Source of this article: Times Weekly Author: Zheng Xutong Qi Xin
Recently, there are media reports that Samsung has set up a new China market innovation group, focusing on mobile phones and smart home devices, and the team directly reported to Han Zongxi, co-CEO of Samsung Electronics. This may become a turning point for Samsung to revitalize the Chinese market.
In the Chinese market, Samsung's share has been around 1% for many years, inferior to "Huami OV" (Huawei, Xiaomi, OPPO, vivo). But in the global market, Counterpoint data shows that Samsung will rank first with a market share of 18.9% in 2021.
On January 24, Sun Yanbiao, president of the First Mobile Phone Industry Research Institute, told the Times Weekly reporter that the establishment of the above innovation group means that Samsung China has begun to rely on itself. Based on the Samsung brand and the global products provided by Samsung, Samsung China needs to operate and take responsibility for its own profits and losses, aiming to enable the Samsung China team to get rid of its dependence on the Samsung Group and be more flexible.
From the product point of view, Samsung is currently focusing on high-end machines in China, and Samsung distinguishes itself from other brands with the top screens produced by itself. The current hot high-end folding screen mobile phone, Samsung has also laid out early and has undergone iteration, far more mature than domestic manufacturers.
In 2021, a number of domestic mobile phone manufacturers have also launched folding screen mobile phones, intending to seize the high-end machine market, and Samsung's revitalization of the Chinese market is facing many strong enemies. Whether it is sales channel construction or brand image reconstruction, Samsung has a lot of homework to make up.
Image source: Visual China
Sales channels require make-up lessons
Samsung mobile phones in China from prosperity to decline is the collective memory of many smart phone users.
From 2013 to 2014, Samsung smartphones had a market share of about 20% in China. In 2016, after a number of Samsung Note7 mobile phone explosions, Samsung recalled the mobile phone except for the Chinese market, and since then Samsung's reputation in China has declined.
Samsung adjusted its China structure in 2017 to pursue a Chinese localization strategy, and then repeatedly shouted to revive the Chinese market, but with little success. With the rise of "Huami OV", Samsung's presence in China has become weaker and weaker.
By the third quarter of 2021, Counterpoint data shows that in the domestic market, in addition to "Huami OV" and Honor and Apple, the remaining smartphone market share, including Samsung, is only 3%. This is in stark contrast to Samsung's soaring in the global market.
Sun Yanbiao told the Times Weekly reporter that in the past, Samsung did not operate well in China, one reason was the problem of the system. This time, Samsung China is self-reliant and broken, precisely because Samsung "can't hold back" in China. After the establishment of the "China Market Innovation Group", it is expected to make Samsung China's financial independent accounting clearer, or generate a new dividend mechanism to enhance team flexibility. Relying on brand awareness and talent assets, Samsung's follow-up development in China is worth looking forward to.
To revitalize the Chinese market, Samsung not only needs to rebuild its brand image, but also needs to make up for the shortcomings of sales channels, and it is not simple to challenge mainstream domestic mobile phones.
The Times Weekly reporter found from the official website of Samsung Electronics that the number of authorized stores of Samsung mobile phones nationwide is only 702. On January 23, a Samsung salesperson told the Times Weekly that even in Guangzhou, the capital of Guangdong, a major consumer province, not all districts have authorized stores. Offline, Samsung's sales channels are mainly authorized experience stores, and there are no flagship stores. Another salesperson said that even if Samsung mobile phones have stores in large offline stores such as Gome, they are not the main force, and the categories are not as complete as authorized stores.
A number of Samsung mobile phone wholesalers also told the Times Weekly reporter that Samsung's domestic market demand is general, and there are not many merchants who focus on selling Samsung.
As the growth of the smartphone market slows down, expanding the offline market is crucial for domestic mobile phone sales. Even Xiaomi and Glory, which used to focus on Internet mobile phones, have recently paid more and more attention to offline channels and sinking markets, and the scale of offline stores is far behind Samsung.
By 2020, OPPO has 200,000 sales points in China; in 2020, the number of retail experience stores in Huawei China will exceed 10,000, and the after-sales service points will cover more than 97% of the prefectures and cities and more than 70% of the counties and districts across the country; Xiaomi will open its 10,000th Xiaomi Home store at the end of October 2021, increasing the county-level market coverage rate to 80%; by the end of 2021, the total number of Glory zones, counters, and authorized experience stores will exceed 30,000.
To revitalize the Chinese market, strengthening sales channels will be an important step for Samsung.
Folding the screen into a breakthrough?
In terms of products, Samsung's high-end mobile phones have advantages. It remains to be seen whether brand awareness and high-end mobile phone manufacturing capabilities can gain a foothold in China.
Times Weekly reporter recently visited a number of Samsung authorized experience stores in Guangzhou and found that a variety of Samsung high-end folding screens priced at more than 7,000 yuan were placed on the most conspicuous counters, and many sales staff admitted that high-end mobile phones represented by folding screens are Samsung's main products.
Compared with many domestic mobile phone brands, Samsung folding screen mobile phone styles are more. At present, there are mainly Galaxy Z series and W series. Z series is more fashionable, left and right folding W series is more business style, up and down fold galaxy Z Flip3 price is about 7600 yuan, left and right folded Galaxy ZFold3 and W21 price is about 15000 yuan.
