Published 18 March 2025
Once the leader in several markets in China, Samsung has seen its position in the country decimated by local firms, strategic missteps, a fickle regulatory environment, and geopolitical backlash. Its experience shows how FDI intended to help local suppliers can be turned by Chinese competitors and authorities against the foreign investor, and stands as a stark warning for those attempting to navigate relations with the world’s second-largest economy.
China is becoming increasingly challenging for foreign firms. Under Xi Jinping, Community Party and government influence on business is rising, government support for Chinese companies is growing, more stringent regulations have been imposed, Chinese competitors are improving, and foreign companies have faced China’s ire for their actions, or for those of their home governments. While some foreign companies continue to prosper in China, others are starting to fall by the wayside.1
One company that has experienced the ups and downs of the Chinese market is Samsung Electronics. An early leader in China, Samsung has seen its share of key China markets fall rapidly and now faces increasing competition from Chinese firms in global markets.
Samsung Electronics is one of the world’s leading companies, with 2024 sales of KRW 301 trillion (US$205 billion) and net profits of KRW 34.5 trillion (US$23.5 billion). The company is active in semiconductors, semiconductor design and foundry services, displays, mobile and network devices, and digital appliances.2 Samsung has been the world’s leading supplier of semiconductors, TV sets, and smartphone displays; the second-largest semiconductor foundry; and depending on the year either the world’s leading or second-biggest smartphone brand.
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Samsung Electronics is best known as a leading supplier of smartphones. In the last 10 years, Samsung trailed only Apple as global leaders in smartphone shipments. In the fourth quarter of 2024, Apple had a 23.2% share of global shipments and Samsung 15.6%, followed by the Chinese companies Xiaomi (12.9%), Transsion (8.2%), and Vivo (8.2%).3 Chinese companies as a group accounted for approximately 50% of global smartphone shipments in that year.4 Samsung was the world’s largest producer of Android smartphones, competing against leading Chinese makers that also use Google’s widely licensed operating system.
Samsung began producing low- to medium-priced products for export in China in 1992. In 1994, it invested nearly US$1 billion to create an electronics and electronic parts factory in Tianjin and followed with factories for home appliances in Suzhou (opened in 2003) and semiconductors in Xi’an (starting in 2012). Samsung was among the largest foreign investors in China in the early 2010s, with a vertically integrated structure including research and development, design, component production, assembly of finished goods, and extensive local sales and export activities. It was the market leader in unit sales in China in mobile phones, smartphones, and televisions, including an estimated 30% of China’s smartphone market in 2011 compared to Apple’s 10%.5 Samsung had nearly duplicated its Korean base in China, which accounted for a quarter, or over 60,000 people, of its global employment at its peak.6
Samsung produced mobile phones, communications equipment, computers, home electronics, and appliances; LCDs, LEDs, screens and monitors, semiconductors, and opto-electronic components (electronic devices to detect and control light) in China. It differed from many other foreign firms by bringing its best technology to China rather than older generations. Samsung attracted scores of local and foreign suppliers to locate near its facilities and ran programs to help local suppliers to become Samsung partners, significantly adding to the capabilities of the electronics supply chain in China.7
But Samsung Electronics’ early success in China could not be sustained. It announced closures of its last remaining smartphone factory in China in 2019,8 its last personal computer (PC) factory in China in 2020,9 and its last TV factory in China in 2020.10 It shifted production in to Vietnam, India, and elsewhere, and reportedly has invested over US$22 billion in Vietnam alone.11 The company’s only remaining facilities in China are those for home appliances in Suzhou and semiconductors in Suzhou and Xi’an. Samsung was the leading smartphone brand in the world in the early 2020s, but had less than 1% market share in China.12 Its once dominant share in China’s TV manufacturing industry had fallen to 6% of the installed base by August 2024, while Chinese firms accounted for roughly 85%.13 Samsung’s employment in China peaked at 63,316 in 2013, fell to under 20,000 by 2022, and is expected to fall further under a restructuring announced in September 2024.14
