Did Samsung and LG Exert Pressure to Halt Xiaomi Sales in Korea?

South Korea’s number two phone seller KT Corp. has suspended selling Chinese Xiaomi brand smartphones only two days after it started selling them.

KT started sales of the Xiaomi Redmi Note 3 through a partnership with online shopping site Interpark Corp. on Monday before coming to a sudden halt.

Local media first reported the move to stop sales was due to “legal matters related to sales.”

 
 

The Chosun Ilbo, however, without specifically naming names, reported that the sudden stop had prompted suspicions that pressure from “domestic competitors” in Korea caused KT and Interpark to pull the plug.

The Korea Times went even further reporting that officials said the overnight decision was to prevent hurting ties with Samsung and LG Electronics due to increased sales of Xiaomi would “sap demand for Samsung and LG phones.”

LG has denied there was any pressure involved.

 
 

“This wasn’t happening. Korean consumers are ready and even eager to buy Xiaomi phones and even Huawei phones. Chinese phones improved in quality and use chips and displays sourced by Samsung and LG. A new market order will happen in the local telecom market,” said an executive at LG Electronics in an interview with the Korea Times.

The sudden halt of sales of Xiaomi incurred protests from netizens who were keen to purchase cheaper Chinese alternatives to Korean smartphones –which are often sold at a higher markup than in other markets abroad, much to the bemusement of Korean consumers.

An editorial echoed the frustration with paying higher prices charged by domestic makes:

“This is not good for the future of the Korean brands, as a lack of proper competition will undermine their growth and limit choices for customers. There are many Koreans who are fed up with the pricy local brands with substandard customer service.”

“The cheap Chinese smartphones, known for their quality exceeding their price, are already generating huge ripples in the domestic smartphone market dominated by local brands.”

Chinese threaten Korean brands at home and abroad

Explosive growth of Chinese brands like Xiaomi and Huawei phones has already burned Samsung and LG in the Chinese market where Korean smartphones market share has fallen to the single-digit level.

Samsung was far and away the top selling phone in China until early 2014. It has since that time plunged to No. 5.

Domestic-produced Xiaomi has seen its market share grow to 15.7 percent as of the third quarter of 2015 while Samsung had only 7.2 percent and LG less than one percent.

Gone are the days when the only advantage Chinese smartphones had was their price, as the quality has improved tremendously said Jung Ok-hyun at Sogang University

“Consumer perceptions of Chinese products being cheap knockoffs are changing quickly,” Jung told the Ilbo. “We’re going to see not only Chinese smartphones but other Chinese IT products grab a larger piece of the Korean market.”

Related