It is too early for domestic mobile phones to overthrow Samsung

Market research firm Canalys recently announced that Samsung Electronics sold 13.22 million smartphones in the Chinese market in the second quarter of this year, surpassing Xiaomi, a Chinese company, which sold 14.99 million smartphones. This is the first time Samsung has given up its position as the leader in the Chinese market since 2011. At the same time, the market share of domestic smartphones such as Huawei and Lenovo is also rising, and they are expected to catch up with Samsung. For this reason, many analysts believe that the era of the comprehensive rise of domestic brands and the fall of foreign brands such as Samsung has arrived.

Mobile phone manufacturing is an industry with extremely fierce competition. In the era of feature phones, Motorola and Nokia were the leaders for several years. After entering the era of smart phones, the emergence of iPhone quickly defeated Nokia. Two years ago, Samsung surpassed Apple . Now it is the turn of new generation domestic mobile phone brands such as Xiaomi, Huawei and Lenovo to challenge Samsung's dominance.

In fact, as early as two or three years ago, there were predictions that domestic brands would usher in a period of rapid development with many advantages such as low cost, technological catch-up, and Chinese elements. After a few years, domestic smartphones now have the right time, place, and people, and a counterattack has become possible.

First, the Chinese market has huge potential. Since 2012, China has become the world's largest smartphone market. In 2014, the scale of China's smartphone market will exceed 400 million units, accounting for about 30% of the global market. More importantly, unlike the United States, Western Europe, South Korea and other countries that have entered the mature stage, the smartphone penetration rate in developing countries such as China still has great growth potential, which has also caused the focus of the smartphone market to shift from high-end to mid- and low-end, and price competition has become increasingly fierce.

Secondly, the manufacturing threshold of smartphones is constantly lowering. With the development of smartphones, products and formats have become fully mature. As a manufacturing powerhouse, China has accumulated technology from LCD screen, integrated circuit, chip manufacturing and other foundry companies for many years. Smartphone manufacturing technology has become popular and the threshold is no longer out of reach. The manufacturing advantage brought by Samsung's complete supply chain has been largely offset. The success of Xiaomi and the subsequent emergence of domestic brands such as Hammer, Beidou, and Xiao Lajiao are proof of this.

Secondly, domestic mobile phones still have a huge cost advantage. With fierce competition, as smart phones continue to become more popular, the gap between domestic mobile phones and high-end mobile phones such as Samsung and Apple is getting smaller and smaller, and the performance is sufficient to meet the daily use of users. In particular, domestic mobile phones with hardware configurations similar to Samsung mobile phones are priced at only 1/2 or even 1/3 of the former, which has greatly impacted Samsung's sales in China. According to Korean media reports, Huawei recently intends to launch a smart phone in the Korean market. The configuration and functions are basically similar to Samsung mobile phones, but the price is only 380,000 won (about 2,280 yuan), which is equivalent to half of Samsung's mainstream smart phones, which made the Korean industry exclaim "wolf is coming".

Finally, domestic brands are obviously more down-to-earth than Samsung and Apple. Domestic mobile phone manufacturers are more familiar with the domestic market and understand the habits and characteristics of domestic consumers. They can not only provide more appropriate mobile phone products according to consumer needs, but also adopt the current popular Internet marketing methods in the Chinese market to carry out sales and services. Samsung still insists on investing huge amounts of money in traditional methods such as TV advertising for publicity, which undoubtedly greatly offsets its advantages in cost control, product turnover, and capital efficiency.

In short, the sudden rise of domestic brands represented by Xiaomi, Huawei, Lenovo, etc. is foreshadowing that the global smartphone market landscape, which has been dominated by Apple and Samsung in the past few years, is undergoing dramatic changes. As the overlord of the global mobile phone industry, Samsung is "lonely at the top", being squeezed from both sides by Apple's high-end phones and Xiaomi's mid- and low-end phones. "If you don't advance, you will retreat" is a true reflection of Samsung's surrender of its position as the leader in the Chinese market.

However, it is too early to conclude that domestic smartphone brands will surpass Samsung. As a giant with annual sales of more than US$200 billion, Samsung Electronics still occupies nearly one-third of the global mobile phone market share, and Samsung's integration capabilities in the entire vertical industry chain are also the best in the world.

In addition to smartphones, Samsung also produces a full range of consumer electronics products. It is also a world-class supplier of core components such as processors, memory, and panels. It also has many key technologies and patents, which give it advantages in product research and development, production, quality, and bargaining power. Not only that, Samsung also has a strong product distribution management system, which is something that domestic brands that have just entered the world market cannot do.

Moreover, Samsung has a better grasp of the future trends of the mobile Internet industry than domestic smartphone manufacturers. According to analysis, Samsung is likely to focus on smartphones, tablets, wearable devices and other products in the future, combined with smart homes, mobile medical services and other services, to create mobile Internet services in all fields. This is something that domestic brands that are still struggling to compete for smartphone market share cannot achieve.

After losing its position as the leader in the Chinese market, Samsung is bound to launch a strong counterattack. As the Korean industry has called for, it is time to pay attention to Xiaomi. According to a recent report by Korean media, Samsung has begun to adjust its business strategy and increase its resource investment in the mid- and low-end smartphone market. It can be predicted that Samsung is likely to lower its profile in the next step, integrate high, medium and low-end smartphone channels, and use competitive strategies such as reasonable price cuts, even at the expense of short-term interests, to curb the rapid development momentum of domestic mobile phone manufacturers.

In addition, despite the rapid development of domestic mobile phones in the past two years, the profitability is not satisfactory. Although Xiaomi has not disclosed accurate profit data, it is generally believed that its profit margin is definitely lower than Samsung. On the other hand, although Samsung's profit in the second quarter fell by 20% year-on-year, its net profit for the quarter was still as high as 6 billion US dollars, which is almost the total sales of Xiaomi in the first half of this year. Moreover, as more and more domestic manufacturers join the battle of smartphones, the smartphone market will once again usher in the "Warring States Period", and fierce price wars will inevitably break out between domestic smartphones with serious homogeneity. It is also a question how long the extraordinary development of domestic brands such as Xiaomi can last.

In summary, the author would like to say that the rise of domestic smartphones represented by Xiaomi is certainly gratifying, but to truly overthrow Samsung, the hegemon of the global mobile phone industry, domestic brands obviously still have a long way to go. The outcome of this counterattack remains to be verified by time.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.