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 Long the leader in price-conscious India, the South Korean giant had
been losing ground to local rivals such as Micromax and Lava, as
well as Chinese brands. But Samsung's Indian market share rose to 30
percent as of February this year, from 28.6 percent in the fourth
quarter of 2015 and 27.4 percent in the final quarter of 2014,
research firm Counterpoint says.
The company credits strong sales for its mid-tier products,
particularly its new Galaxy J series phones.
"Differentiated offerings are driving the trend in the
mid-to-low-end segment," said Manu Sharma, vice president of product
marketing for Samsung India Electronics.
For example, Samsung recently introduced its "S bike" mode, a
feature targeted at India's legions of motorbike riders that, when
activated, notifies callers that the phone's owner is riding and
cannot answer.
Other draws for Indian buyers include models with features for using
less data or keeping the phone alive for longer when charging is not
possible.
Researcher GfK says the J2, J5 and J7 account for nearly 20 percent
of the Indian mobile market by value. Production cost savings are
also enabling Samsung to sell higher-quality phones for less,
analysts said.
CUTTING PRODUCTION COSTS
Samsung's surge in the No. 2 smartphone market behind China comes as
arch-rival Apple struggles to gain a footing with its expensive
phones, holding market share of just 2 percent in the fourth quarter
of 2015. The U.S. firm's renewed efforts to import and sell used
iPhones, meanwhile, are facing opposition from local vendors.
Samsung's gains also underscore how the world's No. 1 smartphone
maker, with just under a fifth of the global market as of the end of
2015, is finding its footing after a long slide.
Though still squeezed by Apple in the premium segment and by Chinese
rivals such as Huawei Technologies Co Ltd [HWT.UL] at the lower end,
analysts say Samsung is righting itself by launching more attractive
products and shaving production costs to compete better on price.
"Samsung mid-level smartphones, especially the J series, have been
doing quite well in emerging countries, especially in India," said
Tarun Pathak, an analyst for Counterpoint Technology, noting that
budget-tier products have driven volumes for the South Korean firm
in recent quarters.
Such efforts, and better-than-anticipated sales for its flagship
Galaxy S7 devices, are expected to lift Samsung's earnings. Some
analysts now expect Samsung's January-March profit to top 6 trillion
won ($5.2 billion), compared with the Thomson Reuters StarMine
SmartEstimate of 5.6 trillion won derived from a survey of 22
analysts.
Though Samsung will offer no details beyond estimated January-March
revenue and operating profit when it gives guidance on Thursday,
analysts expect its mobile division to have been its top earner for
the first time in seven quarters.
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PRODUCT OVERHAUL
Since mid-2014, Samsung has been overhauling its product design,
particularly in the mid-to-low tier segments, phasing out old and
unpopular models and launching new devices including the A, E and J
series.
The newer devices incorporate parts and features traditionally found
only in high-end phones, such as metal frames and organic
light-emitting diode (OLED) screens.
As well as giving the phones a premium feel, that also enables
Samsung to increase the number components common across its
products, cutting costs and enabling more aggressive pricing,
analysts said.
Dongbu Securities analyst Yoo Eui-hyung said such efforts could
boost mobile division margins by 1 or 2 percentage points, although
savings were likely to be offset by price cuts.
"Samsung is trying to hold its ground," he said.
Still, Samsung is expected to remain under pressure from Chinese
competitors growing more aggressive overseas as growth at home
slows.
"Samsung has regrouped itself but will have to be constantly on its
toes," IDC analyst Kiranjeet Kaur said.
In addition to trying to secure permission to sell used, or
refurbished, phones in India, Apple is betting its new 4-inch iPhone
SE can help it gain new customers in the country.
The cheapest iPhone SE will sell at 39,000 Indian rupees ($587),
before discounts or promotions, compared with 8,350 rupees for the
Galaxy J2 or 14,249 rupees ($215) for the J7, according to the
companies' Indian online stores.
Despite the price gap, Apple's emerging market-focused phone could
pose a threat to Samsung, some analysts say, particularly if it wins
approval to import refurbished iPhones.
"Apple's portfolio strategy with the iPhone SE launch is
particularly designed to make room for refurb devices for sub-$300
price-points," said Neil Shah, another Counterpoint analyst. "So
Samsung and others who are playing in the $200-$400 segment should
be worried." ($1 = 66.4350 Indian rupees)
(Editing by Tony Munroe and Alex Richardson)
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