Samsung, which was the first to enter the folding screen mobile phone and achieve mass production, gained a lot of benefits in the global market in 2021 due to the folding screen mobile phone. CITIC Securities expects Samsung to account for more than 70% of the global folding screen mobile phone share in 2021. Driven by Samsung, in the third quarter of 2021, global folding screen mobile phone shipments increased by 480% year-on-year.
At the same time, domestic mobile phone manufacturers have launched high-end machines with a price of more than 4,000 yuan, trying to seize the high-end market that Huawei is vacant after being held back by chips and compete with Apple. The folding screen with novel concept and technical difficulty is regarded as a breakthrough in the high-end track, and Xiaomi, Huawei, OPPO, and Honor will all launch new folding screen machines in 2021.
Huawei folding screen mobile phone, image source: Time Weekly reporter photo
In the folding screen mobile phone track, Samsung and the domestic mobile phones are inevitably a battle. If Samsung "attacks" the Chinese market, folding screen mobile phones are likely to be a breakthrough.
"Samsung's hinges, screens, etc. can be said to be the best, because Samsung does folding screens early, products undergo iteration, and domestic folding screens are basically just launched, lack of experience." In addition, the screen provided by Samsung to itself is top-notch, and the basic products provided to domestic brands are the products of the previous generation. On January 23, a Samsung salesperson summarized the advantages of Samsung's folding screen mobile phone to the Times Weekly reporter.
Domestic manufacturers are catching up
Competing in the folding screen market, Samsung occupies an advantage in technology and production capacity.
According to the Times Weekly, oppo and glory launched a new folding screen machine, the output is not high, OPPO FIND N supply shortage. According to the Visit of the Times Weekly reporter, Samsung's multiple folding screen mobile phones are well supplied.
On January 25, Liu Yushi, a senior analyst at CINNO Research, told the Times Weekly reporter that the supply of domestic folding screen mobile phones depends to some extent on the product level of domestic panel factories and Samsung's export capabilities. In contrast, Samsung has a complete layout in the semiconductor supply chain and can independently produce most of the parts needed for folding screen mobile phones. Samsung still has a leading edge in key technologies such as LTPO, and it has considerable supply chain advantages in terms of yield and other factors that are enough to support self-supply before export.
Liu Yushi said that Samsung M series OLED materials are mainly supplied to their own flagship mobile phones, and their performance in terms of power consumption, peak brightness, color accuracy and other aspects is generally better than that of the E series materials exported in the same period. Due to various factors such as industrial chain monopoly and patent barriers, domestically produced OLED screens can reach the level of Samsung in terms of parameters, but cost and yield are often difficult to take into account, and the process of catching up with Samsung is more tortuous.
The ultra-thin glass UTG material cover plate used in Samsung folding screen screen also has certain technical barriers. Samsung is leading the industry in this type of material production technology used to enhance the bending performance of folding screens and replace the glass cover of traditional mobile phones. As the first folding screen mobile phone equipped with a UTT cover, the Samsung Galaxy Z Flip, which came out in February 2020, has a better screen quality than the competitor equipped with CPI.
Domestic folding screen mobile phones have more different ways to use CPI (transparent polyimide) instead, but the material still has transparency and crease problems. Some domestic manufacturers have abandoned the CPI alternative, OPPO FIND N decided to use Samsung's UTC cover folding screen products to improve the quality of the screen. If you do not rely on Samsung to supply UTT cover products, domestic manufacturers still need to improve the production technology of UTG cover.
Despite this, domestic manufacturers are also accelerating to catch up. In March 2021, Kaisheng Technology (600552. SH) announced a capital increase of approximately CNY 1.025 billion for the construction of the second phase of the UTT Glass project. In May of the same year, Changxin Technology (300088. SZ) announced that it has placed orders for UTT. In December of the same year, Lens Technology (300433. SZ) said that the folding screen smartphone UTT glass has reserved the industry's leading technical advantages, and the relevant mass production products are applied to the folding screen mobile phones that have been listed.
Some domestic folding screen mobile phones have also found domestic flexible OLED suppliers. The Honor Magic V flexible inner screen is supplied by BOE (000725.SZ) and the Huawei P50 Pocket flexible screen is supplied by 002387.SZ.
According to CITIC Securities Research Report, in 2022, Samsung accounts for 36% of the global flexible OLED production capacity distribution, and domestic manufacturers such as BOE, Shentianma, Huaxing Optoelectronics, and Visionox account for no less than 43%, and it is expected that the yield rate of domestic flexible OLED products will continue to increase, narrowing the gap with Samsung.
Liu Yushi told the Times Weekly reporter that although Samsung Electronics has more advantages in folding screen technology and supply chain, product feedback is generally not as good as domestic enterprises, and oppo Find N, a folding screen product that also uses Samsung display UTT cover, has better market feedback than Samsung Electronics' own folding screen products.
On January 23, a mobile phone sales staff told the Times Weekly reporter that Huawei's folding screen mobile phone sales are significantly higher than Samsung folding screen mobile phones, Huawei's brand image in the high-end market is better, and Huawei folding screen mobile phones are more suitable as high-end gifts for the holiday. Although Samsung has rich experience in the production of folding screen mobile phones, in addition to folding characteristics, consumers also value Huawei's photo advantages.
According to iResearch data, the brand with the largest market share of folding screens in China in 2021 is Huawei, accounting for up to 64%, with an absolute leading edge. With a number of mobile phone manufacturers and supply chain manufacturers entering the folding screen, Samsung's "folding screen war" in the Chinese market is doomed to be not easy.