China's Internal Demands Expected to Stimulate Growth in Second Half of the Year
By George Liao
The implementation of the "Four Trillion Yuan Stimulus Package for China" to increase China's internal demands and other projects launched by the Chinese government, such as the "home appliances going to the countryside," "trade in old for new," "energy-saving products project," and "ten major industries revitalization program," have given strong boost to China's economy, and brought good impetus to Taiwan's IT industry.
The overall effect of the projects to revitalize China's economy, which appeared to be faltering before February, began to be felt towards the end of the first quarter of 2009. After March, signs of economic rebound began to be seen in export value, retail sales of consumer goods, total investment in fixed assets, and China Manufacturers Purchasing Managers Index. It is believed that similar projects will be launched in the future to further expand China's internal consumer markets, which will play a leading role in China's economic recovery. Topology Research Institute (TRI) researcher Chang Jui-hua said thought 3G, LCD TV, NB/netbook, LED and car electronics will become the five bright spots in China's IT industry in the second half of the year. Despite feeling the impact of global economic downturn, China's strong internal demands and massive government stimulus packages will provide tremendous business momentum and opportunities for China's economic recovery, which will in turn benefit Taiwan's IT industry.
The number of 3G Service Subscribers Breaks the 10 Million Mark
With the reorganization of the telecommunications industry in China and the issuance of 3G licenses, the top three Chinese telecommunication operators have begun network construction and terminal equipment tender bidding. China Mobile's TD-SCDMA, China Telecom's CDMA2000, and China Unicom's WCDMA activated their services for commercial tests in May, and China will enter the era of 3G service in the second half of the year. The TRI predicted that with supportive government policies and strong pushes from the operators, China will have 13.4 million 3G service subscribers and the sales of 3G mobile phones will reach 13 million units in 2009. With regard to Taiwan's operators, while many mobile phone equipment providers have joined the TD-SCDMA Industry Alliance, including Inventec and BENQ, several others have joined the CDMA and WCDMA. For example, HTC has won mobile phone orders from China Telecom, and the two companies are likely to have further cooperation in 3G market in the future.
In the area of chipsets, the TD chipset solution under the cooperation of Taiwan's MediaTek, which has a 70% mobile phone chipset market share in China, and China's Datang Telecom enjoys the leading status. VIA has strengthened technical cooperation with China Telecom in a bid to improve its competitiveness and opportunities in CDMA2000 mobile phones and netbooks. In addition, Taiwan's netbook brands have also strengthened their cooperation with Chinese telecommunication operators. For example, China Unicom cooperating with Acer; China Mobile with Acer and MSI; China Telecom with Asus, Acer, and BENQ are just a few combinations. The cooperation across the Taiwan Strait, which should be helpful to the promotion and sales of the terminal products and the 3G services, is expected to create a win-win situation for all the cooperative parties.
Chinese LCD TV Market on Stable Growth Path
There are several beneficial news for China's LCD TV market in the second half of the year. In addition to the holiday hot season, the "home appliances going to the countryside" and "trade in for old for new" projects have been implemented and the implementation areas have been expanded. Currently, the price for the home appliances going to the countryside is capped at 3,500 RMB, and the mainstream screen size has changed from 26" to 32". The continuous price falls of LCD TV will stimulate the sales and speed up the replacement for CRT TV. The TRI predicted that LCD TV sales in China will reach 21 million units in 2009, a 53.8% growth over last year.
The "home appliances going to the countryside" program has benefited several home appliance manufacturers in Taiwan. AOC has won the bids for being the LCD TV supplier in many regions throughout China. Five BenQ LCD TV models have also won the Chinese bid. Regarding panels, Taiwan has overtaken South Korea as China's biggest panel supplier, with Taiwan made LCD panels taking more than 50% of the market share in China. Taiwanese LCD panel manufacturers AUO and Chimei have been the two biggest beneficiaries from the Chinese demands.
Netbooks and Commercial NB have Revived China's NB Market
With the recession gradually loosening its grip on the economy, the "home appliances going to the countryside" program, and the "old for new" subsidy program, Chinese businesses are expected to restart their ICT procurement plans. Moreover, as a means to demonstrate its leading role in creating more internal demands, the Chinese government and state-run enterprises will begin to place orders for NB, especially commercial NB that are ultra light and slim, have long battery life and are priced between 4000 - 6000 RMB. The TRI predicted that sales of NB will break the 10 million unit mark to reach 11.3 million units in 2009, an estimated 25% growth over last year. Besides commercial NB, netbooks are another strong point in China, where white brand netbook shipments have been spectacular.
Taiwan NB manufacturers will have an important role to play with respect to the NB market in China. While Acer has 24 models that have won the Chinese bids for computers to go to the countryside program, Asus has 27 models winning the bids. In the area of 3G wireless Internet access technology, Acer, Asus, MSI, and BenQ have each had certain market penetration in China.
China's LED Demands Skyrocket
The Chinese government has been treating LED as one of the most important items for strong promotion across the country. The "Ten Cities Ten Thousand LED Lights" project, spanning from 2009 to 2015, will jumpstart China's LED market and create a yearly demand of four billion LED lights in the future. The TRI predicted that the Chinese LED market would create a 74.5 billion RMB business in 2009. According to the LED project, China will install 1.4 million LED streetlamps by the end of 2009, lighting up 21 cities, including Shanghai, Shenzhen, Dalian, and Ningbo. The TRI forecast that upwards of 2.5 million streetlamps would be erected in China for 2010, and by 2016, LED lights would gain 30% of China's general lighting market, with output value reaching 500 billion RMB.
Taiwawn and China have jointly announced a six-point consensus regarding LED, hoping to establish a regular industrial exchange mechanism, to jointly build LED industrial chains and industrial alliances, and to jointly participate in the "Ten Cities Ten Thousand LED Lights" project. The two sides will also cooperate on technical research and development, build a LED patent database as well as a mutually beneficial mechanism of intellectual property rights, and set up a standardized working mechanism as well as test and certification platform.
Car Electronics and Components are in Great Demands as China's Car Market Rebounds
While American auto manufacturers are faced with closure crises, China's auto industry has enjoyed great sales. With the enforcement of China's plan to revive its auto industry and the promotion of "vehicles going to the countryside" program launched in March, China's auto sales in the first quarter, totaling 2.6 million units, surpassed the U.S. auto sales for the first time in history, making China the biggest car market in the world. The tremendous car sales in China has brought strong demands in car components and car electronics, which will benefit not only the original equipment market but also the after-market.
Taiwan's car component and car electronics manufacturers have cultivated China market for a long time and have factories all over China. Besides traditional plastics, sheet metal and tire industries, car security system providers Tung Thih Electronic and Mobiletron Electronics, car information and entertainment system manufacturers E-Lead Electronic and Hamg Shing Technology, as well as car body system provider Universal Scientific Industries and Delta Electronics have gained shares in China's car market and prepared themselves for the greater demands created by the "vehicles going to the countryside" program.
TRI researcher Chang Rui-hua said that with China markets becoming more important due to its increased internal demands, there are no reasons for Taiwan enterprises to be absent from China's market. Chang noted that Taiwan's ICT industry, especially those engaging in making panels, IC, netbooks, and LED, will benefit the most from the business opportunities created by China's various policies to increase internal demands. Chang suggested that Taiwan manufacturers grab the opportunities across the Taiwan Strait to establish their footprints in the vast Chinese market.
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