China-Computer business-state of affairs.
Hi Kemble:
Here is an informative article on PC biz in China.
Notice the conspicuous absence of DELL,should be interesting how things will look in 1999,by then DELL would have completed one full year of operation. Also notice how the market share of Compaq has eroded in Q3 98.Very interesting.
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Tuesday December 8 1998
Mainland market challenge to foreign computer firms
ELLA LEE
The mainland has become the fifth-largest buyer of personal computers in the world, after the United States, Japan, Germany and Britain, technology consultancy International Data Corp says.
Its PC market is expected to grow strongly and become one of the top three by 2002, IDC says.
Leading PC vendors in china in 1998
1.Legend-13%
2.IBM---->7%
3.HP----->6%
4.CPQ---->4%
5.Tontru->4%
6.Founder
7.Great Wall
8.Toshiba
9.NEC
10.ACER
Although the runaway mainland demand for PCs offers huge opportunities for multinational vendors, it remains another story whether they can be converted into real profits.
In the first nine months of the year, about 2.8 million PCs were shipped to the mainland, accounting for about 4 per cent of the world total. It was the fastest-growing market with a growth rate of 28 per cent, although growth is expected to slow to an average of 22 per cent next year.
However, a PC maker's success in the Asia-Pacific - and the world - depended increasingly on how well it sold in the mainland, Kitty Fok, PC research manager at IDC Asia-Pacific, said.
In the third quarter this year, 38 per cent of PCs shipped in Asia went to the mainland. This percentage is expected to increase to 40 per cent next year.
However, domestic PC vendors seem to be benefiting more from rising PC sales than their overseas rivals. The top four locals - Legend, Tontru, Founder and Great Wall - saw shipments grow 65 per cent in the first nine months, compared with 14 per cent growth for the top four multinationals - IBM, Hewlett-Packard, Compaq Computer and Toshiba.
That has enabled the top four mainland vendors to boost their local market share from 18 per cent to 23 per cent, while the top multinationals fell from 21 per cent to 19 per cent, IDC says.
Ms Fok said local vendors had key advantages over international rivals. They had lower prices, more extensive distribution channels and better relations with Beijing, the ultimate policy-maker and key customer.
"There is no way for multinationals to compete with locals in home, small office and government sectors," she said.
Multinational vendors would do better to focus on the high-end market, including PC servers, notebook PCs and workstations aimed at the mainland offices of multinational corporations, Ms Fok said.
However, this high-end segment, traditionally a high profit-margin area, might not prove too successful in the mainland. Low margins and the popularity of low-end machines made the mainland market, on the whole, less profitable than other Asian countries.
For instance, the average selling price of a PC server in the mainland was US$3,800, and $4,100 in the rest of the region, Ms Fok said.
The crackdown on smuggling into the mainland that began mid-year is another challenge for foreign vendors. Grey market channels were used to ship products into the mainland without having to pay heavy import taxes. These are being closed down.
Though it was impossible to see smuggling activities disappear soon, Beijing had reaffirmed its determination to implement its anti-smuggling plan, Jared Peterson, IDC's research director in China, said.
Shortages of products from certain vendors have been immediate. Compaq was believed to have the largest share in the grey market, and therefore was hurt the most. Its PC shipments to the mainland in the third quarter fell 36 per cent year-on-year. Compaq's market share also fell from 6.9 per cent to 3.5 per cent in the same period, IDC said.
As a result of the crackdown, foreign vendors will have to build even more of their PCs in the mainland.
IDC said 81 per cent of the estimated 3.9 million PCs sold on the mainland this year were made there, including local brands, clones and locally made foreign brands. That figure is expected to grow to account for 88 per cent of the estimated 10.3 million PCs sold in the mainland in 2002.
(Courtesy:IDC via scmp)
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