China Rural-region Development Scheme to Encourage Taiwan-branded Computer Lines
To Begin with Full-colored TVs
The “Rural-regional Development Schemes” project has officially spread into the national-wide 31 provinces. These product ranges include refrigerates, full-color televisions, laundry machines and mobile phones. Seven more categories such as personal computers, motorcycles, water heater systems, air conditioners, motor vehicles, microwaves, and electronic stoves have been also attached on the list recently. More items are expected to be covered soon. From “full-colored TVs to country sides”, “personal-computer TV to country sides” and “motor vehicles to country sides”, China government is keen to encourage its domestic market and consumer demands to offset the global economy recession and financial risk impact. Despite 8% GDP growth rate by 2009, it is also crucial for China leaders to balance the living gap between metropolitan cities and outskirt cities by increasing the ownership rate of home appliances in the rural areas. This so-called scheme is hoping to narrow the development gap down to 10-year behind by 2012. The business opportunities to fulfill the upcoming customer demands are vital. Top products on the list are personal computers, LCD TVs and mobile phones. Many end-user products related components supplies are also urging, particularly those OEM/ODM dedicators.
According to Jeter Chang, research manager of Topology Research Institute, the “Rural-regional Development Schemes” has had a comprehensive follow-up strategy to meet different market conditions and product requirements in every province. The total income that generated by the schemes include non-schemed products will grow from NT$550 billions in 2009 to NT$1.95 trillions by 2012. It is a 28.8% compound annual growth rate. Meanwhile, the total product sales in the next five years is also targeted at NT$3.62 trillions. Although the product requirements to be deployed in the rural areas may be restricted due to price concern, Taiwan suppliers still have a very confidence forecast based on its experienced cost control capability. Despite those self-branded products, OEM/ODM contracts suppliers will also grab this significant market share. A total of RMB$900 billions (around NT$4 trillions) business opportunity is highly expected during such a downtown period.
Keys to Step into China Rural Market
While the object of the Rural-regional Development Schemes is actually aimed to open up consumer market in the country sides, enhance the self-ownership rate of home appliances as well as improve the consumer structure and living standard within the nation; Topology thus defined the schemes as a market activator to build up further users demands in the long run. More consumer behaviors and intention will be revealed when rural-regional residents are fully accommodated with these new technologies and conveniences. It takes a long while to complete the year-round process. However, it is also a golden opportunity for many Taiwan suppliers to put eyes on long-term investments as well as business strategies in order to establish considerable market status in the rural China cities. Market positioning, consumer characters analysis, product needs investigation and price segments are keys to mange these third- and forth-level markets successfully together with insightful brand awareness development tactics.
Appendix:Glowing Business Future for Taiwan Suppliers in China Rural-regional Development Schemes
To fulfill the requirements of China Rural-regional Development Schemes project, Taiwan suppliers include PCs, LDC TVs and mobile phones are rapidly devoting themselves to join the competition. Twenty-one companies and 164 product items are biding for the finalist. Among all, five foreigner-investment brands are Dell, HP, ASUS, ACER and BENQ while 21 product items in total are from Taiwan. These Taiwan products include 10 from ACER, nine from ASUS and two by BENQ. Despite general desktop computers and laptops, ASUS also proposed three models of NetBook in the finalist. New product “all-in-one nScreen” launched by BENQ has huge possibility to win the final bid too, according to by Topology Research. In OEM/ODM wise, Taiwan major cooperated contract manufacturing clients such as Dell and HP are very eager to succeed. It further gives Taiwan suppliers more confidence in sales profits. While the overall price requirement of personal computer is targeting below NT$17.5 thousands, Taiwan suppliers have great chance to cope with the criteria both in self-branded and OEMs/ODMs levels if the cost control capability met the advantages.
In the sectors of LCD TV and mobile phone, most of the business may emphasize on flat-panel and IC product lines. Around 200 millions households are currently located at China rural regions with a 37% adoption rate of full-colored TVs only. Thus the rural-regional development schemes tend to bring forward 5 millions units of full-colored TVs together with NT$33 billions sales revenues. The LCD TV itself accounts approximately 25% of total unit sales which is about 1.25 millions sets. Many Taiwan components suppliers in flat-panels and ICs fields have paved their way to the channel market. Nine out of sixteen bidders are belonging to Taiwan flat-panels suppliers. A total of NT$5.55 billions (around US$160 millions) purchase order is highly expected. More than 80 percent of the market value goes to CHIMEI and AUO. According to the schemes, middle- to small-sized full-colored TVs (19” to 16”) with price range lower than NT$10 thousands will receive the most benefits. Taiwan suppliers may take this cost-effective advantage to generate the best sales performance. CHIMEI LCD TVs will take over LG’s market share by 2009 as a new leader in China if its 26” LCD TVs were fully adopted in the rural regions.
Similar scenario applies to the mobile phones market as well as the total adoption rate of mobile phone in the rural areas is 5% low. Among final contracted 13 China-owned companies who have prepared to deploy baseband IC into their mobile phones, ten of them are committed to work with MEDIATEK. It is a 70-percent high market share. Taiwan-owned flat-panel companies also supply another 11 players which make up over 75% market ratio in China. Taiwan-based SITRONIX and ORISE are playing significant roles in driver ICs sector. An initial estimation of 1 millions mobile phones are expecting to sell to rural China. Taiwan-supplied mobile phone ICs will account for 70% market while mobile phone panels may grab over 50%. Beyond more, Taiwan’s auto parts companies have had invested in China production line for many years. It is also a great chance for these companies to meet the requirements of quality and price-friendly in this rural-regional development project. Although in the home appliances sector including refrigerators, washing machines and air conditioners, SAMPO is the only one Taiwan-based company to receive the supply power. The annual-basis contract renewal system still distributes a number of business potential in the next three years before the accomplishment of phase one project by 2012.