Samsung in India

Debalina Ghoshal
August 03, 2018

Debalina Ghoshal examines Samsung's choices in the changing dynamics of the market for smartphones in Asia, specifically focusing on the two countries with the largest populations in the region: India and China. 

During South Korean President Moon Jae-in’s visit to India in July 2018, both India and South Korea welcomed the opening of South Korea’s Samsung Electronics in Noida, New Delhi. The opening of this factory would strengthen both South Korea and India’s trade relations and India’s ‘Make in India’ strategy. However, it is worth examining how and why Samsung established its factory in India.

While in India, Moon committed to raising South Korea’s relations with India to the level of those with China, Japan, US and Russia as a component of Moon’s ‘New Southern Policy’. There are several reasons for South Korea’s interest in the Indian market. 


Samsung’s China tango

It is a well-known that Samsung’s market share in China had declined over the last few years with the emergence of new Chinese local companies that have captured Samsung’s share. Once a leading brand in China, Samsung has lost out to local electronic companies, due to the fact that the company was not able to live up to the requirements of the Chinese people, who switched to local brands like Vivo, Oppo, and Huawei. In 2013, Samsung held 20 percent of the market share in China. Now, it is down to only 0.8 percent. One of the major factors for this downslide is the battery related complications of the Samsung Galaxy 7, which tarnished the image of the company. 

Additionally, the deployment of the Terminal High Altitude Area Defense (THAAD) system in South Korea by the United States has jeopardised economic relations with China. China is known to punish countries when they commit actions that are strategically destabilising for China by cutting off economic ties with them. This is not for the first time that China has resorted to economic retaliation in response to geo-strategic issues. In 2012, China boycotted Japanese goods due to tensions between the two countries related to territorial disputes. Japanese companies operating in China experienced protests and Chinese consumers boycotted Japanese cars and other products.

China has time and again protested against the THAAD deployment in South Korea, which they believe jeopardizes their nuclear deterrence. In fact, Samsung is not the only company in South Korea that has faced the consequences of the THAAD deployment. Lotte Group of South Korea also suffered in China due to boycotts, with Lotte Group planning to sell some of its Chinese stores, and 80 percent of the stores were closed as Chinese authorities raised inspection issues on safety and sanitation. In fact, by February 2018, LG decided to quit the smartphone industry in China. 


India’s gains?

While the recent opening of the Samsung factory in Noida is a positive development in the improvement of bilateral relations between India and South Korea, the South Korean company is not without rivals in India. Chinese electronic companies are already participating the Indian market. Xiaomi for instance, has already emerged as one of the top selling smartphone brands due to its low cost models. 

Another Chinese brand, Vivo, is the fourth largest brand in India, evolving from a company with 0.35 percent of the market share to its current share of 6.5 percent. Vivo, Xiaomi, Oppo, and Lenovo- four Chinese companies, have already acquired a market share of a total of 40.3 percent in the smartphone segment. Samsung, on the other hand, is unable to provide satisfactory models for the lower end segment. Meanwhile, Xiaomi is leaving no stone unturned to overthrow the Samsung from the Indian market. 

Chinese companies are providing high quality products with innovative features at affordable prices. There have been complaints that Samsung models are just old models that have been re-packaged as new models. However, most of the Chinese companies, except China’s One Plus, are yet to capture the higher end smartphone market in India. This is likely where Samsung can regain its market share. The US-based company Apple’s iPhones are too expensive for even the upper-middle class to afford, giving Samsung some advantage here. But Samsung will face competition from China’s One Plus, which only ranks second to Samsung in high-end smartphone markets. Samsung has tied up with local plants in India to manufacture smartphones that have helped the company evade custom duties levied on smartphones imported from abroad. Since Apple did not tie up with any local plant in India, its smartphones are prohibitively expensive. 

While Samsung will face stiff competition, amid these concerns, it is noteworthy that South Korean investment in India will help India become a manufacturing hub. Simultaneously, India accounts for forty crores smart phone users, and is not a market South Korea wants to lose. According to reports, India’s smart phone market is further expected to grow by 23 percent, making it one of the world’s fastest growing. 

With research and development factory now in India, and the manufacturing factory in South Korea, costs of the production of smart phones may decrease, offering middle class Indians with affordable smartphones and expected job opportunities. 



The Indian market wants cost effective products, while allowing for production to be localised for the overall economic development of the country. South Korea on the other hand, has incurred huge losses in the Chinese market, and probably does not see itself as regaining the same position it held five years back, wants to hold on to its position and build up in the large Indian market.  

Debalina Ghoshal is a defense and strategy analyst.