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Samsung’s decline in China’s smartphone market coincided with the development of Android phones by Chinese companies Xiaomi, Huawei, Oppo, Vivo, and others, several of which leveraged supply chains and distribution channels Samsung had helped create. Samsung did not have a proprietary operating system to protect it from direct competitors and its vulnerability was multiplied by a series of strategic mistakes. It failed to develop its own China app store after Google’s 2010 exit from China took Google’s app store away from Samsung’s China-made smartphones. It was slow to recognize the growth potential of China’s second-, third-, and fourth-tier cities. Samsung’s C-series smartphones designed for the Chinese market flopped, leading Samsung to stop releasing models in the series from 2017 to 2024, and the company missed out on introducing the range of features Chinese competitors offered and Chinese consumers came to demand. The company’s reputation hit a nadir in 2017 when its Galaxy 7 phone batteries began catching fire. Samsung issued a global recall that initially excluded China on the premise that there was a different battery supplier for the China phones. When batteries began to catch fire in China as well, the company was forced to extend the recall under withering criticism from Chinese state media and consumers. These issues, plus the closure or sales of its China facilities, caused consumers to lose faith in the company.15
Geopolitics also hit Samsung at a vulnerable time. The deployment of a US Terminal High Altitude Area Defense (THAAD) anti-missile system in South Korea in 2017 elicited an aggressive response from China. While billed as a measure to protect South Korea from North Korea, China viewed the deployment as targeted at China and destabilizing to regional security. China cancelled multiple entertainment and arts events involving Korean performers, de facto banned South Korean online video games, and ordered Chinese travel agents not to sell travel packages to South Korea. Regulators banned sales of a variety of Korean consumer products and Chinese consumers boycotted Korean goods. Korean conglomerate Lotte, which gave land to the Korean government for the THAAD system, had most of its China retail outlets closed by Chinese regulators and the company was essentially forced out of the country.16 Samsung, like many other Korean firms, wound down much of their China operations.17 By 2022, it was estimated that less than 25% of Samsung smartphone production was outsourced to contract manufacturers in China, and more than 75% of smartphone manufacturing had been moved to Vietnam and other countries.18
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Geopolitics also has affected Samsung’s semiconductor business in China. The company stopped selling used semiconductor manufacturing equipment to China in 2024 under pressure from the Biden administration.19 The Biden administration initially gave Samsung an exemption on sales of high bandwidth memory (HDM) chips necessary for advanced AI applications, an industry where Samsung held a 48% market share, to China, which accounted for 20% of Samsung’s HDM sales. Just a week before leaving office, however, the administration issued new export controls targeting HDM sales to China, a move analysts say would hit the company hard.20
Samsung’s semiconductor and display businesses have also had intellectual property (IP) issues with China. In 2018, nine individuals were charged with selling Samsung display technology to Chinese interests and in 2023 seven former employees were convicted of selling semiconductor IP to other Chinese interests.21 In September 2024, two former Samsung Electronics executives were arrested on suspicion they had stolen technology worth KRW 4.3 trillion (US$4.3 billion) to help Chinese officials develop a semiconductor facility. This was just one of 10 reported major thefts of Korean technology involving China in the first half of 2024 and represented what researchers from the Korea Institute for Industrial Economics and Trade called the tip of the iceberg.22
Samsung announced a new attempt to gain share in the higher end of the Chinese smartphone market in 2024. However, the market and competition had changed dramatically from the company’s heyday in China. According to Nikkei Asia, “Chinese consumers strongly prefer domestic products, and even when they opt for foreign products, they believe local options can always replace these. Samsung’s re-entry into the Galaxy market is significant but unlikely to yield substantial results.”23
With growing tensions between China and Korea’s allies, increasing emphasis on Chinese technological self-sufficiency, much more capable Chinese competitors, and Chinese consumers now far more nationalistic than they once were, whether Samsung will succeed in once again becoming a major player in key Chinese markets remains an open question. This is particularly true given the roughly 50% share of Chinese firms in recent global smartphone shipments and the inroads that Chinese firms have made in traditional Samsung strongholds, like India, where Samsung fell to third in smartphone shipments in the third quarter of 2024, behind Chinese firms Vivo and Xiaomi, though ahead of Chinese firms Oppo and Realme.24
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Samsung Electronics’ experiences in China show that even a world-leading company, one that had been an early leader in China, can see its position evaporate in the face of increasing competition from Chinese firms, changing tastes of Chinese consumers, and a changing Chinese regulatory environment. It shows that even leading firms can be disrupted by geopolitical conflicts over which they have little control. It shows that failure to adjust to market conditions in China and missteps that offend Chinese officials and consumers can be fatal to a company’s ambitions. It shows that investments necessary to help develop local suppliers can be leveraged by competitors. And finally, it shows that competition with Chinese firms in China can be a prelude to competition with Chinese firms globally.
