How Samsung is beating Apple in China

(Agencies) Updated: 2013-07-26 16:01

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Samsung's history and corporate culture could hardly be more different than Apple's, the iconic Silicon Valley start-up founded by Steve Jobs and Steve Wozniak in 1976. Lee Byung-Chull started Samsung in 1938 as a noodle and sugar maker. It grew over the decades into an industrial powerhouse, or chaebol as Koreans call the family owned conglomerates that dominate the nation's economy and are run with military-like discipline.

Apple, by contrast, became the epitome of Californian cool, an image the company revels in. That hip image translates in China its stores are routinely packed but hasn't been enough to overcome the more entrenched Samsung.

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

Samsung Galaxys and Apple iPhones of different generations sit side by side, glinting under bright display lights as vendors call out to get customers' attention. With its varied models, Samsung smartphones outnumber iPhones at least four to one.

While Apple releases only one smartphone a year, priced at the premium end of the market, Samsung brings out multiple models annually with different specifications and at different price points in China.

And those models, analysts say, are loaded with features tailored specifically for the local market: apps such POCO.cn, 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 away.

"People just love features. They want their phone to have 50 different things that they're never going to use," said Michael Clendenin, managing director of technology consultancy RedTech Advisors. "Apple just doesn't play that game. Unfortunately, if you want to hit the mainstream market in China, and you want a lot of market share percentage points, you have to offer the Swiss army knife of cellphones."

"SETTING THE PACE"

Analysts believe Samsung's increasing strength in China is a critical reason behind its rival's possible intention to introduce globally a new and cheaper iPhone model, as well as one with bigger screens - a staple of Samsung's offerings.

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

Most audaciously, Samsung has gone after Apple not simply by offering lower priced smartphones, but by attacking its rival directly in the pricier end of the market. "We put a lot of emphasis on the high end market in China," co-CEO JK Shin told Reuters in an interview.

Samsung launched a China-only luxury smartphone together with China Telecom marketed by actor Jackie Chan that retails for about 12,000 yuan ($2,000). The flip phone, named "heart to the world," is encased in a slim black and rose gold metal body.

"We launched luxury phones promoted by Jackie Chan. This helps target niche customers and build brand equity," said Lee Young-hee, executive vice president of Samsung's mobile business.

While Samsung won't sell millions of these smartphones, the creation of the phone in conjunction with a carrier reinforces Samsung's willingness to go local - and tap into niche markets.

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

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.

"People know intellectually that Samsung is from Korea, but when it comes to the messaging there is always a local face," Wong said.