Chinese Tech Stock Weekly Summary (Dec. 1 - 7, 2008)

by: IRG Ltd

The following is excerpted from IRG's weekly stock report:

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  • has canceled plans to build a Chengdu subsidiary, which was originally expected to contain a 1,200-seat calling center. The company will not reduce its advertising budget in an effort to stay on track with its target to reach 3 million registered users, three times the current figure, in 2009. The digital-product-focused site puts 80 percent of its ads online with 70 percent of online ads placed on search engines. Monthly sales volume on exceeded 100 million yuan (US$15 million) by November and targets sales volume of 1.2 billion yuan (US$175 million) for the whole year. Sixty percent of 360buy's 1 million registered users are active users.
  • eBay (NASDAQ:EBAY) established its first South China office in the Nanhai District of Foshan, Guangdong province, reports Sohu. The office plans to promote small and medium-sized local e-commerce enterprises through government partnerships. More than half of eBay sellers come from the Pearl River Delta. The company also launched the first "eBay Nanhai E-commerce Contest" on the same day to train college students in the e-commerce business.
  • (NASDAQ:NTES) will soon launch the official version of the free desktop email Right-key Mail. The company suggested Internet users not download the beta version of the application because it is not completed. The beta version has been given away and widely downloaded by Internet users recently. The official version of Right-key Mail is scheduled to hit the market this month at the soonest. The new application supports emails of,, and, and it enables email users to receive and send email on the desktop. Some users say that the new tool is practical, but the function is somewhat simple. A lot of users doubt that the new application is developed by The application was developed independently by itself, and its developers are speeding up their efforts in a bid to come up with the official version as soon as possible.

Information Technology

  • Domestic import/export volume for IT products reached US$754.84 billion, up 17 percent year-on-year, in the first ten months of 2008, an increase of 6.9 percent from that of 2007. Exports were up 20.5 percent year-on-year to US$440.1 billion, while imports came in at US$314.7 billion, an increase of 12.5 percent year-on-year. IT products made up 36.6 percent of the nation's total exports and 31.9 percent of total imports for the period. China's IT industry posted revenue of 4.7 trillion yuan (US$683.5 billion) through October, up 17.6 year-on-year. Manufacturing attributed 4.1 trillion yuan (US$590 billion) to the total, while 643 billion yuan (US$94 billion) was provided by the software industry.


