China Consumer

Small can be beautiful too

Telcos jump on the netbook bandwagon. Expect sales to surge

Small can be beautiful too

Small product, big potential

KISS or “keep it simple stupid!” is a mantra more commonly repeated on sales training courses.

But now it seems to be getting a hearing around the corridors of tech firms too, as they race to launch the latest series of netbooks. Rather than stuffed with powerful processors or state of the art graphic chips, netbooks have been stripped down to the basics.

The small, mobile computers are the fastest selling segment in the PC market. Analysts predict that the netbook, which emphasises lightness and easy wireless connectivity – even to just a cellphone signal – will become the product of choic for users who are only interested in the basic web-browsing functions.

This strikes a chord with a number of Chinese consumers, many of whom just want to get online or watch movies. They don’t want to end up paying for functionality they don’t use.

Research firm IDC estimates that the market for netbooks in China will quadruple this year to 2 million units, and grow by close to triple again by 2012 (by contrast, 11.6 million netbooks were sold globally last year).

“The netbook represents an exciting evolution of personal computing that has the potential to tap new markets due to their lower cost, portability, and web connectivity,” says Robert Nalesnik, senior director of marketing at Broadcom Corp, one of the world’s largest mobile chipmakers.

Price is a major motivation. Net-books sell from Rmb2,000 ($293) to Rmb4,000 – which makes them much more affordable than a notebook, which is priced at an average of Rmb6,000.

The country’s aggressive push in to 3G is also seeing telecom operators offer rebates to new subscribers, in hope of enticing them away from fixed-line internet to 3G services.

The three telecom giants – China Mobile, China Telecom, and China Unicom – have all launched 3G networks this year (see WiC3). China Mobile, which provides the homegrown TD-SCDMA service for 3G, has partnered with 17 leading computer makers including Dell, HP, Lenovo Group, Founder and Haier to provide 29 models of netbook.

They all come with a built-in TDSCDMA chip which enables users to connect to its 3G network. All the netbooks are priced around Rmb3,000, says the Shenzhen Special Zone Daily.

So far, China Mobile, the world’s largest mobile operator by number of subscribers, has only attracted a million 3G users, compared with its more than 400 million 2G customers. It continues to add many more 2G subscribers than 3G ones (1.5 million to 2 million new 2G users a week, versus 100,000 for 3G, says the TD-SCDMA Industry Alliance.)

China Unicom, which trails China Mobile in its 3G business, has been given the license for the more popular WCDMA technology. And it has collaborated with Samsung Electronics, Acer, and Lenovo to provide 3G-compatible netbooks too.

China Telecom, which operates a CDMA-2000 mobile network, is also offering more than 20 models.

But China Mobile is the netbook’s most aggressive promoter, with new subscribers getting rebates of up to Rmb2,100 on their netbooks. That’s deducted from monthly fees but still amounts to a big discount.

China Telecom’s rebate is Rmb1,200 and it is bundling a new netbook with both mobile and fixed-line accounts – that will be appealing to users who want to use their devices on the move, but then switch to a faster broadband connection at home.

The netbook manufacturers are the happiest of all. Michael Yang, general manager of Dell China, estimates that the segment will comprise over 12% of the company’s sales this year. “According to our sales numbers in the first quarter, the estimate may even be a little conservative,” says Yang.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.