China to Be Key Helper to Rebuild ICT Market in Q4

TRI projects NB PC shipment to rise 54% yearly

With high unemployment in the U.S., the EU and Japan battering buying of a variety of goods as cars, fashions, consumer electronics etc., a whole gamut of suppliers globally has been stunned by the downturn. Many reports have exposed slumping exports and local sales by Taiwan-based ICT (information and communication technology) suppliers since the global meltdown. However, amid reports of a marked rise in global trade in the last quarter or so, the ICT industry in Taiwan and elsewhere looks forward to brighter prospects in the upcoming Christmas and year-end booms, with demand for consumer electronics obviously warming up.

Rosy Projections

The Topology Research Institute (TRI) projects global shipments of mobile phones, LCD (liquid crystal display) TVs, notebook PCs and TV game consoles for the fourth quarter of this year to rebound strongly, with that of notebook PCs to rise 54% yearly and TV game consoles to even surge 245% quarterly.

The positive effects of the seasonal boom are already being felt by ICT suppliers, whose order schedule has been gradually filling as the extended October holiday, marked by the 60th anniversary of China's National Day, allowed consumers to get a head start on shopping. The current uptrend in the ICT segment may be seen as a positive omen of the recovering global economy in 2010, according to Simon Yang, vice president of the TRI. However, he also concedes that excessive inventories held by distributors and retailers would likely hamper makers' shipment performance for the quarter.

Positive Factors

In addition to seasonal booms, a number of positive factors are working for the global consumer electronics segment in the fourth quarter of this year. Yang stresses that a promising market outlook is foreseeable in the quarter, mainly driven by consumer demand for new mobile phones that has been gradually recovering worldwide since the third quarter of the year, and is expected to rebound sizably after nearly a year of slowdown. Unlike somber reports on developed nations, the first half of the year saw solid consumer demand in emerging countries as China and India, helping to prop up the industry.

Industry insiders' optimism towards strong sales and shipments in the fourth quarter are buoyed by the launch of Microsoft's newest PC operating system Windows 7 for notebook PCs; ultra-thin, CULV (consumer ultra low voltage) platform-based notebook PCs; as well as the increasing popularity of netbook PCs, since such innovations effectively feed tech-geeks' craving for newer, better and faster products.

Also, with Sony adding its newest PS3 Slim to the PS family, as well as adopting lower-pricing strategy to enhance competitiveness and attract buyers, fierce underselling among the top game console suppliers is expected to be triggered during the year-end boom. The under-pricing race, especially in markets with strained discretionary budgets, will likely nudge consumers to be more price-sensitive, hence choosing more affordable TV game consoles for Christmas gifts, according to Yang. Incidentally, Sony even projects its shipment for the quarter alone to contribute 51% to the total for the entire year. Currently the market is shared by three major players: Sony (PlayStation), Nintendo (Wii) and Microsoft (Xbox 360).

Semiconductor Industry

Meanwhile the semiconductor manufacturing sector, upstream along the ICT supply chain, has gradually rallied back from the trough earlier this year with improving overall capacity utilization rates recently, Yang says. For instance, United Microelectronics Corp. and Taiwan Semiconductor Manufacturing Co. have pushed up the rate to 85% and 90%, respectively, as of the third quarter, driven by steady downstream demand.

Nevertheless, Yang doesn't think the chip suppliers will profit from the booms during Christmas and China's extended break in October, for the downstream clients in the LCD TV, monitor and notebook PC sectors have stocked enough driver ICs for display panels after placing orders for many months. In fact UMC recently projected a 10-15% drop in shipments of semiconductors for the third quarter. In other words, a demand slowdown downstream will delay recovery of the industry until next year.

China to the Rescue

The Chinese authorities have taken concrete action to allow its teeming masses to live with ever more creature comforts, with subsidized buying of TVs and other consumer electronics. So most optimistic observers believe that the extended October holidays will play a key role to reenergize the global ICT industry in the fourth quarter of this year.

TRI Shanghai says that LCD TVs, especially full HD models, had been the must-have objects of desire for consumers before the extended October break, further fanned by various brands having been aggressively promoting LED (light emitting diode)-backlit TVs at discounts, which also have become hot-sellers.

With China's big-three telecom service providers-China Mobile, China Telecom and China Unicom-having been heavily promoting 3G communication services nationwide, the sales of 3G phones will hopefully surge in the near future, according to TRI Shanghai.

Popularizing 3G Phoning

To make 3G phoning more attractive, China Unicom has started providing WCDMA (wideband code division multiple access) services across 285 cities nationwide, while China Telecom has improved the bandwidth of wireless Internet accesses for low-end 3G smartphones. Plus, China Mobile is also about to launch 3G phones based on TD-SCDMA (time division synchronous code division multiple access) and independently-developed OMS (Open Mobile System). Coupled with increasingly widespread WiFi hotspots, the future demand for 3G phones in China looks promising.

The major PC brands in China, including Lenovo, HP, Asus, Acer, Samsung, Haier, etc., seem to agree that consumers in a downturn tend to be more price-conscious, so will discount notebook PCs to drum up sales in the fourth quarter of this year, with some adopting other strategies to improve lackluster sales in the first half of the year and others to further raise market shares. Eventually and without surprise, competitive pricing generally has one certain outcome: the market is sure to offer bargains that would normally be unavailable during a stout economy, which will especially benefit students.

Global Shipments of Consumer Electronics (2008, 2009)
Product	Annual Shipment			Quarterly Shipment
	2008	2009 (f)	Growth Rate	Q4, 2008	Q4, 2009	Growth Rate
Mobile Phones	1.183 b.	1.19 b.	1%	298 m.	346 m.	16%
LCD TVs	102.824 m.	125.213 m.	22%	33.451 m.	37.403 m.	12%
NB PCs	128 m.	148 m.	16%	31.55 m	48.5 m.	54%
TV Game Consoles	55.6 m.	51.921 m.	-7%	23.4 m.	26.7 m.	14%
Digital Cameras	130.769 m.	123.22 m.	-6%	31.095 m.	38.278 m.	23%

Source: TRI