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Wednesday, January 05, 2005

Consumer Electronics : China Way Behind!!

Businesweek writes, Everybody thinks that China is the world's next economic superpower. Excerpts with edits and my comments added:

Each year, it gets billions and billions of dollars in foreign investment, powering its booming economy. The Middle Kingdom has more cell-phone users than anywhere else on the planet, and soon it will be tops among Net surfers, too. American consumers can't get enough of the low-cost TVs, DVD players, mobile phones, computers, and other gizmos that come out of China's factories. All the hype about the Lenovo-IBM deal and China's might obscures one problem: For a country that's about to become such a powerful threat to the U.S., China has a tough time producing world-class companies that can compete with the likes of America's Dell and Hewlett-Packard, or Japan's Sony or Asia's Samsung. Sure, China has Huawei Technologies and ZTE, both of them growing providers of low-cost, high-quality networking equipment. But when it comes to consumer electronics, Chinese outfits just aren't in the same ballpark.

Other signs indicate that China may not have what it takes to be a major-league player. Just as investors soured on the Lenovo-IBM deal, they've also been exiting some other Chinese concerns with ambitions of becoming big-time global brands. Changhong, one of China's largest producers of TVs, suffered a major setback in late December when it announced that its American sales agent, Apex Digital, was unable to pay the $310 million that it owed the Chinese concern. Changhong's Chinese-listed shares plunged on the news. TCL International, the Hong Kong-listed subsidiary of TCL Group, is another example of things not going exactly as planned. It made a splash in 2003 with its joint venture with France's Thomson Group That gave TCL control of the RCA brand and positioned the business to become a worldwide leader in TV production. And Chairman Li Dongsheng's vision may pay off in the long run, with TCL becoming China's answer to Sony or Samsung. Lenovo, Changhong, Skyworth Digital, TCL, and Konka may still emerge as true competitors to the big consumer brands. But amid all the hype about China being a threat to the U.S., it's worth remembering that many of the upstart's potential global champions have a long way to go before they can achieve their lofty ambitions.

We firmly believe that Chinese dominated would be restricted to a few areas – we covered earlier that china is no big force in software services We wrote,"China's spectacular economic success has prompted speculation that the country's software-outsourcing industry could soon compete with India's. A recent McKinsey study of China's software sector,however, shows that it will be many years before the country poses a threat to its continental rival in this arena. We concluded the said article by saying,Its going to be the Indian Headquartered companies all the way in future ruling the IT services market.

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