• Industry sources said that Siemens AG (SI) may withdraw from the Internet TV market in China after the German industrial conglomerate has dismissed its team in charge of Internet Protocol Television in China. Earlier, the company lost a bid to cooperate in the launch of IPTV services in Shanghai. China Telecom Corp. (CHA) and Shanghai Media Group in September launched a joint Internet TV service. Shanghai Media Group is the first company in China to receive a license from Beijing to run IPTV.
• Shui On Land, a mainland property developer, announced its partnership with Cisco Systems (CSCO) to design and build Internet-linked residential and commercial projects across China. Earlier in September Shui On Land raised by way of an IPO some HK$6.2 billion (US$797 million). Shui On and Cisco signed a memorandum of understanding to start their initiative by establishing a digital community in Shanghai. Shui On formed its first IT-related strategic relationship in 2005 with Oracle (ORCL), which will initially focus on establishing an Advance Technology Solution Centre in Yangpu. Under the deal, Shui On's strategy will involve an extensive use of the Cisco Connected Real Estate [CCRE] framework, which uses Internet protocol networking communications technologies in the foundation of building design and development. The Cisco framework will be introduced in Shui On's Knowledge and Innovation Community [KIC] project in a 61-square kilometer area with a population of more than one million and home to more than 100 research institutes, 14 universities and colleges. The 840,000-square meter KIC project is a six-year development with support from the Shanghai government. Analysts see the relationship with Shui On as deepening the mainland market presence of Cisco, which dominates sales of networking equipment to large enterprises and service providers in China.
• The top official of Hurray! (HRAY) announced that the company is not involved in any merger with Mop.com. Earlier, a rumor circulated stating that Mop.com, which is seeking an IPO, might merge with Hurray! but the company said the cooperation is merely built around business services. Hurray! announced that it will shift to the digital entertainment field and focus on developing music and games service, with the company aiming to boost its share in the music market from less than 10 percent at present to 25 percent in the next two to three years.
Media, Entertainment and Gaming
• Industry sources said that China Central Television reported bringing in a record 6.8 billion yuan (US$865.6 million) at its annual auction of prime-time advertising slots, with the auction registering a 16 percent increase in ad sales revenue from last year's 5.9 billion yuan (US$751.1 million). The auction saw about 180 companies participating in the bidding, with about 70 percent coming from the consumer goods sector, such as food and beverage makers. The auction saw also a new trend in the participation of local banks. Industry observers noted how increased ad spending kept pace with the growth in consumer spending, especially with the country recording a13.6 percent growth in retail sales to 6.2 trillion yuan (US$789.2 million) during the first ten months of the year. P&G of U.S. became the biggest spender at the auction for the third consecutive year with the company shelling out 420 million yuan (US$53.4 million).
• China.com, a GEM-listed provider of mobile value-added services, announced that it is selling its loss-making online game business to its controlling shareholder for up to HK$1 billion (US$128.5 million). The deal is seen as leading to the spin-off of the online game business under the name CDC Games and a listing of the unit either on Hong Kong's main board, NASDAQ in New York, or in London. The transaction is subject to independent shareholders' approval. NASDAQ-listed CDC Corp is the controlling shareholder of both companies, holding 77 percent of China.com. Under the deal, China.com will sell all the assets of its wholly owned online game business, which operates mainly as Beijing 17game Network Technology, for a total consideration of HK$858 million (US$110.2 million) with an additional HK$195 million bonus (US$24.9 million) to be paid subject to a listing. A first tranche of HK$390 million (US$50.1 million) will be settled in cash at the close of the transaction scheduled for December, with the HK$468 million (US$60.1 million) balance to be paid in the form of a promissory note bearing an interest rate of 5 percent a year. The company said it will use the proceeds to fund future transactions. The market capitalization of CDC Games is placed at around US$500 million.
• Foxconn disclosed plans to invest US$1.2 billion to build a new mobile phone factory in mainland China in order to further expand its business. Foxconn's new mobile phone factory will be located in Langfang, Hebei Province, which is known as the Silicon Valley of China. At present, the Taiwan-based Foxconn is working as a mobile phone OEM for Nokia and Motorola. Company sources indicate that Foxconn's existing factories in Shenzhen and Beijing cannot meet the company's growing needs in the coming years, which is the main reason that they have decided to set up the new factory. At present, Foxconn holds about 48.5 percent of the mobile phone OEM market in the world. It is estimated that the company's revenue in 2007 will grow by 50 percent compared with that of this year.
• The country’s Ministry of Information Industry together with China Mobile (CHL), China Unicom (CHU) and some major firms including Sina.com (SINA) have announced the initiative dubbed the China Green Mobile Phone Culture Construction Alliance. The group said the alliance is aimed at working towards terminating illegal and unsolicited short messages. Under the agreement, members of the alliance have pledged to work on regulating their own operations and service behavior. Statistics issued by the group showed that mobile phone users in China receive an average of 8.2 unsolicited short messages each week. Out of these figures, some 54 percent are fraudulent and 48 percent Chinese sex messages.
• Semiconductor Manufacturing International Corporation [SMIC] (NYSE: SMI) and Saifun Semiconductors (SFUN), a provider of Non-Volatile Memory technology, announced entering an agreement to work jointly on delivering 8Gb Data flash using SMIC's advanced process technology. The product which is expected to reach the market in 2008, will be based on the Saifun Quad NROM technology and designs, is expected to hit the market in 2008. Saifun Quad NROM four-bit-per-cell technology represents a breakthrough in existing NVM technology by doubling the storage capacity of conventional memory cells and providing a simpler architecture that requires fewer manufacturing steps and reduces manufacturing costs. The development of 8Gb Data flash on SMIC's advanced process demonstrates the advantages of Quad NROM in enabling the most cost-effective Flash manufacturing processes on the market today. The agreement is seen as enabling SMIC to enter the Flash market with reliable, high performance products. SMIC aims to provide a comprehensive flash product offering to tap into the emerging consumer electronics market in China and globally.
