SEOUL-After being dethroned in 2014 and 2015 as the leading smartphone brand in China, India and Indonesia, Samsung Electronics Co. recovering customers in these key markets with a very simple strategy. lower prices
Until this year, Siddharth Sharma, a resident of New Delhi, had not thought to buy a Samsung as smartphones Micromax Informatics Ltd. and other Indian technology companies offer similar devices for about two-thirds the price. In January, however, Sharma saw a Galaxy J2 that fit your budget. The phone has a long battery life, faster data and screen looked bright. Your price: about $ 130. Before says Sharma, the model would have cost twice as much. “Quality is superior,” said Sharma, 35, comparing this phone with inexpensive brands that had used.
The aggressive strategy in the low-end market is part of a new bet South Korean tech giant to win the price race against local and global competitors.
the Chinese Xiaomi Corp. in February introduced a new flagship device, which has the same powerful processor of premium Samsung models, but with prices from US $ 250. Apple Inc. launched in March a cheaper version of its iPhone for $ 399, which ensures that the price war will continue this year.
the flagship models high-end Samsung cost more than US $ 600, but in the last 12 months the company has been adding features to their phones low ranges and a half, which cost between US $ 100 and US $ 300.
the Galaxy J series, which has gained strength in India and Indonesia, was redesigned to look more like the Galaxy S series, the most expensive line of Samsung. For less than half the price of its flagship devices, phones between US $ 100 and US $ 250 offer features like saving mode that allows users to regulate consumption data. It is an important in emerging markets where mobile data plans usually have a limit function.
Analysts warn that price cuts will affect the margins of Samsung and are not a long term solution for straighten the course of its smartphone business, whose operating profit 60% fell in the fourth quarter of last year compared to the level of two years earlier, to 2.230 million won (about US $ 1,850 million).
Samsung said on Thursday it expected an operating profit of 6.6 trillion won in the first quarter, thanks to the launch of the Galaxy S7. However, even with that momentum, that profit would be only slightly higher than in the first three months of the previous year, and 22% would be below that of the first quarter of 2014.
Even if Samsung increases its stake in emerging markets, this would intensify the pressure on their profit margins, which remain stuck at around 10% despite promises of its executives. Analysts estimate that Apple’s gross margin round 40%.
The research firm Gartner estimates that the share of Samsung in the global smartphone market fell to 22.5% last year, compared to 31% in 2013, while margins on mobile fell from 16.1% to 8.9% in the period.
the company plans to revive these margins through continuous cost reduction and rationalization of the number models of smartphones. DJ. Koh, who took over as head of Samsung mobiles in December, said in an interview that the cost cuts take time. “Material costs can not be reduced in a day,” he says.
Cellular Samsung still cost 25% more than their local rivals in these countries. Before introducing changes, however, the difference amounted to 40%, according to Tarun Pathak, an analyst at Counterpoint Technology Market Research, based in Gurgaon, India. Samsung declined to comment on its pricing strategy.
The company has been the leader in sales of smartphones in Latin America for four years, although its market share fell to 22% in the last quarter of 2014 , after reaching 38.4% in the first quarter of this year, according to Counterpoint. However, as prices fell, regained market share at the expense of the average sales price of their phones.
In Argentina, the most developed market in the region, Samsung took its share to 38.3% in the last quarter of 2015 thanks to strong price cuts and multiple promotions for the holidays this year, according to Counterpoint.
in India, the new policy has helped Samsung to regain its share, which climbed to 26% in the last quarter of 2015, versus 22% in the previous quarter, beating Micromax. Samsung also tested in India with the sale of mobile Internet, including a new line of Galaxy On series, which the online retailer Flipkart began distributing in November.
In Indonesia, where in the second quarter last year Samsung was exceeded briefly in total sales of mobile low-cost local rival Evercoss, new versions helped the South Korean company to regain first place in the third quarter.
Samsung says has taken steps to boost its brand recognition, expanding its program of customer service in Indonesia to more than 100 centers.
in China, after having been the undisputed leader for years, Samsung collapsed the year last to sixth by market share among manufacturers of smartphones. The company launched the Galaxy A series a mid-range phone that has better front-facing cameras. Koh, head of mobile phone Samsung said that the worst has passed and that the numbers in China will rebound in the coming months.
The president of Xiaomi, Bin Lin said he did not worry him the new prices for Samsung since the high cost structure of the South Korean manufacturer means you can only compete on price if it reduces their profits, which is not sustainable.
the risk of Samsung is that their price cuts erodes its premium brand, said Patrick Moorhead, an analyst at Moor Insights & amp; Strategy. “If they continue discounting the Samsung brand, will have to continue selling at a discount Apple and that will cause them great harm in future,” he says.
Eric Bellman in New
Delhi, and Min-Jeong Lee in Seoul
contributed to this article.
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