In China, Ap­ple's fo­cus pays off while Sam­sung mo­bile de­vices feel squeeze

The Political and Business Daily - - CORPORATE -

The mo­bile in­dus­try has long held that Sam­sung's broad range of mo­bile de­vices makes it nim­ble in chang­ing mar­kets, while Ap­ple loses out by rigidly stick­ing to its high-end gad­gets.

But man­u­fac­tur­ers' re­cent earn­ings re­ports chal­lenge those as­sump­tions, at least in China, the world's big­gest mo­bile mar­ket - where the roll-out of the next-gen­er­a­tion 4G wire­less net­work has been touted as a booster for smart­phone mak­ers seek­ing growth as de­mand in ad­vanced coun­tries fal­ters.

Ap­ple Inc's lat­est quar­terly re­sults showed sales of its high-end phones in China grew at nearly twice the pace an­a­lysts had ex­pected. Mean­while, bud­get of­fer­ings from Chi­nese firms won at the cheaper end, ef­fec­tively squeez­ing in­dus­try leader Sam­sung Elec­tron­ics Co Ltd.

Even as Ap­ple posted strong China sales, the South Korean tech gi­ant warned this month that quar­terly earn­ings could drop 25 per­cent due to an in­ven­tory build-up of cheaper phones and weaker de­mand for 3G prod­ucts in China.

That could sug­gest that Sam­sung's strat­egy of of­fer­ing ev­ery­thing to counter ev­ery price point may ac­tu­ally have left it stranded be­tween be­ing a price com­pet­i­tive brand and a pre­mium gad­get seller. By con­trast, Ap­ple has stu­diously cul­ti­vated its high-end aura, and its iPhones and iPads con­tinue to com­mand a higher price tag on av­er­age than its ri­vals.

Sam­sung has strong brand loy­alty in China, but charges 60-100 per­cent more than Chi­nese-made phones with sim­i­lar fea­tures, said Tom Kang, an an­a­lyst at Coun­ter­point Re­search in Seoul. "Even though they have a brand pre­mium, that's a bit too much."

Sam­sung de­clined to com­ment for this ar­ti­cle.

Sam­sung's high-end smart­phones and tablets such as its Galaxy S range, its an­swer to the iPhone and iPad, ac­counted for just a quar­ter of its Jan­uaryMarch sales vol­ume in China, while de­vices priced below 500 yuan ($80.75) made up the vast ma­jor­ity, ac­cord­ing to data firm Canalys.

At the same time, Sam­sung has come un­der pres­sure from the rise of Chi­nese bud­get hand­set mak­ers like Xiaomi, which this week re­leased the Mi 4, its new 1,999 yuan 4G hand­set.

Un­der­scor­ing the chal­lenges Sam­sung faces, it had just one model in China's top-5 best sell­ers in May and June - with its bigscreen Galaxy Note 3 tied in fifth place with a Len­ovo Group phone, ac­cord­ing to Coun­ter­point.

Ap­ple said this week its third-quar­ter rev­enue was buoyed by un­ex­pect­edly strong re­sults in China, where iPhone sales jumped nearly 50 per­cent in AprilJune.

"China, hon­estly, was sur­pris­ing to us ... we thought it would be strong, but it went well past what we thought. The unit growth was re­ally off the charts across the board," CEO Tim Cook told ana- lysts on Tues­day.

China Mo­bile Ltd's 4G cus­tomer growth has been ac­cel­er­at­ing af­ter a tepid start in Fe­bru­ary. The num­ber of 4G sub­scribers rose to nearly 14 mil­lion in June, up from just 1.3 mil­lion at the end of Fe­bru­ary.

"A lot of China Mo­bile cus­tomers have been hold­ing on to old phones, so when the high-speed 4G came out they nat­u­rally switched to a 5S or 5C and up­graded. This trend will only be­come more ap­par­ent with the iPhone 6's re­lease," said C.K. Lu, an an­a­lyst at Gart­ner.

China Mo­bile, the world's big­gest car­rier by sub­scribers, de­clined to dis­close the cur­rent break­down of its 4G sub­scribers, but its chair­man, Xi Guo­hua, said in March that "most of our 1.34 mil­lion 4G users are us­ing an iPhone."—

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