Thus, Samsung’s China story should serve as a warning to foreign companies operating in China as well as to companies operating globally.
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[1] Michael J. Enright, “Rising challenges for foreign firms in China,” Hinrich Foundation, 10 September 2024, https://www.hinrichfoundation.com/research/article/us-china/rising-challenges-for-foreign-firms-in-china/, accessed 2 February 2025.
[2] Samsung Electronics, “Earnings Presentation: 4Q 2024 Financial Results,” 31 January 2025, https://images.samsung.com/is/content/samsung/assets/global/ir/docs/2024_4Q_conference_eng.pdf, accessed 2 February 2025.
[3] IDC, “Worldwide Smartphone Shipments Grew 6.4% in 2024, Despite Macro Challenges according to IDC,” 13 January 2025, https://www.idc.com/getdoc.jsp?containerId=prUS53072325, accessed 2 February 2025.
[4] Worldostats, “Global Smartphone Brands Market Share 2025,” https://worldostats.com/global-smartphone-brands-market-share-2025, accessed 3 February 2025.
[5] Robin Kwong and Song Jung-a, “Samsung’s China strategy pays off,” Financial Times, 20 May 2012, https://www.ft.com/content/85607930-a0d3-11e1-9fbd-00144feabdc0, accessed 2 February 2025.
[6] Michael J. Enright, “Samsung's contribution to China through FDI,” Hinrich Foundation, 5 September 2017, https://www.hinrichfoundation.com/media/zekcpg4i/hinrich-foundation-fdi-in-china-samsung-case-study-9-5-17.pdf, accessed 3 February 2025.
[7] Samsung, “Samsung Electronics China hosts Samsung Developers Training,” Samsung Developers, 8 August 2013, http://developer.samsung.com/what-is-new/events/2013/Samsung-Electronics-China-hosts-Samsung-Developers-Training, accessed 2 February 2025. [8] Ju-min Park, “Samsung ends mobile phone production in China,” Reuters, 2 October 2019, https://www.reuters.com/article/us-samsung-elec-china-idUSKBN1WH0LR, accessed 3 February 2025.
[9] “Samsung Electronics to halt production at its last computer factory in China,” Reuters, 1 August 2020, https://www.reuters.com/article/us-samsung-elec-china-pc-idUSKBN24X3K4, accessed 3 February 2025.
[10] Joyce Lee, “Samsung to stop production at sole China TV factory by November,” Reuters, 20 September 2020, https://www.reuters.com/article/us-samsung-elec-china-tv-idUSKBN25Y0RL, accessed 2 February 2025.
[11] Melissa Cyrill, “Samsung’s US$1.8 Billion Investment to Boost Vietnam’s OLED Manufacturing Capacity,” Vietnam Briefing, 23 September 2024, https://www.vietnam-briefing.com/news/samsungs-us1-8-billion-investment-to-boost-vietnams-oled-manufacturing-capacity.html/, accessed 3 February 2025.
[12] Yoon Jin-woo and Yeom Hyun-a, “Samsung aims to overcome 0% market share in China with new 'Galaxy C Series' launch,” The Chosun Daily, 25 April 2024, https://www.chosun.com/english/industry-en/2024/04/25/OBTR3KJJJZHXFIU3B775KJQUXM/, accessed 2 February 2025.
[13] Statista, “TV ownership by brand in China as of December 2024,” January 2025, https://www.statista.com/forecasts/1348357/tv-ownership-by-brand-in-china, accessed 3 February 2025.
[14] Wency Chen, “Samsung said to slash 8% of sales team in mainland China amid weak performance,” South China Morning Post, 4 September 2024, https://www.scmp.com/tech/big-tech/article/3277208/samsung-said-slash-8-sales-team-mainland-china-amid-weak-performance, accessed 3 February 2025.
