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The tides of the times have shifted, yet Samsung remains a fortunate behemoth. This tech giant, with decades of deep-rooted expertise in semiconductors, display panels, and storage solutions, boasts a formidable arsenal of technology and capital, affording it strategic maneuverability amidst industry upheavals.

Cover image source: Unsplash"

Samsung Electronics has further scaled back its presence in the Chinese smartphone market.

Recent reports from Sina Technology indicate a strategic retreat, with sources revealing that Samsung stores with monthly sales below 300,000 yuan (approximately $42,000) will be gradually phased out. Already, Samsung has shuttered stores in major cities including Shenzhen, Fuzhou, Zhengzhou, and Xi'an.

This move comes just three months after Samsung Electronics announced its exit from the Chinese home appliance sector. In May 2026, the company cited "rapidly evolving market dynamics" as the reason for its withdrawal from the home appliance arena.

However, Samsung has clarified that its semiconductor (storage), mobile terminal (smartphone), and medical device operations in China will continue uninterrupted. As of now, the company has maintained silence regarding the adjustments to its smartphone business.

Behind this silence lies a palpable sense of helplessness. Whether in home appliances or smartphones, Samsung's once-dominant position in the Chinese market has significantly eroded. The company is bidding farewell to an era, while new brands are ushering in another.

For Samsung, the once-golden age in China now casts a shrinking shadow.

1

Samsung Phones Follow Home Appliances Out of China

Three months ago, when Samsung Home Appliances announced its withdrawal from the Chinese market, industry observers had already predicted a less-than-optimistic future for Samsung's smartphone business in the country.

This prediction was not unfounded. Establishing a brand in the market requires a trifecta of brand recognition, compelling products, and a robust distribution network. However, as Samsung Home Appliances exits China, its distribution channels are inevitably shrinking, and its brand influence is taking a hit.

Market data further underscores the challenges faced by Samsung Home Appliances and smartphones.

In 2025, Samsung Home Appliances held a mere 1.5% market share in China. The situation for Samsung smartphones is even more dire. According to IDC data, in the second quarter of 2026, Samsung's market share in the Chinese smartphone market plummeted to 0.1%, with shipments dropping by 60.8% year-on-year.

What does a 0.1% market share signify? During the same period, approximately 66.01 million smartphones were shipped in the Chinese market, with Huawei, Apple, OPPO, vivo, and two other manufacturers accounting for about 96% of the domestic market. Samsung has been relegated to the "Others" category.

Interestingly, while Samsung has lost its foothold in the Chinese market, it remains the "king of phones" overseas.

Omdia data reveals that in the second quarter of 2026, Samsung's global smartphone shipments reached 60.5 million units, up 5% year-on-year, maintaining its global leadership with a 22% market share.

The stark contrast in performance between the Chinese and overseas markets highlights that Samsung's struggles in China cannot be solely attributed to product issues.

So, how did Samsung lose the Chinese market?

Firstly, there's intense competition. Over a decade ago, Samsung was the undisputed "king of phones" in the Chinese market, with its Galaxy flagship models synonymous with high-end quality and durability, peaking at nearly 20% market share.

However, in recent years, consumer demand has become more rational, while domestic smartphone brands have accelerated their innovation cycles. A barrage of new features, configurations, and imaging technologies has expanded consumer choices.

Yet, Samsung smartphones have maintained an "arrogant" stance. Compared to domestic brands, they are more expensive, yet their specifications are not necessarily superior.

Take Samsung's Galaxy S26 Ultra, released in February 2026, as an example. The 12+256GB configuration is priced at 9,999 yuan (approximately $1,400) on the official website. In contrast, the Honor Magic8 Pro, also equipped with the fifth-generation Snapdragon 8 Elite chip, is priced at just 5,699 yuan (approximately $800) for the same configuration.

Moreover, Samsung smartphones have been surpassed by domestic brands in core experiences like imaging, AI, and battery life. For instance, the Galaxy S26 Ultra supports 80W fast charging, while domestic flagship models now offer 90W or even 100W fast charging.

On social media, many users complain that Samsung smartphones produce "dull" photos and have battery life of less than four hours, necessitating a power bank for daily use.

Consumers are doing the math: why pay twice as much for similar performance, or even worse photography and slower charging? Samsung's brand halo is no longer a valid reason for premium pricing.

Secondly, there's a cultural mismatch in its product ecosystem.

Samsung's ONE UI system resembles a "global" template, with system functions, ecosystem services, and interaction logic that do not truly align with the lifestyles and cultural habits of local users.

For example, its NFC transit cards are only supported in a few cities, and Samsung Pay's deep integration with WeChat and Alipay lags behind, lacking convenient features like HarmonyOS's "one-tap payment code." Consumers accustomed to domestic smartphone systems may find Samsung's offerings cumbersome.

Finally, Sino-Korean relations also play a subtle role, directly influencing the popularity of Korean brands in the Chinese market. As Korean stars and variety shows lose their domestic appeal, Korean brands' popularity has also begun to wane.

Rome wasn't built in a day, and Samsung's decline in the Chinese market has been a gradual, decade-long process.

2

Stronger Chips, Greater Pressure on Phones

However, another set of numbers may have prompted Samsung's decision to withdraw from the Chinese market.

Recently, Samsung Electronics released its Q2 2026 financial report, showing revenue of 171.5 trillion Korean won (approximately $118.8 billion), up 130% year-on-year; operating profit reached 89.5 trillion won (approximately $62 billion), up over 1800% year-on-year, setting a new quarterly profit record for the third consecutive quarter.

