Market Analysis: Tapping China´ s Laptop Market

cctv.com 09-15-2003 16:57

In first 8 months of this year, laptop computer sales in China grew at a speed of around 40% on a year-on-year basis, almost double of the global growth rate of 22 percent. With Intel鈥檚 launching and massive marketing campaign for its wireless Internet access CPU solutions, Centrino, and massive price cuts, many Chinese consumers find laptops more useful and affordable to them. In Today鈥檚 Market Analysis, we will examine the latest surge in laptop sales and how laptop makers are reacting to the continual price declines.

This is the biggest computer market in Beijing. The salespersons are giving out advertisements for laptops. The fifth floor is crowded with laptop stores. This is the place that one can find almost any laptop brand. The continual price cuts have made here a place many potential laptop buyers will visit to get the latest price quotation and compare the options. These two girls are having a look of a computer designed for students.

The price of this laptop is only 730 US dollars. I thought with this little money, you could only buy a desktop computer. As students, we do not have much money. It will be very convenient to use such a laptop in dormitories and classrooms. I find it suits us both in terms of appearance and weights. As girls, we need light laptops. I think it suits us and the configuration is wonderful.

The laptop that attracted the girl is the student laptop introduced by Tsinghua Unisplender in July this year. Within less than two months, some other laptop makers have produced even cheaper laptops onto the market. At the beginning of this year, the bottom line for laptop prices was still 1200 US dollars. But the price dam broke when Intel introduced its new generation of CPU with wireless Internet accession function, Centrino, into the market in March this year. With its massive marketing campaign, the customers accepted Centrino as the development direction. The price cuts in CPU and the major technology breakthrough triggered a new round of price war.

Centrino just provides half of the solutions for the realization of wireless Internet surfing. The other half is infrastructure, or the accession points鈥coverage. In China, the wireless Internet accession network is only available in some office buildings in large cities. So even with Centrino, the chances to use such functions are limited.

Xiong Ping, Executive President of Beijing CCIDNEt Information Technology Co., Ltd. , said, 鈥淏ut in many places, it is incontinent to surf the Internet wirelessly. I can access the Internet wherever I am in the CCID building. But when outside this building or in some smaller cities, it is difficult to realize mobile working. Based on the overall environment, it will take quite a long time before the realization of mobile working.鈥

Still, the Centrino opens up a new field and further strengthens the portable functions of laptops. The technology breakthroughs, together with price cuts, effectively stimulated the consumers鈥enthusiasm for laptop purchasing and possession. Based on the current market booms, some experts even predict that in the next two years, the Chinese laptop market will keep an annual growth rate of nearly 50%.

Xiong Ping, Executive President of Beijing CCIDNEt Information Technology Co., Ltd. , said, 鈥淟ast year, we predicted that this year鈥s growth rate would be around 40 percent. This year鈥s sales was generally just as what we expected. In the next two years, such a steady growth will continue.鈥

The rapid market growth attracts more enterprises into the market. Some leading Chinese TV makers are now expanding their business scope to laptop computers. TCL is one of them. Through cooperating with Beijing Youbang Electronics, a veteran laptop maker, TCL entered the laptop market in March this year. The merger seems to be successful as the new entity鈥s laptop and production has doubled in the past 6 months.

Fan Leitao, Product Manager of TCL Digital Technology Ltd. , 鈥淚n the IT sector, laptop is seeing rapid development. Compared with desktop computers, its profit margin is bigger. TCL used to have good cooperation ties with Beijing Youbang Electronics. Now the two companies have merged to conduct the laptop business. For the TCL group, this is a new profit center. With it, TCL can also expand to a new industry.鈥

Although many enterprises focus their attention on the ever-expanding market size, a side effect of the price wars and more market players is smaller profit margin. Compared with 3 years ago, the sales volume has increased several times, but the profits won by each market player may not rise at the same pace. Having sold Samsung and Toshiba laptops for some years, this shop manager has much to say.

