Is COVID an opportunity for Samsung to unseat Xiaomi?

Samsung, the former smartphone market leader, has been reclaiming lost ground, by beating its Chinese rivals like Realme, Oppo and Vivo. Research firm Counterpoint Research says that the Korean brand now holds the second spot, only a few percentage points behind Xiaomi.

The Indian smartphone market nearly halved (from around 36 million units) in the last quarter. Only around 18 million units were sold all across the country during the last three months. This was mostly due to the impact of the COVID-induced lockdown.

According to Counterpoint, Samsung’s share witnessed a steady decline over the last several quarters falling from 23 per cent in Q1 of 2019 to 16 per cent in Q1 of 2020. The brand now holds 26 per cent, while Xiaomi commands 29 per cent of the market

While Samsung has surged, the overall share of Chinese brands in the Indian smartphone market has fallen. The share of Chinese brands fell to 72 per cent in Q2 2020, from 81 per cent in Q1 2020.

Counterpoint attributes this to the unsteady supply of major Chinese brands (like Oppo, Vivo and Realme) and delayed import of goods from the country alongside the growing anti-China sentiment due to the border conflict.

Also, while rivals struggled to launch new products and many decided to postpone new launches, Samsung reportedly launched over nine new models across price segments over the last few months. The latest addition in Samsung’s line of products is Galaxy M01 Core priced at Rs. 5,499. The brand has been trying to strengthen its value portfolio amid news of Reliance’s launching accessible Android devices in partnership with Google.

Samsung had claimed the top spot in the Indian market after dethroning erstwhile leader Finnish smartphone brand Nokia around 2013. The brand lost its place to Xiaomi in 2017 and has struggled to reclaim and hold on to the top ever since.

Can Samsung now reclaim the top spot? Also, will the impact of the anti-China sentiment sustain over the coming quarters?

Shipments have shrunk across brands. In October last year, Samsung had announced that it had ended its mobile phone production in China. Samsung’s non reliance on China for production could have played a role in placing the brand in a better position.

Shubhajit Sen, founding partner, A Priori Consultants (former CMO, Micromax), opines that it won’t be right to predict long-term trends based on one quarter. Especially because it (the quarter) has witnessed so many variables like the Coronavirus pandemic, its economic impact, the Indo-China border conflict, among other things.

“It has been a pretty bizarre quarter and the category has shrunk by 50 per cent. When the category itself has seen such a huge change and offline sales were really affected, we need to proceed with caution when discussing market share. The impact of the anti-China sentiments might happen in the margins, but it won’t have any major impact,” says Sen.

He adds that if the anti-China sentiment really had any impact, a Chinese feature phone brand ITEL could not have held on to its leading position in the feature phone market. “The consumers there don’t seem to have responded to the sentiment,” he says.

In the feature phone segment, ITEL competes with brands like LAVA, Micromax, Karbonn among others.

Nimish Dubey, senior technology editor and writer, highlights a significant difference in the reports on the same market from two different research agencies, Counterpoint Research and Canalys. While Counterpoint has put Samsung in the second spot, Canalys has put Vivo in that position. According to Counterpoint, Samsung holds a 26 per cent share, followed by Vivo at 17 per cent. On the other hand, Canalys pegs Samsung’s share at 16.8 per cent and Vivo’s at 21.3 per cent.

“The difference between both the reports is usually of a few percentages here and there. This time, they are almost contradicting and it is difficult to say which one is correct. With this, the figure starts getting murky and we should wait for other reports. That said, whether the anti-China sentiment has had any impact is hard to say, but it has been very evident and loud,” Dubey says.

Speaking of Samsung’s surge, Dubey maintains that it’s hard to decide if it’s because of the brand being in the right place at the right time with its local manufacturing and components, or the anti-China sentiment.

“Looking at OnePlus’ high profile launch, it’s hard to understand. It didn’t have any problems, despite being Chinese. It is almost like some brands are more Chinese than the others. It looks like a temporary impact, but if something flares up at the border again, it could turn permanent.”

But, can Samsung topple Xiaomi? “It definitely can. It is a giant that has the resources, the technology, supply chains, etc., to do so. But will Xiaomi sit quietly? It is a relatively smaller company and it moves really fast. The way it took over the TV market is surprising,” Dubey responds.

Putting forth his view, Sen says that Samsung has been recovering over the last 3-4 quarters. “Samsung is a very professional organisation, and has been the fastest in getting their supply chain and distribution sorted out. That is one key reason why Samsung has recovered. If it persists in the next few quarters, we might look at a trend,” he adds.

Sandeep Budki, founder and editor, The Mobile Indian, says that it will be very difficult for non-Chinese brands to sustain, unless they come up with innovative products and their shipments are in order. Samsung has a decent portfolio of devices across segments, and they’re still launching.

“The anti-China USP will be a very small thing for non-Chinese brands like Nokia and Samsung, and they might present themselves as an alternative if consumers are looking for it.”

Budki explains that players like Xiaomi and Realme play the pricing game, and Samsung has to match up to that. “Also, all the top players are producing smartphones in India and are trying to make it their hub. Samsung has been doing so, Oppo-Vivo have their factories in India, Xiaomi and Apple have partnered with Foxconn to produce their devices in India. They are on the same plank that way and the products will be the differentiator,” he adds.

Lloyd Mathias, business strategist (former Asia marketing head of HP Inc.), says that Samsung will be the natural gainer, given its dominance in the top and middle range smartphones, and (it) will likely close the gap. “However, they have to reckon with sentiments cooling off, once border tensions ease, and clever campaigns like the ‘Made in India’ campaign by Xiaomi. Also, the lower prices for the same feature set that the Chinese brands offer.”

Mathias also maintains that it is difficult to arrive at a conclusion at this stage. Understandably, the Chinese smartphone brands’ shares have dropped – given the overall sentiment around the border standoff. Many Chinese brands are even struggling to manage inventories at the retail level, given the import restrictions coming into play.

Dubey says that as a company, Xiaomi fared better than most others. “They didn’t fire people, supported their dealers, etc. Manu Jain (Xiaomi’s global VP and Xiaomi India MD) actually had a point when he said that Xiaomi was more Indian than many Indian companies,” Dubey signs off.