Samsung's 108-megapixel image sensor highlights China's turnaround

Samsung has had a difficult time in the Chinese smartphone market in recent years.

Faced with fierce competition from local players such as Huawei and Xiaomi, the South Korean technology giant's market share has fallen to 1% in one of the world's largest smartphone markets.

But these same Chinese rivals – which have weakened Samsung's position in smartphones – could also be the company's return to China through components.

On Monday, Samsung introduced what it claimed to be the industry's first 108-megapixel image sensor for smart cameras with a resolution equivalent to that of a "high-end digital SLR camera." range".

The sensor will feature in a future Xiaomi phone this year and highlights Samsung's strategy to capture market share in China's handset sector through innovative smartphone components. Xiaomi previously used Sony sensors.

Samsung has already won other successes, particularly with the Chinese consumer electronics company Oppo, which recently decided to use the image sensors of the South Korean company.

"Samsung's market share in China is only 1%, but with its strong component business, it is gaining ground in China," said Neil Shah, director of research at Counterpoint Research.

With the help of OLED display technology and memory chips such as Storage NAND and DRAM, "Samsung has experienced significant growth thanks to the growth of Huawei, Oppo, Vivo, Xiaomi, Realme and OnePlus "said Shah. "Now, the share of its other components is growing rapidly … among Chinese actors."

Realme and OnePlus are other brands of Chinese handsets.

Targeting Chinese companies is a good growth strategy because three of the top five global players in the smartphone market, in terms of market share, come from China. In the domestic market, four of the five major players are Chinese. This can help Samsung gain ground in China.

It is not only with the image sensor technology that Samsung has been successful with Chinese companies. Motorola, which belongs to Chinese Lenovo, announced in May that its new phone would use a Samsung processor.

The company must find new sources of revenue because of the weak smartphone market and the pricing of memory chips, one of its main profit generators. Thanks to these factors, Samsung's operating profit in the second quarter fell more than 55% year-over-year.

Samsung, however, noted in its second quarter earnings release that "demand for 5G modems and high-resolution / high-pixel image sensors was strong."

5G refers to next-generation mobile networks that promise ultra-fast data speeds that can support new technologies such as driverless cars. Samsung has also developed a processor and a modem, called SoC, which could be another area of ​​growth.

In recent years, Samsung has announced its commitment to the Chinese market by investing in new factories.

Last year, the company started to build a second memory chip production line in its Xi'an factory in China. Earlier this year, Samsung announced it would invest $ 116 billion in advanced processing chips by 2030 to diversify its business and reduce the use of memory chips.

Shah said that Chinese consumers want to use the latest technology in their devices and that Samsung is seeking to develop it through its research and development efforts.

"Samsung is definitely a long way ahead and is investing a lot in R & D to meet the growing demand for differentiated and advanced experiences for mature smartphone users in markets such as China," said Shah. at CNBC. "But this time through his component activity."