CCID ADVISORY

China’s Consumer Electronics Market

Overview

By Alden ChangPartner, CCID Consulting

alden.chang@ccidadvisory.com

ccidadvisory.com

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CCID ADVISORY Consumer Electronics Show

Mobile computing has become mainstream enough to begin affecting society …. Intel research has shown that women are

playing more of a role in technology buying decisions, favoring lighter notebooks with wireless capabilities, while men generally

prefer more robust desktop machines.

Keynote Address

“In the digital home … we all want to experience our digital content in the way we want to …. We don’t want to be stuck in one room.”

Craig BarrettCES Keynote 2005Intel CEO

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CCID ADVISORY Let’s Step Back

U.S. Consumer Evolution

China’s Consumer Evolution

• In search of the perfect solution: PC on a mobile phone.• Learning how to use mobile phones in society.

PCPC HomeHome CarCar PersonPerson

• The “good enough” solution.• Communications center is the mobile phone.

PersonPerson HomeHome CarCar

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CCID ADVISORY

Mobility in China:

It’s already here.

Things to Keep in Mind

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CCID ADVISORY Mobile Phone Subscribers

0

50

100

150

200

250

300

1998 1999 2000 2001 2002 2003

Mobile Phone Subscribers (millions)

In 2004, at over 310 million subscribers, is the year that exceeded entire population in U.S.

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CCID ADVISORY Market Spotlight

0

20

40

60

80

100

120

2003 2004 2005 2006 2007 2008

Mobile Phone Shipments (millions)

Replacement cycle in some urban segments: down to 12 months.Diverging product features: Very sophisticated, or very simple.Projected 2004–2008 CAGR = 7.7%

Mobile Phone Shipments

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CCID ADVISORY Mobile Phone Market in China

100%73.8Total41.8%30.9Others8.6%6.3Samsung58.8%6.5TCL413.3%9.8Nokia313.4%9.9Motorola214.0%10.3Bird1

Market ShareShipments (millions)Vendor

2003 Competition Review

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CCID ADVISORY Market Spotlight

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2003 2004 2005 2006 2007 2008

Smart Phone Shipments (thousands)

High growth: Projected 2004–2008 CAGR at 46.3%.Targeted at more sophisticated users.

Smart Phone Shipments

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CCID ADVISORY Smart Phones in China

Product ReleasesNokia model 7610Panda model E88Dopod model 535Dopod model 565Lenovo model ET280Sony-Ericsson model P910cMotorola “Entertainment PDA” E680 China Mobile initiates smart phone standards for interconnectivity and interoperability

7.1%Others

3.2%Sony-Ericsson

5

3.4%Dopod4

5.5%Lenovo3

14.5%Motorola2

66.3%Nokia1

Market Share

Vendor

3Q 2004 Competition

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CCID ADVISORY Market Spotlight

Computer Shipments (thousands)

0

2000

4000

6000

8000

10000

12000

14000

16000

2003 2004 2005 2006 2007 2008

Servers NotebookConsumer Desktop Business Desktop

Projected 2004–2008 CAGR:Servers 18.7%; Notebook 31%Consumer Desktop 16.5%; Business Desktop 13%

Computer Shipments

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CCID ADVISORY Market Spotlight

(thousands units)

0

1,000

2,000

3,000

4,000

5,000

6,000

2003 2004 2005 2006 2007 2008

RP TV LCD TV PDP TV

Projected 2004–2008 CAGR:RP 36.8%LCD 77.1%PDP 58.4%

High-End TV Shipments

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CCID ADVISORY High-End TV in China

8.3%Toshiba5

8.4%Hisense4

10.4%LG3

10.5%Samsung2

11.7%Changhong1

Market Share

RP Vendor

11.5%Xoceco5

12.1%LG4

14.9%SVA3

20.5%Sharp2

23.1%Konka1

Market ShareLCD Vendor

3Q 2004 Competition

8.3%Samsung5

9.5%TCL4

12.3%Hisense3

16.5%LG2

24.6%Matsushita1

Market SharePDP Vendor

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CCID ADVISORY China Market Entry

Know your Core CompetencyKnow which of your core competencies are hard to copyBe open to new cultures, new ways of doing business, new marketsTreat China as a market that commodifies incredibly quicklyBut stay closer to your core competency than you would in the U.S. markets

Key Point #1

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CCID ADVISORY China Market Entry

Does your core competency apply to the China?1. Geography

Geographies more disparate than you expect—find those that fit you.

2. Market TierEconomic development of cities and provinces very disparate.

3. IndustryGood opportunities where industries are reforming with WTO as a driver.

4. ChannelsRapidly evolving, and differently in different regions, tiers, and industries.

5. TimingConstantly monitor the markets: China is rapidly evolving.Check out websites and news items such as ccidadvisory.com.

Key Point #2

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CCID ADVISORY China Market Entry

Know the CompetitionLots of itBoth multinational and Chinese companies“Coopetition” is the keyword

Offensive strategyDefensive strategy

Key Point #3

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CCID ADVISORY

Thank You