China's ICT Industry to Grow 14.9% in 2012: TRI

Despite increasing global economic uncertainty and other negative factors, including inflation, tightening credit, and a potential currency war between China and the U.S., the production of ICT- (information and communications technology)-based devices in China is expected to keep expanding at a rate of 14.9% in 2012, predicted the Topology Research Institute (TRI), a Taiwan-based market research organization.

Y.C. Hsieh, an analyst with TRI's Shanghai Branch, pointed out that after years of rapid growth driven mainly by exports, China's economy has come to rely increasingly on its own huge consumer market. This change is especially significant at a time when the U.S. and Europe cannot consume as many Chinese goods as they once did because of persistent economic sluggishness.

Buoyed by the rapid growth of domestic consumer demand and the implementation of the 12th Five-year Plan, Hsieh said, the Chinese ICT industry will continue to gain growth momentum at home and will turn out a projected RMB10 trillion worth of products in 2012.

Niche Products to Lead Growth
Hsieh forecasted that overall sales of LCD TVs, cellphones, and notebook PCs in China will grow by 12%, 8.1%, and 17.8%, respectively, in 2012; these figures are down from the 13.5%, 10.9%, and 20.4% predicted for 2011, mainly because of market saturation. Niche products such as smart TVs, smartphones, 3G phones, and tablet PCs will serve as a new growth engine for China's domestic consumer electronics market in the years to come.

In the LCD TV sector, Hsieh noted, a number of brands, including Samsung, LG, Hisense, Changhong, and TCL, have brought a variety of smart TVs to the Chinese market, pinning their growth hopes on niche products. Hsieh predicted that more than 8.5 million smart TVs will be sold in the country in 2012, for a 117.9% growth from the estimated sales of 3.9 million units this year, and that sales of LED-backlit LCD TVs will hit 289.4 million units, up 69.2%.

Since feature phones do not offer much room for growth, handset suppliers in China have switched their focus to smartphones; as foreign brands such as Apple, Samsung, and HTC compete fiercely against each others in the middle-to-high-end segment, local companies, including ZTE, Huawei, and Lenovo, are quickly proliferating in the low-to-middle-end landscape.

Hsieh predicted that sales of smartphones in China will mount to 148 million units in 2012, representing a 39.6% growth from an estimated 106 million units in 2011. He added that 3G-enabled phones will contribute 145 million units to overall handset sales in China that year.

Tablet PC Market Still Open to Chinese Firms
The global trend toward tablet PCs began with the introduction of Apple's iPad, and Apple's lead in the field seems practically unassailable so far. In China, local suppliers are left with only 20-30% of the market, said Hsieh.

With the government's accelerated development of a nationwide wireless mesh networking infrastructure to facilitate audio and video streaming, however, Hsieh feels that local suppliers of MP4 players will have a better chance to penetrate the tablet PC sector, since most Chinese consumers tend to use tablet PCs as streaming media. With more local players joining the competition, TRI projects that sales of such devices in China will rise to 8.25 million units in 2012, for a 50% growth from this year.

Smart Devices to Stimulate Related Industries
Hot sales of smart devices in China will stimulate related industries, added Hsieh, who pointed to a variety of electronic products, including small and medium-sized display panels, lithium batteries, and LEDs, which will all face heavy demand in the future.

With the explosive popularity of smart devices triggering more demand for application software, software developers involved in the Chinese market will also benefit in the short term. Hsieh cited the success of the iPhone 4S's Siri as an index of the huge business potential of application software that uses natural language processing or handwriting and voice recognition systems. This, he added, will allow suppliers of related peripherals such as cameras to gain steam as well.

Some to Stumble
Although the Chinese government has come up with a couple of economic stimulus policies that include preferential treatment for local emerging industries--Internet of Things, cloud computing, and LED lighting--TRI warned that not all ICT players will be assured a promising future.

For example, Hsieh noted, Chinese solar cell manufacturers, regarded by TRI as a part of the ICT industry, will likely decline sharply in number primarily because government belt-tightening policies in Europe have dampened development of the market for solar energy. Amid flagging consumer markets in Europe and the U.S., makers of large-sized display panels, he added, will also have to cope with capacity downsizing.

Chinese LED lighting suppliers are facing a dilemma about whether or not to expand output, Hsieh stressed, mainly because local consumer demand has remained sluggish because of high prices, despite strong government support and the replacement of traditional bulbs with LEDs throughout the country in recent years. Worse, he indicated, the current bearish consumer market in the U.S. and Europe will also curb investment in expanded production. (SC, Nov. 2011)

Estimated Sales Volume of Mainstream Consumer Electronic Devices in China Sales Volume Unit: 1 million units
Year	2009	2010		2011		2012
Product	Sales	Sales	Y-on-Y Growth	Sales	Y-on-Y Growth	Sales	Y-on-Y Growth
LCD TVs	23.23	33.47	44.0%	38.00	13.5%	42.56	12.0%
Smart TVs	--	--	--	3.90	--	8.50	117.9%
LED-backlit TVs	0.93	5.60	502.2%	17.10	205.4%	28.94	69.2%
Mobile Phones	255	322	26.3%	357	10.9%	386	8.1%
Smartphones	44	69	26.8%	106	53.6%	148	39.6%
3G-enabled Phones	5.3	41	673.6%	76	85.4%	145	90.8%
Notebook PCs	28.01	37.80	35.0%	45.50	20.4%	53.60	17.8%
Tablet PCs	--	1.8	--	5.50	205.6%	8.25	50.0%

Source: TRI