Li Qinbao, Shop Manager of Beijing Century Chutian Science & Trade Ltd. , said, 鈥淭here are more and more brands. The number of dealers is increasing. The profit margin is shrinking. The competition becomes increasingly fierce鈥

Another strategy adopted by laptop makers is market segmentation. Today, the entertainment functions of laptops are more stressed. Targeted at different consumer groups, the sizes, weights, and appearances, and even functions vary in a much wider range. Take the CPU of laptops as an example; Intel used to dominant the laptop market. Today, to better serve their customers, CPU from other makers, such as AMD from the US and VIA from Taiwan, are also used by Founder, Tsinghua Unisplendour, TCL and some other famous Chinese laptop makers.

Fan Leitao, Product Manager of TCL Digital Technology Ltd., 鈥淎s far as CPU is concerned, Intel still enjoys a dominant position. This is especially true in the laptop market. Although VIA is not the market leader, it has some distinct features. When making products, what we consider is the customers鈥needs. We are doing everything to satisfy the customers鈥needs.鈥

Entered into the market only 3 years ago, VIA from Taiwan has managed to won the cooperation with many major laptop makers. The Laptop with VIA CPU tends to be cheaper and offers the laptop makers some competitive edge in competition.

Jack Ruan, External Affairs Manager of VIA Technologies (China) Inc., Ltd., said, 鈥淚t鈥s true we provides ample technology and product support on the low-priced product market. But low prices do not mean low quality. The key point is that the technologies created need to satisfy the application demands and have a performance-to-price ratio acceptable to the customers.鈥

Now different laptops are produced for top managers, students, young white-collar workers, even accountants. In view of the over 300 million school students鈥massive demand for laptops, Tsinghua Unisplendour has specially designed some laptops for students that are cheap, light, and have some software and configurations for study.

John Huang, Notebook Dept. Manager of Tsinghua Unisplendour Cooperation Limited, said, 鈥淭his is the first time we especially developed a laptop product for students. But we feel that much more needed to be done to satisfy the students鈥demands. So we have decided to invest 6 million US dollars to student laptop development.

They seem to find the right way for development. The cheap student laptops aroused wide repercussion and a surge in the company鈥s laptop sales. They are now expecting double their sales this year. As the 4th biggest Chinese laptop maker, that is an ambitious target.

John Huang, Notebook Dept. Manager of Tsinghua Unisplendour Cooperation Limited, said, 鈥淎fter we launched this new laptop model into the market, the market reaction is good. Many organizations, students, and training firms are purchasing this new product. Besides, we will also introduce some high-configuration Centrino laptops less than 1200 US dollars each. With these products, I believe our growth in the second half of this year, we will grow even faster. We hope this year our sales can double from last year.鈥

In face of the Chinese laptop makers鈥price-cutting competition strategy, foreign laptop makers that still dominant the top-of-the-end part of the market also lowered their laptop prices.

Today, almost 20 laptop brands from China and abroad are available in the Chinese market. Dell leads the trend among foreign laptop makers in terms of price lowering. Stimulated by the low price strategy of Dell, HP, IBM and other international brands changed their market strategy of high quality and high prices and started to make massive price cuts to maintain and expand their market share.

Xiong Ping, Executive President of Beijing CCIDNEt Information Technology Co., Ltd., 鈥淲ith the fierce competition and declining in prices, the profit margin is narrowing. The laptop makers will face a new round of reshuffling. It is expected that the Chinese makers will parallel foreign ones in the competition. Finally, the local makers will win the competition because of their familiarity with the market.鈥

To better prepare for the competition for the most promising laptop market, many foreign laptop makers are moving their production bases to China. Even some Taiwan laptop makers and OEM plants are setting up factories in Suzhou, a city near Shanghai. As a result, it is expected that at the end of this year or early next year, China鈥s mainland will replace Taiwan as the biggest laptop making and processing base in the world.

Among the 1 million Centrino laptops sold worldwide, one fifth is to the Chinese market. After investing 500 million dollars in Shanghai, Intel has announced its decision for investing another major factory in west China. Like Intel, all other laptop and related product makers have realized are reacting to China鈥s important position as the most promising market and the soon-to-be biggest production base in the world.

Editor:Zhang  Source:CCTV.com