Samsung’s Uneven Handling of Galaxy Note 7 Fires Angers Chinese

TIANJIN, China — Zhang Sitong was saving a friend’s phone number on his Samsung Galaxy Note 7 smartphone when it started to vibrate and smoke. He threw it on the ground and told his friend to start filming.

Two employees from Samsung Electronics showed up at his house later that day, he said, offering a new Note 7 and about $900 in compensation on the condition that he keep the video private. Mr. Zhang angrily refused. Only weeks before, even as Samsung recalled more than two million Note 7s in the United States and elsewhere, the company had reassured him and other Chinese customers that the phone was safe.

“They said there was no problem with the phones in China. That’s why I bought a Samsung,” said Mr. Zhang, a 23-year-old former firefighter. “This is an issue of deception. They are cheating Chinese consumers.”

Samsung, already reeling from its embarrassing and expensive decision last week to kill the Note 7, has a particularly vexing problem in China. On Tuesday, China’s powerful state-run broadcaster, China Central Television, or CCTV, criticized the way Samsung tested its phones and asked whether its claims that the phones were safe and reliable were “fabricated falsehoods.”

“If Samsung continues to violate the legitimate rights and interests of Chinese consumers and continues to refuse to make public the samples used in its testing process as well as the process itself, who would be able to help Chinese consumers find the truth?” the CCTV report said.

The South Korean company is paying a price for treating China differently. Samsung initially said the Chinese version of the Note 7 had a different battery and was safe. But last week, after reports in China of phones catching fire, it finally recalled the Note 7 there before it scrapped the phone globally.

“The brand has been damaged already,” said Di Jin, research manager in China for IDC, a technology research firm. “It will be really hard for Samsung to regain its market share in the near future.”

In a statement, Samsung said it “would like to apologize for any misunderstandings this may have caused the Chinese consumers due to an unclear communication in the process.” It said its quality control was the same in all countries. “To Samsung, China is one of the most important markets and a crucial destination for foreign investment,” it said. “Samsung never holds a double standard against them.”

Samsung was once the top phone maker in China, which is now the world’s largest smartphone market. It enjoyed a reputation for quality in a country weary of cheap products, as well as the benefit of a Korean name in a country that adores Korean pop music and culture.

Photo

Lei Jun, chief of Xiaomi, one of the local mobile companies that have taken market share from Samsung, once a leader in China. Credit China Network/Reuters

But Samsung has become the latest global brand to get hit by rising Chinese rivals that compete on quality as well as price. Samsung has lost market share in China to Huawei Technologies, Xiaomi, Oppo Electronics and other local companies making competitive gadgets with advanced features. The South Korean company’s market share dropped to less than 7 percent in the second quarter of this year from nearly 19 percent in 2013, according to IDC.

The treatment of Chinese consumers by foreign firms is an issue that resonates in a country where nationalistic sentiment runs deep. The state news media has vilified foreign brands such as McDonald’s, KFC, Apple and Starbucks for what they perceive as unequal treatment of Chinese customers.

“Foreign companies who appear to employ any less favorable policy for the China market can quickly find themselves waist-deep in a P.R. quagmire,” said Mark Natkin, the managing director of Marbridge Consulting, an advisory firm based in Beijing.

“Those who have navigated the Chinese market most successfully are the companies that have understood they can’t win every battle,” he said, “and that sometimes, to maintain a happy relationship, it’s better just to say: ‘I’m sorry. I love you.’ ”

The official news media in China has become increasingly critical of both foreign and domestic companies as China’s consumer culture has grown. The push culminates each year in March, when CCTV takes on companies for their practices as part of Consumer Rights Day in a prime-time special complete with song-and-dance routines.

Foreign brands have a mixed track record dealing with attacks from the official Chinese news media. Apple apologized after CCTV criticized its warranty policies but went on to enjoy strong sales in the following years. Starbucks continues to move lattes there at a brisk pace despite CCTV’s criticism of its pricing three years ago. But KFC’s parent, Yum Brands, took a hit after CCTV scrutinized its suppliers.

Mr. Zhang, a salesman in the city of Fushun, in northeastern China, was a Samsung loyalist. He has owned four smartphones made by the company, in part because of the pen-type stylus that comes with its Note models.

After he rejected the offer from Samsung, Mr. Zhang quit his job and hit the road. He joined up with Hui Renjie, another man who said his Note 7 had also blown up, to visit laboratories to figure out the problem with their phones. The trip and the testing were paid for by CCTV, which featured the two in Tuesday’s report.

In the report, CCTV said an independent lab could not determine the cause of the fire that consumed Mr. Zhang’s phone. It said an external heat source was not responsible for the fire that destroyed Mr. Hui’s phone.

Mr. Hui said Samsung had declined his repeated requests to conduct an investigation into the cause of his phone catching on fire in his presence and had ignored his calls.

According to Mr. Hui, a representative from the e-commerce site JD.com, where he had bought his phone, told him that Samsung had offered to compensate him for his burned phone and laptop, which he had ruined after throwing his phone on it. Mr. Hui, in response, said, “I told JD to pass this message to Samsung: ‘Go to hell.’