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TheStreet Open House

Why Chinese Aren't Boycotting Samsung

Stocks in this article: NOKAAPL

"If we talk about the qualities (of handsets) and after service, we can easily tell the difference from between China local brands and Samsung," says Wilson Miao, a smartphone analyst with TrendForce. "Samsung also spent a lot of money on China marketing. If you went to Beijing, you would see Samsung's advertisement everywhere."

Smartphones are priced to compete with notoriously cheap Chinese brands, Miao adds, noting quotes of 1,200 to 2,000 yuan (1 yuan=$0.16).

Samsung China, which covers not only electronics, reported operating revenue of $75.1 billion in 2012, up 25.6% over a year earlier, the online industry newspaper China Tech News said, citing a company corporate-social-responsibility report. And that's only the China side of the business. As Chinese authorities said after the anti-Japanese boycotts of 2005, foreign projects aren't just foreign anymore.

Does CSR mean workers are now putting in six-hour days and getting Galaxy models as bonuses? The simple answer is, it doesn't really matter. Chinese customers look down at their own mobile phones as poorly built and poorly serviced despite lower prices. Domestic mobile phone leaders such as Huawei (002502.SZ) and Xiaomi (XIAOMZ) failed to make their country's top three mobile phone brands despite steady growth, TrendForce says.

So if a foreign brand comes out with solid stuff sold for less than an iPhone, which TrendForce places at No. 3, it's probably a hit. That's Samsung's secret.

But part of its rise stems from Nokia's fall. Samsung has overtaken Nokia in much of the world because the Finnish company that first got settled in China as a major seller of not-so-smart cellphones has not caught up to the Korean rival's technology.

"Part of this is due to Nokia's slowness to adapt to the changes in smartphone technology and interfaces that came with the introduction of (Apple's) iOS and Android," says Mark Natkin, managing director with the Beijing-based market research firm Marbridge Consulting. "In partnering with Microsoft to make Windows Phone-based handsets, Nokia has finally taken this step, but only after losing major market share to Samsung and various other vendors."

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