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‘Huawei Effect’: China Becomes Samsung Electronics’ Biggest Client
China Accounts for Over 30% of Samsung Sales
‘Huawei Effect’: China Becomes Samsung Electronics’ Biggest Client
  • By Kim Eun-jin
  • April 3, 2019, 09:08
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China has become Samsung Electronics' biggest market by accounting for more than 30 percent of its global sales.

China accounted for more than 30 percent of Samsung Electronics Co.’s global sales for the first time last year. The proportion of the U.S. market has gradually decreased since 2016, while demand from Chinese companies has been on the rise. In particular, Huawei Technologies Co., which competes with the South Korean electronics giant in the network equipment and smartphone sectors, has become one of its biggest clients.

Samsung Electronics’ global sales (based on separate financial statements) came to 170.38 trillion won (US$149.85 billion) last year, according to industry sources on April 2. Out of this, 54.78 trillion won (US$48.18 billion), or 32.1 percent, of the sales came from China.

The proportion of China sales has been growing steadily after it surpassed the 20 percent level (20.6 percent) for the first time in 2014. The amount of China sales stood at 45.75 trillion won (US$40.24 billion) in 2017, up 42.7 percent from 32.05 trillion won (US$28.19 billion) a year earlier, and the figure also grew 19.7 percent on-year last year.

Accordingly, China emerged as the biggest market of Samsung Electronics for the first time last year, replacing the United States. The United States took up 31.8 percent and 30.2 percent of the total in 2016 and 2017, respectively. However, the proportion fell to 27.2 percent with 46.41 trillion won (US$40.82 billion) last year, the first time that it dropped to the 20 percent range.

China sales expanded largely due to two factors -- the Trump administration’s protectionism and the Chinese IT industry’s rapid progress. The U.S. market relatively shrunk with a stronger move toward protectionism, while the Chinese IT firms’ demand for domestic products increased.

In fact, Huawei was newly added to Samsung Electronics’ top five client list, which included Apple, Best Buy and Verizon of the United States, Germany’s Deutsche Telekom and China’s Huawei. These companies accounted for 14 percent of the total sales. Four of Samsung Electronics’ top five clients were Apple, Best Buy, Verizon and Sprint in the United States until 2017 but Huawei pushed out Sprint and became a new client making the top five.

In this case, Huawei is now a client and a competitor in the smartphone market at the same time for Samsung Electronics. Huawei announced a plan to surpass Samsung Electronics and become the largest smartphone maker in the world in 2020. In addition, Samsung Electronics’ Galaxy Fold and Huawei’s Mate X are competing in the market of foldable phone, which is a new smartphone form factor.

However, some point out that Samsung Electronics should take precautions against the expansion of China sales as China is aggressively promoting its high-tech industries under the “Made in China 2025” strategy.

Industry analysts believe that the key is whether Samsung Electronics can keep a super gap in the semiconductor sector. An official from the industry said, “Now, Samsung Electronics makes profits when Huawei sells more smartphones. It needs to keep maintaining the domestic core technology gap, including memory chips.”