With local smart phone makers in China and India toppling Samsung, the company is feeling heat in the fastest growing markets. The South Korean electronics maker is the biggest Smartphone vendor in the world, but cracks are appearing in second quarter. It has lost its footing in both China and India, reporting a steep drop in company profits.
Recent setbacks underscore just how difficult it is for a company like Samsung, which attempts to sell a phone regardless of budget and demography. Last few years, consumers have become bored of Samsung products especially smart phones. Especially Apple and HTC churning new designs which has metal clad smart phones. There is little change in Samsung’s smart phone design from past 2-3 years.
Samsung failed to understand an important development in the emerging markets like India and China. Since the entry of Chinese brands, such as Xiaomi and the Oppo, the market has moved in favor of low priced devices with relatively high specs. Samsung tries to stuff as much advanced components in its high end devices, mid range or low range devices are the lowest equipped one.
The other area of dissatisfaction with Samsung’s smart phone is its software. Most of the features come inbuilt into operating system for other smart phone like HTC or Motorola. On the other hand, brands like Xiaomi, Motorola and Asus will update their operating system regularly, where Samsung does not update their mid level and lower end devices. Recently Motorola and Asus have promised that Lollipop update will be rolled out to their mid level and lower end devices, whereas there is no official update from Samsung on it.
Samsung, blankets the market with phones of all prices and capabilities, from the high end to low end. This strategy has paid off for last four years, by getting dominant position in the markets. It has been top vendor from past few years in China, India and few other countries. In India, it unseated Nokia from top spot in 2012. Customers have sought out Samsung’s phones for its strong hardware and allure of Galaxy line, which contributed to the rise in the overall mobile market.
Research firm Canalys, recently said that Samsung skid to second spot in Chinese Smartphone market for the first time ceding its position to Chinese Smart phone maker Xiaomi. In India, it was knocked to second spot by the local vendor Micromax from its top position, as per Counterpoint Research.
Samsung has grown 0% in Indian market, whereas the market grew by whopping 64% in 3rd quarter of 2014. According to the latest numbers, Xiaomi has established itself as the fourth largest smart phone vendor in the world, thanks to its low price, high spec high volume business model. These numbers are present to only to limited markets, whereas Samsung present throughout the world.
Samsung understands some of the problem and is trying to improve upon them, but not at a pace at which it needs to be. Losing no.1 mobile spot in India may not be a big blow to Samsung as the Korean Company’s setback in China. It has a reason to worry about losing the smart phone advantage in India because it will have to contend not just with Micromax but with Xiaomi.
India is a large and growing market, which accounts 81 millions handsets, compare to China’s 436 million handset market. Per IDC, India will be fastest growing market among the BRICS market with market share of 37% to 110 million handsets.
Samsung has some tough choices to make; it has to decide just what it’s willing to give up succeeding in the emerging markets and just what success there means – profitability or market share. It can take path of Apple by keeping its devices prices steady but sacrificing its No. 1 position. Or it can load lower end devices with high end specs and cut prices to gain share at the cost of razor thin margins.
Samsung is working on the issues, but needs to pace up if it wants to compete with fast moving competitors. It needs to work a lot on the software speed, bloat down, and provide faster software updates. A lot of things will get stabilized when Samsung releases better low end and mid range smart phones at slightly lower costs.