Samsung has lost its No. 1 position in the Chinese smartphone market, the world's biggest, to local rival Xiaomi. The Korean electronics giant first took the top spot there in the fourth quarter of 2011 and held on to it until early this year, but its share dropped from 18.3 percent in the first quarter this year to 12 percent in the second.
In contrast, Xiaomi's share of the Chinese smartphone market rose from a mere five percent in 2013 to 14 percent this second quarter. Smaller Chinese players, such as Lenovo and Huawei, are also catching up quickly, signaling tough times ahead if Samsung is to defend at least its second rank.
In India, the fastest-growing market in the world, Samsung also ceded the No. 1 position in the overall mobile phone market to local manufacturer Micromax.
Future market conditions are far from rosy for Samsung and, given its dominant position here, for Korea. The best-selling products in the global smartphone market are shifting quickly from high-end to cheaper models. Innovations in technology have reached their limits, resulting in few differences in the functions of different devices.
Instead, the price tag has become the most important factor, and Xiaomi, which has been criticized as something of an Apple knockoff, sells smartphones that cost less than half a Samsung Galaxy. And even if Samsung recovers its market share by pumping out low-priced smartphones, its profits will still shrink.
Samsung's affiliates and parts suppliers are feeling the impact as dominance of the smartphone market shifts to Chinese players. The IT industry, which is the backbone of the Korean economy, is looking at a crisis. The future of Samsung and the Korean economy rests on whether the company can figure out a game plan that goes beyond smartphones.