Chinese brands are poised to thump Samsung in the Chinese smartphone market, according to Jun Zhang at Wedge Partners.
In a note on the Chinese smart phone market Zhang writes:
In China, a $US300-$400 price range is considered the middle-range smartphone market, compared with the high-end market segment which is dominated by Apple, Samsung, Sony and other foreign brands. Local brands such as Xiaomi, Lenovo, Huawei, ZTE, Coolpad, Meizu, Vivo, etc. view this segment as their high-end smartphone segment, compared with Apple’s and Samsung’s flagship products retail price above $US700.
The middle range smartphone market focuses more on price competition, production launch speed, as well as channel/carrier relationships/commissions. Therefore, China local brands have an advantage over foreign brands, as they give higher commission fees to retail channels than foreign brands and prices are very competitive.
We think Lenovo will become the leader in the middle range smartphone market and we think the upcoming Vibe X will be selling in the $US300-$350 range. We anticipate over 5 million units shipped in Q4.
We think local brands will take share away from Samsung in the middle range market and its smartphone will soon lose its No.1 position in the China smartphone market. We think Lenovo and Huawei will become the No.1 and No.2 players in China.
We highlighted a lot of this note already for a story about Apple’s iPhone 5C pricing.
This bit about Samsung is interesting to us. It sounds like things are going to get difficult for Samsung in the near future.
It’s confronting the same problems Apple confronted. The high-end market is reaching saturation, so it’s time to go after the low-to-mid range market.
But unlike Apple, Samsung doesn’t have a differentiator like iOS, Apple’s mobile software.
The market is more competitive for Samsung since it uses Android, just like everyone else.
In the mid-to-low-end, Chinese brands running Android are taking over.
When a new consumer is looking at buying a phone, especially if they’re price sensitive, they’re not necessarily going to choose a Samsung. Or, if they do go with Samsung, it might be a low-end device, which hammers Samsung’s profits.
Maybe this analyst is wrong. Maybe Samsung will figure out a way to thrive. But, we think things looks much harder for Samsung today than they did at the start of the year.