Jul 30, 2013

    Why Samsung is beating Apple in China

    APPLE said this week that its revenue in Greater China, which includes Hong Kong and Taiwan, slumped 43 per cent from the previous quarter to US$4.65 billion (S$5.9 billion). It was also 14 per cent lower from the same quarter a year ago.

    Sales were weighed down by a sharp drop in revenues from Hong Kong.

    "It's not totally clear why that occurred," Apple chief executive Tim Cook said on a conference call with analysts.

    Neither is it totally clear what Apple's strategy is to deal with South Korean competitor Samsung Electronics - 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 US$80-billion smartphone market in China, a market expected to surge to US$117 billion by 2017, according to International Data Corp (IDC). That's 10 percentage points ahead of Apple, which has fallen to fifth in terms of China market share.

    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 telecommunications operators.

    It also appears to be in a better position, over an arc of time, to fend off the growing assault of home-grown competitors such as Lenovo, Huawei and ZTE, said former company executives, analysts and industry sources.

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

    Samsung Galaxy phones and Apple iPhones of different generations sat side by side, glinting under bright display lights as vendors called out to get customers' attention. With its varied models, Samsung smartphones outnumbered iPhones at least four to one.

    And those models, analysts said, are loaded with features tailored specifically for the local market: apps from, the most popular photo-sharing site in China, or the two slots for SIM cards (Apple offers one), which allows service from multiple cell carriers, either at home or abroad.

    Mr Michael Clendenin, managing director of technology consultancy RedTech Advisors, said: "The Chinese just love features. They want their phone to have 50 different things that they're never going to use. Apple just doesn't play that game."

    Said a Samsung executive with experience in China: "We definitely think we're setting the pace there. They are having to respond to us."

    Apple's latest mobile operating system offers links to popular Chinese applications like Sina's microblogging platform Weibo, but the application itself must be downloaded onto the phone. On all of Samsung's entries, it's already there.

    "The key point is that Samsung consistently adapts to the local market," said Mr T. Z. Wong, a Singapore-based technology analyst with IDC.