[15] Isaiah Mayersen, “Samsung closes its last Chinese manufacturing plant as sales plummet,” Techspot, 6 October 2019, https://www.techspot.com/news/82217-samsung-closes-last-chinese-manufacturing-plant-sales-plummet.html accessed 2 February 2025 and Philippe Meda, “How Samsung Lost China,” Innovation Copilots, 27 July 2021, https://www.icopilots.com/how-samsung-lost-china/, accessed 2 February 2025.
[16] Ethan Meick and Nargiza Salidjanova, “China’s Response to U.S.-South Korean Missile Defense System Deployment and its Implications,” US-China Economic and Security Review Commission, 26 July 2017, https://www.uscc.gov/sites/default/files/Research/Report_China%27s%20Response%20to%20THAAD%20Deployment%20and%20its%20Implications.pdf, accessed 2 February 2025.
[17] Finbarr Bermingham and Lee Jeong-ho, “How the trade war led to Samsung and other South Korean companies' exodus from China,” South China Morning Post, 4 July 2019, https://www.scmp.com/economy/china-economy/article/3017110/samsung-and-other-south-korean-firms-exodus-china-example, accessed 2 February 2025.
[18] Patrick McGee, “What it would take for Apple to disentangle itself from China,” Financial Times, 18 January 2023, https://www.ft.com/content/74f7e284-c047-4cc4-9b7a-408d40611bfa?accessToken=zwAAAYXFvuHWkc909-KEwEdMxNObekCNQGEb-g.MEUCIQDGj4rTeYQGSqt9kYjMeknANGoKLOnJODwXn0P3PNBoJQIgc5rVhWYFMC-CB8b5dm-f_49-bwvnvRzsehKBKWhE7_8&segmentId=e95a9ae7-622c-6235-5f87-51e412b47e97&shareType=enterprise, accessed 4 February 2025.
[19] Park Eun-Jee, “Samsung blocking China from chip equipment 'encouraging,' U.S. official says,” Korea JoongAng Daily, 22 March 2024, https://koreajoongangdaily.joins.com/news/2024-03-22/business/industry/Samsung-blocking-China-from-chip-equipment-encouraging-US-official-says/2008932, accessed 3 February 2025.
[20] Jessica Tsai, “US tightened chip controls put Samsung's China operations at risk,” DigiTimes Asia, 18 December 2024, https://www.digitimes.com/news/a20241218PD211/samsung-hbm-nvidia-technology-bandwidth.html, accessed 3 February 2025.
[21] Kate Irwin, “Former Samsung Staff Arrested for Allegedly Sharing Chip Secrets with China,” PC Magazine, 10 September 2024, https://www.pcmag.com/news/former-samsung-staff-arrested-for-allegedly-sharing-chip-secrets-with-china, accessed 3 February 2025.
[22] “Chip war: former Samsung executives arrested for allegedly stealing tech for China,” South China Morning Post, 11 September 2024, https://www.scmp.com/tech/tech-war/article/3278031/chip-war-former-samsung-executives-arrested-allegedly-stealing-tech-china, accessed 3 February 2025.
[23] Quoted in Yoon Jin-woo and Yeom Hyun-a, “Samsung aims to overcome 0% market share in China with new 'Galaxy C Series' launch,” The Chosun Daily, 25 April 2024, https://www.chosun.com/english/industry-en/2024/04/25/OBTR3KJJJZHXFIU3B775KJQUXM/, accessed 2 February 2025.
[24] Iris Deng, “Vivo becomes India’s top smartphone brand in third quarter, overtaking Xiaomi and Samsung,” South China Morning Post, 19 October 2024, https://www.scmp.com/tech/big-tech/article/3283034/vivo-becomes-indias-top-smartphone-brand-third-quarter-overtaking-xiaomi-and-samsung, accessed 3 February 2025.
© The Hinrich Foundation. See our website Terms and conditions for our copyright and reprint policy. All statements of fact and the views, conclusions and recommendations expressed in this publication are the sole responsibility of the author(s).
Michael Enright is a leading expert on international competitiveness, regional economic development, and international business strategy.
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