Samsung is imploding in China

Samsung has seen a catastrophic collapse in China over the last year, with its smartphone sales market share halving in 12 months, according to new data from IDC.

In Q1 of 2014, Samsung shipped 20.5 million smartphones; in Q1 of 2015, that figure has plummeted to 9.6 million.

Meanwhile, Apple has enjoyed year-on-year growth of more than 62%, making it the single-largest smartphone seller in China.

This explosive growth - at Samsung's expense - is due to the breakout success of the iPhone 6 and 6 Plus. The larger size of the smartphone made it far more appealing, especially in Asian markets, and helped Apple generate the most profitable quarter of any company ever.

With a large-screened iOS device available, consumers have turned away in huge numbers from high-end Android manufacturers like Samsung, with devastating results: The South Korean smartphone company's profits cratered, with Apple now taking 93% of all profits in the entire smartphone industry.

Apple hasn't been the only beneficiary of Samsung's fall. The homegrown Huawei and Xiaomi have both seen very strong double-figure percentage growth throughout 2014. Xiaomi in particular is known for its incredibly loyal fanbase, giving the record-breaking Chinese startup 42.3% year-on-year sales growth - though not quite as much as Apple.

In Q1 of 2014, Samsung was the largest smartphone seller in China. A year later, and it has dropped to fourth, behind Apple, Xiaomi, and Huawei.

Apple's record success at the expense of Samsung is not confined to China either. The phenomenon is also seen in older data from Counterpoint, with Samsung's market share even dropping in its home market of South Korea. Historically, no foreign smartphone company has ever seen sales in the country of higher than 15%. In November 2014, Apple hit 33%, and has likely overtaken Samsung by now.

Another finding from IDC suggests that Samsung's woes aren't over yet either. This is because for the first time in six years, China's smartphone market has actually contracted.

Units shipped in the first quarter dropped from 103.2 million in 2014 to 98.8 million in 2015, meaning that "convincing existing users as well as feature phone users to upgrade to new smartphones will be the key to further growth," says IDC China managing director Kitty Fok.

Apple needs this growth - and now more than ever, it will need to come at its competitors' expense.

The Cupertino company is already focusing in on "switchers" - persuading the users of other smartphone platforms to ditch them in favour of iOS. In Apple's most recent earnings call, CEO Tim Cook used the term "switchers" five times (a record!), and indicated that Apple is targeting further down the market - into traditional Android territory - than it ever has before.

Cook told investors that Apple wants to go "beyond the middle class" (emphasis ours):

... [on growth in China], it's clear to me that it has to be coming from the middle class, because the upper income earners, there's only so many of those. And you can't grow those kind of numbers without getting significantly into the middle class. And so I think that's where we are. I hope we're also beyond the middle class, but I don't have the data to suggest that that's the case or not the case. But it's clear to me that the middle class statement has to be true.

Trying to go "beyond the middle class" in a contracting market is bad news for Samsung.