Samsung beating budget phone vendors in China, Apple losing ground

iPhone 5 Galaxy S4 (Tagscape 001)

Apple may be winning in the United States, the world’s top market for smartphones, but in the 1.33 billion people market of China – which is Apple’s second most-important territory revenue-wise – Samsung is beating local vendors of cheap handsets to the punch.

According to data from research firm Canalys, Samsung has overpowered rivals in China.

The company has grown its September quarter share to 21 percent, a notable jump from just fourteen percent a year earlier. The Galaxy maker was estimated to have shipped nineteen million smartphones during the third quarter ended September 30. It’s worth underscoring Samsung does not disclose unit sales like Apple does, citing competitive reasons.

For the most part, Samsung’s growth came at the expense of local vendors who build dirt-cheap handsets. But what about Apple?

Although the iPhone maker’s shipments in China grew 32 percent from a year earlier, its market share fell to six percent from eight percent a year earlier, Canalys told the Wall Street Journal. Samsung grew much faster versus Chinese vendors, with a notable exception of second-placed Lenovo whose market share remained steady at thirteen percent though its shipments surged 64 percent.

Blame Apple’s slight decline on the limited iPhone 5s output and iPhone 5c pricing.

Canalys researcher Nicole Peng explains:

As Apple’s hefty price tag for its iPhone 5c in China indicates, the company is clearly focusing on the high-end segment where growth isn’t as robust but margins are more stable.

She thinks going for the low-end would be “too risky” a move for Apple to make.

If the choice is between a cheap smartphone from a Chinese brand and a Samsung smartphone that is only a little more expensive, many Chinese consumers would choose Samsung, said Ms. Peng. “Chinese consumers already know Samsung because of its TV sets,” she said.

On the other hand, Apple’s numbers have gone up slightly from the five percent share in the June quarter, courtesy of strong iPhone 5s sales.

Touch ID Home button

For the first time sine its inception, Apple is offering the iconic smartphone in the 1.33 billion people market from day one. The iPhone 5s/5c went on sale in the United States, United Kingdom, China and additional countries on September 20, 2013.

Apple would have grown more had it not been for production difficulties. The iPhone 5s is a complicated piece of technology to assemble and Touch ID sensor yield issues are only making the problem worse.

iOS 7 teaser (iPhone 5c ad 006)

The Wall Street Journal earlier this morning reported that Apple is now outsourcing iPad mini and iPhone 5c production to an additional two Taiwanese companies, Compal Communications and Wistron, respectively, as it “tries to ensure adequate supply to meet consumer demand”.

According to new comScore data for a three-month period ended September 30, Apple accounted for a 40.6 percent share of the United States smartphone subscribers, up from from 39.9 percent in June. Samsung went from 23.7 percent in June to 24.9 percent in September.

All other vendors lost ground in the U.S. comScore ranking amid intensifying competition. Together, iOS and Android now control a ridiculous 92.4 percent U.S. market share, a new high.