Chinese media has confirmed that as per Korean company Samsung’s announcement from December, it has closed its factory in Tianjin. This leaves Samsung with only one factory in mainland China, located in Huizhou, Guangdong. While Samsung remains the largest manufacturer of mobile phones world wide, the company’s market share in China has fallen from a record high of 20% in 2013 to under 1% in 2018. Based on the dismal figures, the company took what appears to be a pragmatic decision to shut a factory producing phones that Chinese consumers had lost affection for.
This helps to demonstrate that while US tech giant Apple blamed its $674 billion market cap loss on a lack of new sales in the lucrative Chinese market – the trade war can explain the short term reasons behind investors losing confidence in Apple, but not longer term trends. Clearly, the trade war has made investors in a company like Apple nervous because of possible disruptions to long established global supply chains, as well as speculation (unfounded though it is) that China could bar Apple from its market in retaliation for the US forcing its closest partners to abandon 5G network building using hardware and expertise from China’s Huawei. While these speculative trends have hit Apple hard, in addition to its sales figures being down both in China and in its major western markets, in the longer term, Apple is facing other problems that Samsung’s own retreat from China is symptomatic of.
Across the world, Apple smartphone products have gained a reputation for high levels of innovation and attractive design. Because Apple is a maker of both smartphone hardware and software, the company has been largely successful in encouraging brand loyalty due to the fact that once one bases one’s business practices or media connectivity around the Apple operating system, it is not always easy to transfer items to the rival Android system. On the other hand however, Samsung rose to be the world’s overall largest smartphone marker after earning a reputation for phones that were incredibly durable, largely affordable and easy to upgrade.
But while Samsung and Apple have two distinct yet equally positive market reputations, Chinese smart phone leader Huawei has earned a reputation that combines Apple’s reputation for innovation and design with Samsung’s reputation for durability, affordability and reliability. 2018’s introduction of the Huawei Mate 20 Pro saw the arrival of a smartphone with arguably the world’s best cameras, some of the world’s quickest processor speeds, largest memory and one that was still more affordable than Apple’s top products.
Although “just a smartphone”, the Huawei Mate 20 Pro has become emblematic of Chinese innovation, Chinese excellence in a high tier sector of the tech market, as well as the fact that as the 21st century moves on, ‘brand China’ will become a hallmark of quality rather than one signifying excellence merely in mass production.
While at the beginning of 2018, Apple was the second largest smartphone marker in the world, by mid-year, Apple would be eclipsed by Huawei globally, in spite of the fact that Huawei’s products remain difficult and in some cases impossible to buy in the United States.
In this sense, although a much needed resolution to the trade war will likely help Apple’s shares, the fact that Korea’s Samsung is facing an even bigger drop in market share within China, is demonstrative of the fact that as China’s domestically built and designed products become more desirable than flagship imports, market forces dictate that Huawei’s main competitors must up their game in order to maintain desirability among a highly informed Chinese consumer base.
Thus, the lessons behind the shuttering of Samsung’s Tianjin factory are two-fold. First of all, it demonstrates that China’s consumer base is voting with its feet according to what products are the most innovative and sold for the most reasonable price, while secondly, in today’s world, China represents a key centre of technology innovation and brand building while also being a domestic market that can shape global trends. As neither of these things were true in the 20th century, the news from Samsung and similar news from Apple helps to reveal many objective truths about China’s internal development.