.
“The Samsung smartphone sporting a curved screen with an 83 percent screen-to-body ratio has an upper hand over other premium phones from a design perspective,” Roh Gyeong-tak, a Eugene Investment & Securities analyst said.
The Korean tech giant held the launch event of the S8 in Beijing on May 18. The latest Samsung flagship will come in four colors, including maple blue, which is not available in Korea. Its 6GB S8 Plus variant, targeting Chinese consumers who favor phones with powerful hardware specs, is priced at 6,988 Chinese yuan (US$1,013) and will hit shelves in the region on May 25.
By Kim Young-won (firstname.lastname@example.org)