Blow to Samsung, Apple
The three major Chinese telecoms companies have cut their subsidies by at least US$5.9 billion. Under the circumstances, Samsung Electronics’ and Apple’s new products making their debuts next month are expected to take a hit.
China Mobile is going to decrease its subsidies by US$2 billion. China Telecom announced on August 27 that it would lower its subsidies to 15 percent of its sales from the 18.7 percent they were at the first half of this year. Calculated based on the sales for 2013, the amount to be reduced is 12 billion yuan. China Unicom is cutting US$1.9 billion, too.
This is because last month the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council of China told the companies to reduce their marketing and promotion expenses by 20 percent, or US$40 billion, within three years. As such, the subsidy cuts are expected to be ongoing for a while.
This means an obstacle for manufacturers selling expensive mobile phones such as Samsung Electronics and Apple. Until recently, the mobile carriers have provided an average of US$700 in subsidies for such handsets.
“It is interesting to see how consumers will react to new products from Samsung and Apple with the quality of those supplied by Chinese manufacturers like Xiaomi on the rise and the subsidies from the telecoms operators cut,” said market research firm IDC, adding, “The Chinese government’s policy will more affect the Galaxy Note 4 of Samsung and iPhone 6 of Apple than the Chinese makers.”