Telecommunications
Korea Telecom Freetel has purchased 300,000 mobile phones from China for shipment this year. KTF, which is controlled by KT Group, mainly purchases WCDMA mobile phones, which are provided by very few Chinese manufacturers. For 2008, KTF has procured a total of 8 million mobile phones, of which 7 million are WCDMA mobile phones. For 2009, the company plans to purchase 8 million mobile phones, all of which will be WCDMA. Samsung, LG, Pantech and KTFT, a KTF subsidiary, are KTF's main mobile phone suppliers. Samsung is the largest vendor, accounting for 45.4% of shipments to KTF in 2006.
Semiconductors
Hynix Semiconductor Inc. does not see further drops or rises in prices of computer memory chips this quarter and expects improvement in the market in the second half. Makers of dynamic random access memory (DRAM) chips, used mainly in personal computers, have seen their profitability savaged by a severe glut and slower PC demand, which has driven down the price of some key chips by more than 90% since early 2007. Underscoring the chip makers' difficulties, Japanese rival Elpida Memory warned of an operating loss nearly twice as big as the market consensus due to the DRAM tailspin.
Hardware
A special prosecutor levelled tax evasion and breach of trust charges against the leader of Samsung Group but took steps not to upset the fundamental control and operations of South Korea's largest conglomerate. The special prosecutor said Lee Kun-hee, Samsung's chairman, wouldn't be arrested because that would cause enormous disruptions to the 59 Samsung companies, which includes Samsung Electronics. Nine other Samsung executives were indicted on similar charges as the special prosecutor concluded an investigation that began in early January. The investigation was ordered by South Korea's National Assembly after a former Samsung attorney stepped forward last year with allegations of bribery, false accounting and other wrongdoings.
China
Internet
Google aims to become a market leader in China's Internet search market in about five years and is also exploring investments in Chinese companies that focus on social networking and mobile Internet as part of its strategy to expand in China. Google is gaining market share and has overtaken Alibaba Group's Yahoo China but continues to lag behind Baidu.com. Google, which is based in Mountain View, California, accounted for 26% of China's Internet-search revenue in the fourth quarter, up from 17% a year earlier. Market leader Baidu.com's share of the market rose to 60% from 58%.
Market talk suggests that Baidu.com plans to enter into the operation of online games, and will soon launch several game products. The search engine reportedly will make full use of its platform and online game channel to co-manage online game services with a NASDAQ-listed Chinese online game company. BaiduÆs participation is expected to have an impact on the entire online game market as it will be supported by the companyÆs high market coverage rate, rich resources and advanced promotion competence. ChinaÆs online game market amounts to Rmb2.8 billion ($2 billion) and is expected to expand more than 20% annually in the coming four to five years to hit Rmb40.1 billion in 2011.
Hardware
Cisco Systems has appointed Jim Sherriff, its senior vice president of global operations, to a newly created position as chairman of Cisco China. In his new role, Sherriff is responsible for implementing the company's China strategy, which includes research and development, education, procurement, investment and training. Sherriff and Randy Pond, executive VP of global operations, will co-chair the Cisco China Strategy Board. Other board members include Owen Chan, president of Cisco Asia Pacific, and Thomas Lam, president of Cisco China.
Dell, the world's second largest personal computer manufacturer, will enter into a sales partnership with Suning Appliance Co, China's second-largest retailer of home electronics, in a bid to boost earnings outside the US amid a domestic economic recession. The new partnership is in addition to a previous exclusive tie-up with Gome Electrical Appliances. Dell will sell laptops and desktops through Suning stores and, according to global operating manager Michael Tatelman, it also plans to team up with several small-sized Chinese retail chains in the short term to reach a fleet of 12,000 stores in the world's second-largest PC market. Dell began selling products through Gome stores last year and is planning to more than double (to 900) the number of Gome stores carrying its products this year. Dell aims to generate more than 50% of its sales from outside the US.
Walt Mayo, global vice president of Dell and general manager of its consumption business department in the Asia Pacific region, confirmed that the company will also join hands with Hisap High Technology Corporation to enter the retail market. Hisap will introduce a series of high-quality Dell notebooks and desktops with higher price-to-performance ratio and lower prices during the May Day holiday period.
Mobile/ Wireless
GrenTech CorporationÆs net profit tumbled 44.6% year-on-year to Rmb82.5 million ($11.3 million) in 2007. The annual revenue increased 17.6% to Rmb979.3 million. A 39.9% increase in costs was behind the drop in net profit, while large sales volume were countered by a decrease in average selling prices for wireless coverage products. Contracts with China Mobile and China Unicom increased the revenue significantly due to the operators' wireless coverage expansion. China Telecom and China Netcom, on the other hand, reduced their PHS (personal handyphone system) network coverage expenditures, which had a negative impact on the GrenTech's 2007 revenues.