  • China is likely to issue the long-awaited 3G wireless telecommunications licenses by the end of this year. The time was basically ripe for China to issue the 3G licenses, but China stopped short of giving a timetable. The total construction cost for the nationwide 3G networks would be at least 800 billion yuan (US$118 billion). China's three telecom operators, China Mobile (NYSE:CHL), China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA), will be granted one 3G license each, and have outlined investment plans totaling 210 billion yuan (US$31 billion) for the first phase of network construction. The 3G licenses will help boost domestic consumption and drive growth in various industries, which is in line with the government's goal of stimulating the domestic economy in the face of weakening external demand.
  • China's telecom industry revenue grew 8.1 percent year-on-year to reach 680 billion yuan (US$99 billion) in the first ten months of 2008. This time last year telecom revenue posted an increase of 11.3 percent. China added 79.96 million mobile phone users and lost 14.2 million fixed-line users to reach 627 million mobile and 351 million fixed-line users during the period. Mobile users sent 581.11 billion SMS messages, up 20.1 percent year-on-year, in the first 10 months.
  • China Mobile has granted contracts to four telecommunications equipment vendors in a tender for its locally developed third-generation TD-SCDMA mobile network. China Mobile gave contracts to ZTE Corp. (OTCPK:ZTCOF), Huawei Technology Co., Datang Telecommunication Technology Co. and Telefon AB L.M. Ericsson. The executive declined to provide details of the exact contracts awarded to each vendor, but confirmed that Ericsson got 5 percent of the tender. Ericsson received a 5 percent share, or a 175 million Swedish kronor (US$21.8 million) stake, in the second round of telecom infrastructure spending from China Mobile, half of what it had expected.
  • MediaG3, Inc., a developer for broadband wireless product and interactive rich-media content delivery applications will partner with Yung Nan Provincial Cable Network Company in China to pilot a project to provide broadband wireless backhaul services. The participation of Yung Nan Cable Network Company is a milestone step towards commercialization of MediaG3’s wireless broadband applications in China’s multi-billion dollar rural coverage market space. Yung Nan Provincial Cable Network Company owns 113 local cable TV networks and has US$1.1 billion in registered capital, US$2.7 billion in assets with net worth of US$1.9 billion. Yung Nan Province is 8th largest region in China with over 44 million people. Commercialization to cover just 10 percent of the Yung Nan population will potentially generate over US$80 million in revenue.
  • China registered 3.22 million new mobile phone subscribers in October, less than the average monthly increase of 8.5 million recorded in the initial nine months to September. China had in total more than 627.26 million handset users at the end of October. The slowdown in mobile growth was driven by the change in operator for the country's CDMA mobile network, from China Unicom to China Telecom. The new owner changed the way it counts CDMA subscribers, and as a result, the number of CDMA subscribers was 4.99 million fewer than at the end of September. The total revenue for the telecommunications sector reached 680 billion yuan (US$99 billion) in the ten months to October, up 8.1 percent from 2007. The total investment in the telecommunications sector reached 185.05 billion yuan (US$30 billion) in the first ten months, up 9.9 percent year-on-year.
  • Huawei Technologies Co Ltd. has been selected to build a 40Gbps (40G) optical transport network for China Unicom across five major cities in Northern China, centered on Beijing. The 40G wavelength division multiplexing (WDM) transport solution will substantially increase China Unicom's network capacity and enable it to meet the increasing demand for high-bandwidth broadband from China's business and residential customers using new multimedia services. Huawei said that its 40G WDM solution can achieve ultra-long haul transport without electrical regeneration, reducing investment costs and enabling efficient and scalable deployments in countries like China where dense urban centers are often separated by vast distances.

