How Samsung and Apple got beat in China

Back in the beginning of 2014, Samsung was the top dog of smartphone sales in China, commanding 20% share in the world's largest phone market. Apple was just beginning its expansion there with 9%, which ballooned to the whopping 14% in 2015's holiday quarter. Fast forward a year, and Samsung is nowhere to be seen with meaningful numbers, while Apple's share of the all-important Chinese market slumped to 7%. 

Granted, Samsung's fall from grace in China was steeper, due to its much larger midrange and low-end portfolio that were easier to assault by local makers, yet Apple's slump there hurts way more in terms of forfeited profits, as the 50% slump year-on-year represents about $4 billion in operating income left on the table there.

So, what happened? Well, for Apple the reasons are more complex than simply local competition, but one trend is pretty visible when you look at the graph above - companies that made their first phones 5 years ago, are now occupying the largest market share chunk in China. You might not have heard about Oppo or Vivo, although we have followed them through the years, and made a few reviews of their devices, but these two went from barely visible just a year or two ago, to collectively commanding a third of the Chinese market now. What is more, while Apple circles almost all profits in the industry, next in line to make some meanigful money from phones last quarter were only Oppo, Vivo and Huawei.

The reason, according to a Bloomberg investigation, is not only that they offer good value for money in the most popular $200-$500 segment - after all, most Chinese brands already did that. It's their push towards offline marketing that drove an immense amount of sales home, and they managed to beat not only Apple or Samsung, but also the local darling Xiaomi which seemed unassailable just last year.

Xiaomi, however, focuses on glitzy announcements, flash online sales, and targets big urban markets, whereas Oppo and Vivo focused on the rural hinterland, where a billion Chinese still live, and they aren't accustomed to ordering online. Nowadays, Oppo's phones are offered in 240,000 local electronics stores throughout China, and Vivo's handsets in half of that number. Beat that, a few hundred Xiaomi stores, or tens of Apple stores! Moreover, Oppo and Vivo offer incentives for the shop owners to sell their handsets, which range from $6-$30, plus locals have somewhere to physically turn up when there is a problem with their handset. 

All in all, it's not just the South China Sea conflict between the US and China, or the unbridled protectionism that brought Apple's slump there, but rather a good old direct and offline marketing strategy of Oppo and Vivo that's hard to replicate even for local brands.

source: Bloomberg & Statista

FEATURED VIDEO

18 Comments

1. monoke

Posts: 1172; Member since: Mar 14, 2015

iGalaxy-phone 7 edge is how they beat them. Why pick one when u can get both in one phone! lol.

14. SmartPhoneMobiles

Posts: 188; Member since: Oct 16, 2016

It is simple.. Like naive usa ppl started ignoring nokia and sony phones since iphone released.. And they only buys what is american so supporting usa manufacturers, china ppl started doing the same.. :) they don't need apple products as in china many smartphone manufacturers making much cheaper phones and same quality.. ;)

2. HugoBarraCyanogenmod

Posts: 1412; Member since: Jul 06, 2014

Don't complain people being copycat, establishment are to blame by outsourcing job to China in the beginning, Chinese workers are hardworking they willing to be slave in the factory, until they gain working experience they able to go outside and make one device exactly like yours, people will definitely buy their domestic product and kick you out. I'm pretty sure huawei and bkk steal technology via foxconn and make it better and then kick outsiders out. And what did we get? Unemployed! 2017 will be the new year, and no more job outsourcing!

12. razmahtaz001

Posts: 501; Member since: May 11, 2013

"steal technology ad make it better"...isnt that what apple does? and ifans praise the "make it better" when apple does it LOL

15. SmartPhoneMobiles

Posts: 188; Member since: Oct 16, 2016

U stupid idiot.. You are in usa unemployed BECAUSE your greedy usa manufacturers! Wake up kid.. Your own ppl don't giv fk bout you they wanna employ cheap employees... Praise newly freshly your president as he is going to change it..

3. Scarambay unregistered

I'm curious as to which brands come under "others" category. I don't think either HTC or Sony has a meaningful presence in China, doubtful about LG, too. That leaves brands like Gionee, Lenovo, Asus, UMi, Meizu and the likes. But together they have a share of 35%?!

9. tiara6918

Posts: 2263; Member since: Apr 26, 2012

Sony,lg,htc and recently samsung are dead in china. Sad that they used to be popular there before the rise of chinese oems

4. TheOracle1

Posts: 2329; Member since: May 04, 2015

Nothing to see here folks. Please move on.

5. meanestgenius

Posts: 22199; Member since: May 28, 2014

I've been thinking for a while now that if Apple and Samsung's market share was going to be eroded, it would because of the Chines OEM's. BBK (OPPO and Vivo) and Huawei are coming on strong, and I wouldn't be surprised if we started to see similar situations happening elsewhere soon. There are exceptions, of course, like the U.S. and Korea, where Apple and Samsung will maintain their respective market shares for much longer. All in all, great job Huawei and BBK.

7. aznhachi

Posts: 212; Member since: Apr 12, 2016

BBK(vivo and oppo) and Huawei are quite popular in my country(Malaysia) for the time being

11. meanestgenius

Posts: 22199; Member since: May 28, 2014

I could believe it. They offer real value for your money. Lots of "bang for your buck" there.

6. ryq24

Posts: 875; Member since: Oct 17, 2011

They should thought this in business school.

8. poptart574

Posts: 223; Member since: Feb 29, 2016

Both oppo and Vivo are worth owning. Top notch hardware and software.

10. JunN_Vai

Posts: 9; Member since: Nov 21, 2016

no samsung since q2 2015? wow

13. razmahtaz001

Posts: 501; Member since: May 11, 2013

vivo, oppo, meizu, gionee...if all of these oems had us 4G LTE radios in them and sold in u.s. carrier stores, as well as walmart, best buy, amazon.com, etc...they'd take a chunk of sales away from apple and samsung here in the u.s. too

16. poptart574

Posts: 223; Member since: Feb 29, 2016

I completely agree. Although I wouldn't want PA to review any of those phones. They would never get the fair shake they deserve.

17. jeroome86

Posts: 2314; Member since: Apr 12, 2012

Are you sure PA ? A Techie can show you stats and data to prove your wrong. Samsung still leads in China.

18. tiara6918

Posts: 2263; Member since: Apr 26, 2012

I no longer see any of chinese using a samsung smartphone. All of them are using an iphone. Well they used to own a samsung smartphone before, but not anymorr

Latest Stories

This copy is for your personal, non-commercial use only. You can order presentation-ready copies for distribution to your colleagues, clients or customers at https://www.parsintl.com/phonearena or use the Reprints & Permissions tool that appears at the bottom of each web page. Visit https://www.parsintl.com/ for samples and additional information.