In China, Apple's focus pays off while Samsung feels squeeze

Thu Jul 24, 2014 7:55am EDT
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BEIJING (Reuters) - 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 (AAPL.O: Quote) 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 (005930.KS: Quote).

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 January-March 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.   Continued...

The gold colored version of the new iPhone 5S is seen after Apple Inc's media event in Cupertino, California September 10, 2013. REUTERS/Stephen Lam