Media, Entertainment and Gaming

  • Mid-size game developers launch their new games. As NC Soft's new MMORPG, Aion, is making a mega hit in the market, three mid-size game developers are also launching their new MMORPG games. MGame's Holic 2, Wemade's Tartaros Online and Hanbit Soft's Aika Online are the newly launched games. MGame began the open beta service of Holic 2 on November 28, Wemade will open its new game Tartaros Online on December 4 and on December 18, Hanbit Soft will show Aika. Holic 2 is the so-called UCC game. Generally, an MMORPG game is being played in the fixed environment, but, in Holic 2, players can decide their own environment to fight monsters. In addition to Korea, the game will also open in Taiwan, China, Japan, the U.S. and Hong Kong within 6 months.
  • Shanda Interactive Entertainment Limited (NASDAQ:SNDA) announced third quarter net income of US$49.4 million, up 41.1 percent from the third quarter of 2007 and 20.5 percent from the second quarter of 2008. Net revenues were US$137.3 million, up 42.7 percent year-on-year and 11.8 percent quarter-on-quarter, with revenues from massively multiplayer online role-playing games (MMORPGs) and casual games up 39.9 percent and 45.7 percent year-on-year to US$113.2 million and US$17.6 million, respectively. Shanda's active paying accounts (APA), over all commercially operated games, grew 18.2 percent from the previous quarter to 6.96 million. MMORPG APA was up 22.4 percent sequentially to 5.19 million, with average monthly revenue per paying account down 9.3 percent to 49.6 yuan (US$7.2). The company attributed the decline to dilution from new users with lower spending. Shanda recorded 1.77 million APA for casual games, up 7.4 percent quarter-on-quarter, with average monthly revenue per paying account up 3.7 percent to 22.6 yuan (US$3.3).
  • Shanda Interactive Entertainment Ltd. will make strategic investment in Shanghai and, two local online game operators through the 18-fund launched by its subsidiary Shangda Games. Chen Tianqiao, CEO and Chairman of Shanda noted that the cooperation with the two local game operators marks its broadening prospects on the future and Shanda is willing to join hands with more Chinese peers to usher in the new vision for China's interactive entertainment industry.
  • Beijing cable TV network operator Gehua CATV Network has received a 20 million (US$3 million) subsidy from Beijing's finance bureau to fund digital TV transfers. The subsidy would not influence 2008 net profit. The company announced a similar subsidy for 70 million (US$10.2 million) on July 1 that was expected to increase 2008 profit by 8.17 million yuan (US$1.2 million).
  • NetDragon (OTC:NDWTF) will release MMORPG "Disney Fantasy Online" in the spring of 2009. Disney Fantasy offers Disney characters as non-player characters, turn-based battle modes, pet and castle building/personal space systems and virtual items. NetDragon released the game's official site. The company had signed with Buena Vista Internet Group, a wholly-owned subsidiary of Walt Disney (NYSE:DIS), earlier this year to develop and distribute a 2.5D MMORPG for launch next year. It will also develop its first in-house 3D MMORPG based on the themes, characters and content of Electronic Arts' (ERTS) realtime strategy "Dungeon Keeper" PC games. NetDragon has gained exclusive operating and distribution rights for the online game in Greater China.
  • Shstorm Entertainment plans to double employees to 600 in a 2,000-square-meter subsidiary that will be established in Changzhou, Jiangsu province at the end of December. Shstorm plans to hire 200-300 employees for the new subsidiary but has yet to begin recruitment. Shstorm intends to set up branches in Seoul, South Korea, North America, and Jinan, Shandong province in 2009 to attract new research and development staff. The CEO partially attributed the expansion to profitability.

Mobile/ Wireless

  • Shanghai Media Group (SMG) subsidiary Shanghai Dragon Mobile has partnered with China Mobile subsidiary Shanghai Mobile to reduce mobile TV fees to 5 yuan (US$0.70) from the current 10 yuan (US$1.50) through the end of December. Users may also receive a RMB 5 refund in the second month for the first month's spending. Shanghai Mobile has also lowered traffic fees to the current 0.01 yuan (US$.001) per MB from the former 0.03 yuan (US$.004) per KB through late December.

Alternative Energy

  • Solarfun Power Holdings (SOLF) reported third quarter results with net revenues of US$187.8 million, up 69.1 percent year-on-year but down 5.7 percent quarter-on-quarter, after market open. Net loss for the quarter was US$6.5 million, compared to profit of US$9.4 million in the year-ago period. PV module shipments were up 53 percent annually to 41.8MW with an average selling price of US$4.04 during the quarter. The company expects fiscal 2008 shipments to be at or slightly below the low end of its previously guidance of 175-190 MW. Total shipments are expected to rise 50 percent above 2008 targets in fiscal 2009.
  • Baoding Tianwei Baobian Electric Co. Ltd, Sichuan MinJiang Hydropower and Sichuan Province Investment Group plan to invest a total of 2.7 billion yuan (US$393 million) to construct a polysilicon project with annual production capacity of 3,000 tons in Chengdu, Sichuan province. Tianwei Baobian will invest 51 percent of the total, while Sichuan Province Investment Group and Sichuan MinJiang Hydropower plan to contribute 35 percent and 14 percent, respectively. Tianwei Baobian also plans to join Leshan Electric Power in spending 2.2 billion yuan (US$320 million) to construct another 3,000 ton per annum polysilicon project in Leshan, Sichuan province, with Tianwei Baobian and Leshan Electric Power contributing 49 percent and 51 percent of assets, respectively. The project is expected to begin production after three years and reach full capacity after five years.