Chinese handset manufacturers Gionee and K-Touch unveiled several analogue TV mobile phones at a conference in Shenzhen, while an analyst from Sino Market Research said the analogue TV function will become a major selling point for mobile phones in China this year. Gionee plans to launch several more models of analogue TV mobiles this year, including the A11, A12 and A16. They will all have large-sized screens and the A16 will have a stylish design to target women users. The A10, powered by Telegent Systems' single-chip mobile TV receiver, will be sold through Acorn International's TV shopping platform at the end of this month at Rmb1,680 ($240.30).
Mobile phone users in Shenzhen have urged the operators of domestic (China's homegrown 3G technology) networks to connect with Hong Kong's 3G network as soon as possible. The difference in 3G systems means Hong Kong 3G mobile phones cannot be used in Shenzhen and vice versa. Hong Kong and Shenzhen users expect the two networks to connect soon in order to satisfy daily commuter demand. Although China Mobile has launched TD-SCDMA business in Shenzhen on a trial basis, most users are not eager to buy 3G mobile phones due to instable technology and high fees.
Chinese handset manufacturer Beijing Tianyu Communication Equipment, also known as K-Touch, shipped 14 million mobile phones to distributors last year. In addition to selling mobile phones in China, K-Touch also exports its products to countries in Southeast Asia, South Asia, Eastern Europe and Central Europe through partnerships with distributors in those countries. Overseas markets accounted for approximately 10% of K-Touch's revenues in 2007 and the company aims to increase this to 20% this year. K-Touch has a government license for the production of GSM and CDMA mobile phones and has launched mobile phones under its own K-Touch brand.
Mainland set-top box manufacturers are scrambling to deliver advanced products domestically, as demand for higher-performance digital television broadcast services heats up before the Beijing Olympic Games. The country's rapid conversion from analogue to digital broadcasting has led set-top-box makers to increase production to meet the requirements of service providers across the mainland. The mainland's cable television broadcasters had made implementation of high-end digital cable set-top boxes a priority in anticipation of existing and new domestic subscribers watching the games this August on digital television sets. Beijing-based CCID Consulting estimates there were 27 million new digital mainland television users last year, of whom 12 million were cable digital television subscribers.
Media, Entertainment and Gaming
Giant Interactive has launched its much-hyped new game Giant Online. The success of the offering will be critical to the future of the company. The game took 21 months to develop with a team of close to 200 developers. So far, $5 million has been spent, said Eric He, GiantÆs chief financial officer, and a further $5 million to $10 million will be invested in the next five years to enhance the game. Giant shares surged 22% in the two trading days after the game was launched on March 28. The game is free to play, but users have to pay to take shortcuts to gain skills and experience. Essentially, players pay to cheat. That helped Giant boast a net margin of 74% last year.
Chinese online game developer Sohu.com started an open beta test of Tian Long Ba Bu (TLBB) in Hong Kong and Taiwan on April 16. Some Taiwan players have participated in a previous closed beta test of the martial art massively multiplayer online roll-playing game (MMORPG). TLBB was launched as a proprietary online game by Sohu in May 2007. Since November 1, 2007, when the second expansion pack of the game was released, its peak concurrent players have topped 500,000, surging 20% from earlier. Online market research expert iResearch points out that martial art is popular in Taiwan and Hong Kong, so TLBB is very likely to be warmly welcomed in the area.
Software
Ninetowns Internet Technology expects to record a non-cash impairment charge of up to Rmb197 million ($42 million) against its long-lived assets and goodwill. Of this impairment, a significant amount is expected to be charged against goodwill that was derived from the acquisition of minority interests in the company's business-to-government ("B2G") business during its pre-IPO restructuring in June 2004.
Telecommunications
China UnicomÆs subscriber base stood at 167 million at the end of March, up 1.63 million from end-February. Subscribers for its global system for mobile communications (GSM) service rose by 1.32 million over the month to 124 million. Subscribers for its code division multiple access (CDMA) service totalled 42.8 million at the end of March, up 301,000 over the previous month.
ZTE Corporation of China, an advanced telecommunication systems and equipment company, is actively promoting its WiMAX products in both developed and emerging markets. The company's WiMAX product line global marketing director Yuan Wei predicts WiMAX revenue will be close to those of CDMA products in three years. WiMAX product application readiness is four to five years ahead of those of Long Term Evolution so many WiMAX end-products will be ready for commercial use in 2009. Wei says the market currently does not understand WiMAX very well, but the global WiMAX market is expected to reach $10 billion in 2009, of which equipment will account for $4 billion. By 2012, the market value is expected to reach $32 billion and the equipment value $16 billion.
China Mobile chairman and CEO Wang Jianzhou says Apple Computer is interested in introducing its iPhone handset to the China market, but further discussion is needed on cooperation details such as operation mode. With regard to China Mobile's foreign expansion, the company prefers to become a minority equity shareholder in international mobile operators to gain related experience. Although taking over another company by way of shareholding could lead to fast expansion, China Mobile prefers a steady pace, he says. The takeover cost of well-known global mobile communication operators may also be too high for the company.
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