• China becomes one of Skype’s (EBAY) top markets as the firm’s total registered users in the country hit 25 million. Skype's VoIP software first made its entry to the Chinese market in November 2004 and has become very popular since then. Skype announced that it is developing a new product. A representative from Skype China, which is partnered with Tom.com (TOMO), discloses that in the new innovative product, the functions of Tom-Skype will be improved and will focus on more featured services, particularly on voice quality and text transmission. Market sources indicate that Tom-Skype has become the fastest growing IM tool as it posts a quarterly growth rate of over 100 percent. The company predicts that registered users of Skype will exceed that of MSN by next year.
• Kingsoft announced the signing of a deal with the Agriculture Bank of China [ABC] for its WPS Office software products. The deal is reported to be valued at more than 10 million yuan (US$1.2 million) even as the two companies have not revealed any financial details of the agreement. The WPS Office system involved in the agreement between Kingsoft and signed with ABC, is a mix of different office softwares, which include word processing, form processing and graphics programs. It also features higher security and systems based on ABC's high demand for system stability and safety.
• ZZNode Technologies, which provides operational support systems to mainland telecommunications operators, announced its plan to introduce a software system linked to China's 3G-mobile services expected to be launched in April. While nothing has been disclosed yet, sources said the identity of the telecommunications operator ZZNode has signed with has a contract for its new generation network and will cover 3G services in 31 provinces. The government is expected to issue at least three 3G licenses next year, one of which will be for the domestic standard. Beijing-based ZZNode has eight product lines, with one focused on developing its new generation network, which allows massive transmission of multimedia data such as short messages, pictures and videos over 3G networks. The other product lines are developing operational support systems for older mobile services. ZZNode posted a 68 percent growth in first-half net profit to 9.5 million yuan (US$1.2 million) as sales jumped 46 percent to 62.5 million yuan (US$8 million).
• Zhuhai in China's southern Guangdong has become the largest MP3 chip production base in the world as it holds about 40 percent of the global market share. Reports from a recent technology conference in Zhuhai show that the information industry has become the top industry in Zhuhai, where the general output of the information industry has contributed 40 percent of the city's total industrial output value. The area also boasts software and IC businesses, posting annual growth of 40 percent. There are 15 IC companies in Zhuhai with a complete production link. It is estimated that the sales volume of Zhuhai's IC industry will reach 1.6 billion yuan (US$203.6 million) this year. According to a recent report from GFK, an industry-analyst company, throughout March, April, and May 2006, the Chinese MP3-player market was in a downturn. During that period, the market experienced negative growth.
• Neo-Neon Holdings, a world leader in decorative lighting, announced the pre-marketing of its US$300 million IPO, as it plans to list shares on the Hong Kong Stock Exchange next month. The company expects its 2006 profit to post a growth of 82 percent, ascribing the surge to the sale of more high-margin products and cost cutting. ICEA and Deutsche Bank are the listing sponsors while BNP Paribas is one of the arrangers. Market sources said that LED lighting products have profit margins of more than 50 percent, compared with 30 percent for traditional incandescent lighting products. The company boosted the proportion of LED products to 31 percent of total sales in the first half of this year, from 2.7 percent in 2003. BNP said LED product share of sales should reach 58 percent in 2008. BNP estimates the company's profit will be HK$259 million (US$33.3 million) this year, up 82 percent from HK$143 million (US$18.4 million) a year ago, with turnover rising 47 percent to HK$1.4 billion (US$180.4 million) from HK$971 million (US$125.1 million) previously. The firm distributed 46 percent of its earnings as dividends last year, leaving about HK$186 million (US$24.0 million) net cash balance at the end of the year. BNP estimated sales from China would jump to around 20 percent of the firm's turnover in 2008 from 7 percent in 2005.
• The China Banking Regulatory Commission released the approval allowing Motorola China to set up a solely owned accounting company in China. The new company will be the first foreign accounting company in the city of Tianjin. . It has a total registered capital of 100 million yuan (US$12.7 million) and will provide bank loans, deposits, financing, financial services and finance consultant services to Motorola's seven affiliates in the country. The country said it has set up the accounting company in a bid to strengthen the centralized management of the firm’s capital.
• Avery Dennison (AVY) announced the launching of its RFID business in Asia Pacific and the introduction of its technology-transfer initiative to provide better capabilities and support for the region's RFID label converters. A top company official said that the RFID market in China is forecasted to go beyond 5 billion yuan (US$636.5 million) by 2009. The technology is widely used in supply chain, asset tracking, retail, and inventory management. The company said the technology transfer initiative is part of Avery Dennison's long-term strategy in China, which has been operating in China since 1995. In 2000 the company opened the Avery Dennison Self Adhesive Label Converting College in Kunshan, China, offering both introductory and advanced level training programs to label printing professionals throughout the Asia Pacific region, followed by the opening of the Avery Dennison Asia Technical Center in 2005. Avery Dennison disclosed that it has invested an estimated US$175 million in China since it started operations in the country in 1995, and expects its total investment in China to total more than US$275 million by 2010.
The following is excerpted from IRG's weekly stock report:
Source: Chinese Tech Stock Weekly Report