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Samsung’s ‘gadget spam’ strategy may be backfiring in China

Samsung China Smartphone Revenues

By now we’re all familiar with Samsung’s strategy for selling gadgets: Release lots and lots and lots and lots of them and see which ones consumers will buy. But The Next Web points out that while Samsung’s gadget spam strategy has helped it sell a massive amount of smartphones and tablets in China, it hasn’t necessarily been helping with the company’s bottom line. In fact, The Next Web says that Samsung’s percentage of revenues that come from China has actually decreased year-over-year, which it says reflects the brutally competitive Chinese smartphone market.

The danger for Samsung in China is basically that it needs to engage in a race to the bottom to keep up its market share edge over dirt-cheap Android vendors such as Xiaomi and Micromax. Given that these companies are releasing phones with strong specs at seemingly crazy price points — the Xiaomi Hongmi phone, for instance, is priced at $130 and features a quad-core 1.5GHz processor, a 4.7-inch display with a pixel density of 312 pixels-per-inch, an 8-megapixel rear-facing camera and a 2,000 mAh battery — it can be hard for even Samsung to keep pace.

This type of margin-destroying competition goes a long way toward explaining why Apple’s upcoming iPhone 5C isn’t much of a budget phone but is instead more of a mid-tier device: Companies have to be very careful when they engage in price battles with cheap Android vendors if they don’t want to see their profits shrivel up. With the iPhone 5C, Apple is taking a calculated risk that the device will draw enough consumers in emerging markets to help it shore up its market share without doing too much damage to the company’s bottom line.

Prior to joining BGR as News Editor, Brad Reed spent five years covering the wireless industry for Network World. His first smartphone was a BlackBerry but he has since become a loyal Android user.