Driving this impressive performance is the AI-fueled semiconductor boom. According to the report, the Device Solutions (DS) division, responsible for semiconductors, contributed 99.7% of the company's operating profit.

How profitable is Samsung Semiconductor? In Q2, the group earned 89.4 trillion won, more than double its total profit of 43.6 trillion won last year and even exceeding its combined profits from 2023 to 2025.

These numbers have reshaped outside perceptions of Samsung's "money-making power," but they also expose an awkward reality in Samsung's business structure—the stronger its storage business, the greater the pressure on its consumer electronics.

In Q2, Samsung's Device eXperience (DX) division, which includes phones and home appliances, reported revenue of 48 trillion won, down 9% quarter-on-quarter; operating losses reached 0.8 trillion won, marking the first loss for Samsung's phone business since its inception.

However, considering that Samsung's global phone shipments grew by 5% year-on-year in Q2, the decline in profitability cannot be attributed to sales volume but rather to costs.

Late last year, according to South Korean media, Samsung's DS division (responsible for semiconductors) refused to sign DRAM supply agreements with the MX division (responsible for phones and other businesses) for more than 12 months, further driving up costs for smartphones and other devices.

In January, media reported that Samsung planned to introduce BOE as a second OLED panel supplier for the Galaxy S27, hoping to reduce screen procurement costs through supplier competition.

However, this plan has since fallen through. Foreign media reported that the core resistance came from Samsung Display, which had been the exclusive supplier of panels for Samsung phones and was reluctant to see its flagship products switch to a competitor's panels.

Historically, the fortunes of Samsung's storage and phone businesses have often been inversely related: when storage thrives, the phone business faces pressure; when storage is in a slump, the phone business becomes the profit core that sustains the company through cycles.

But with the AI-driven semiconductor boom, this mutually supportive relationship has begun to crumble.

Among current leading phone manufacturers, few have achieved self-sufficiency in chips and displays. Huawei and Apple adopt a "self-developed chips, externally sourced screens" strategy; Xiaomi, OPPO, and vivo are also developing their own chips but have yet to fully succeed.

Samsung holds the most "aces," but its internally coordinated industrial ecosystem has become a liability in the face of competing interests.

Different departments within Samsung have their own interest battles, each seeking to maximize its own gains. However, when different departments of a company work against each other for their own interests, the entire group suffers.

3

Rooting in the Ultra-High-End Phone Market

The cost pressures on the phone business have also become the trigger for Samsung to scale back its Chinese market operations.

According to Sina Finance, Samsung phone stores in multiple Chinese cities have recently faced closures. Store employees revealed that the group has set a hard performance metric: stores and staff with monthly sales below 300,000 yuan (approximately $42,000) will face gradual phasing out.

Samsung has not yet responded to this. However, when viewed in conjunction with Samsung Home Appliances' withdrawal from China and the semiconductor division's financial performance, the 300,000-yuan sales target is not unfounded.

Samsung's intentions are clear: it is actively narrowing its product lineup and redirecting group resources toward high-end products. For example, it exited the hyper-competitive Chinese home appliance market while shifting entry-level home appliances to contract manufacturing.

Samsung is likely adopting the same strategy for its phone business. Last month, Samsung released the Galaxy Z Fold8 series, a broad foldable phone similar to Huawei's Pura X Max, with a starting price of 12,999 yuan (approximately $1,800).

Despite its high price, media reports indicate that the Galaxy Z Fold8 series received 1.44 million pre-orders in South Korea, breaking the Galaxy series' all-time pre-order record; in India, it surpassed 271,000 pre-orders in 72 hours.

Originally, Samsung planned for an initial flexible screen production capacity of about 2.8 million units for the Z Fold8, but it has now placed additional orders with core suppliers for screens, hinges, batteries, and other components, adding several hundred thousand units of capacity.

Previously, broad foldable phones were pioneered by Huawei, which also holds strong consumer appeal in the domestic market. However, with Samsung and Apple (expected to release its first broad foldable product in September) entering the fray, this market share will inevitably be divided.

Counterpoint predicts that in the global broad foldable phone market in 2026, Samsung, Apple, and Huawei will hold market shares of 32%, 25%, and 24%, respectively.

Even though Samsung phones hold only a 0.1% share in the Chinese market, they remain the global leader. For Samsung, fighting more focused battles—whether domestically or internationally—is the wiser strategy.

Therefore, Samsung's channel contraction in the Chinese market may have only just begun.

Ultra-high-end phone products are inevitably targeted at mid-to-high-end consumer groups. Samsung only needs to retain a small number of stores in core cities to cover its target audience—minimizing channel investment while preserving its brand presence.

The trend of the times has shifted, yet Samsung remains a fortunate behemoth. As a tech giant with decades of deep-rooted expertise in semiconductors, display panels, and storage solutions, it holds sufficient technological and capital resources, affording it strategic maneuverability amidst industry upheavals.

However, on the flip side of the coin, while Samsung is further sprinting towards its semiconductor business, the corporate resilience previously supported by businesses such as home appliances and mobile phones may be continuously depleted unnoticedly.

Once the storage chips encounter a cyclical downturn, Samsung will lack sufficient cushioning. When eggs are increasingly concentrated in one basket, the weight of the basket itself becomes the greatest risk.

Currently, Samsung's focus on high-end businesses is a more pragmatic and rational choice.

However, in the realm of business, there exists no such concept as a 'flawless exit.' When a company voluntarily withdraws from a market, it essentially cedes ground to competitors. Similarly, opting to cater exclusively to a niche segment of high-end users entails relinquishing the advantages of economies of scale and the sway of brand influence.

Samsung's high-end strategy may take a different trajectory, but the Samsung that emerges will not be the same as its former self.