Chinese Tech Stock Weekly Summary (6/9 - 6/15)

by: IRG Ltd


China's annual shipment of multimedia mobile phones is expected to hit 133 million units by 2011, about 80 percent of the country's full-year mobile phone shipment. China, the world's largest mobile phone market, is going to enter a new epoch and multimedia mobile phones will be much more popular. The Chinese consumers, who seem to prefer to some low-priced mobile phones in the past, have begun showing rising interest in mobile phones with functions such as music playing and photo taking now. Mobile phones that can play videos and broadcast TV programs have begun drawing increasingly more attention from Chinese consumers.

Research and Markets reports that the number of mobile enterprise email subscribers in Chinawill see triple digit growth over the next five years as the mobile email movement gains firm ground within Chinese enterprises. At present, the enterprise market for mobile messaging remains under-penetrated and there are significant opportunities in the PRC for this technology. China is already the largest mobile communications market in the world, with over 400 million subscribers. As China ascends into becoming one of the most significant economies in the world, many of its enterprise managers are depending on mobile messaging.

Sharp Corp will target wealthy users in China with its mobile phone launch later this month, seeking growth in a market that has defeated its Japanese peers. Sharp is aiming for upscale users in Shanghai and Beijing to avoid direct competition from lower-priced phones by global leaders such as Nokia (NYSE:NOK) and Samsung Electronics Co Ltd, which have greater economies of scale. The move follows pull-outs by fellow Japanese handset makers Matsushita Electric Industrial Co. (MC-OLD) NEC Corp and Kyocera Corp (NYSE:KYO), which failed to earn a profit in price-competitive China despite a lineup of some of the world's most cutting-edge phones.


China's homegrown 3G mobile service, the TD-SCDMA standard, has drawn a cool response from the public. Only slightly more than 3,000 handsets have been sold since the commercial trial was launched two months ago. To lift the service's popularity, China Mobile Communications Corp , the parent of Hong Kong-listed China Mobile (NYSE:CHL), last week unveiled the second phase of a free trial by inviting up to 60,000 existing China Mobile customers to join the service. That could boost the number of 3G users on the mainland from 20,000 to 80,000. However, doubts about the quality of the service remain. China Mobile, the nation's largest mobile operator, is expected to be awarded a 3G mobile licence for the service later this year, after the mainland telecommunications industry restructuring is complete in the third quarter.

China Mobile may acquire part of China Tietong's fixed-line assets as part of the revamp of the mainland telecommunications sector. The state announced earlier this week that China Mobile Communications Corp, the parent of red chip China Mobile, must submit a final proposal on its merger with China Tietong by the end of next month. China Tietong, which owns the telecommunications network along the nation's railroads, was ordered to be merged with China Mobile Communications last month to help the nation's largest mobile phone operator extend its reach to the fixed-line segment.

China Unicom officially started the commercial use of its mobile TV service for CDMA subscribers in the Shanghai service area on July 31. The mobile TV service is launched in partnership with Shanghai Media Group (NYSE:SMG) and provides mainly live broadcasting of film, music and fashion show and video on demand service. The mostly-watched entertainment programs, including Come On! Good Boy and My Show, will also be broadcasted lively on mobile phones. Shanghai Film Group will also provide some part or the whole contents of excellent films and the latest films, making mobile phone another display platform of TV and film programs.

Huawei Technologies Co. has announced that a recent report by industry consulting firm Broadbandtrends, ranked Huawei first in the global DSL market with a market share of over 31 percent. This demonstrates Huawei's leading position in the global broadband access market. Huawei has seen increased DSL port shipments even as total industry sales declined 14 percent. The report also shows that IP DSLAM Ports represent 75 percent of total DSL ports and Huawei also ranks No. 1 position. Huawei had shipped a total of 150 million lines of access equipment including 70 million DSLAM ports to over 96 countries and regions.

Huawei Technologies has signed a contract with Grameenphone, the largest mobile operator in Bangladesh, to expand and enhance its mobile-phone network. The mainland's top wireless equipment maker will help upgrade Grameenphone to offer an all-internet protocol (all-IP) network, which will enable the convergence of mobile-phone and radio-access systems, providing a smooth transition to 3G and future access technologies. The financial details of the deal were not disclosed; it was worth more than US$500 million over three years. Majority-owned by Norway's Telenor, Grameenphone last year invested more than US$500 million on expansion. It had about 18 million customers as of last month.

Media, Entertainment and Gaming

• The shareholders meeting of NetDragon Websoft Inc. approved the company's plan to switch from the Growth Enterprise Board of the Hong Kong Stock Exchange to the Main Board on June 24th. NetDragon is Mainland China's eighth largest online game company after Shanda Interactive Entertainment Limited, Netease and Giant Interactive Group Inc., operating a series of MMORPG games. NetDragon floated its shares on the market on December 2nd, 2007.

The9 Ltd., Blizzard Entertainment and China Merchants Bank, jointly announced that they will jointly issue credit cards featuring the online game World of Warcraft (WoW), as part of their cooperation on brand and marketing. The9 and US-based Blizzard Entertainment are operator of WoW in China and developer of WoW, respectively. The cooperation with China Merchants Bank will bring convenience to WoW players, as credit account will be linked with game account. In addition, the credit card will give players a psychological recognition among credit card holders, and break the gap between the virtual community and real world.

China's online game industry maintained a fast growth in the first quarter of 2008. However, investors doubt that the market is approaching saturation. Statistics from Analysys International show that Shanda Interactive Entertainment Ltd. is still the market leader. Benefiting from massive multiplayer RPG under operation and seasonal proceeds from casual online games, the company's operating revenue from online games reached 745 million yuan (US$108 million) in the period. As to Inc., thanks to its strong Fantasy Westward Journey's wonderful performance during the 2008 Spring Festival, the company's online game operating revenue hit 532 million yuan (US$77 million), with the second largest market share in the industry. Besides Shanda and NetEase, Giant Interactive Group Inc. and The9 also respectively has operating revenue of more than US$60 million.


AsiaInfo has won a tender with China Telecom to develop an Operational Data Store (ODS) system for Xinjiang Telecom and Northern Telecom. As part of China Telecom’s Business Intelligence (BI) system, the ODS system is able to analyze data from multiple business sectors, and thus help the telecom operator to better understand customer behaviors. With market competition increasing, BI system is vital for operators to launch new differentiated services. The win of contract for developing ODS system for China Telecom (NYSE:CHA) proved AsiaInfo's ability to provide ace technology and comprehensive solutions for customers.

Beijing RedFlag Chinese 2000 Software Co. introduced its brand-new Red Office 4.0 office software, which will go on the market on July 1st. The Red Office 4.0 is compatible with the Windows and Linux operating systems and includes six components, namely, word, excel, powerpoint, draw, calculate and database. The Red Office 4.0 meets the domestic new-generation document format standard, the UOF, as well as the corresponding international standard, the ODF. In addition, the new software is compatible with Microsoft's Office, HTML, XML, RTF and TXT formats and can produce high-quality PDF files.


Semiconductor Manufacturing International Corp (NYSE:SMI) is finalizing a sale of shares to several strategic investors, which may include a state-owned company. The chipmaker was talking to as many as four investors about a partnership and preferred to sell a stake to a strategic partner such as a customer, rather than a financial institution. Potential buyers might include some U.S. private equity funds, Shanghai-based Hua Hong Group and Burnon International, all previously linked to SMIC.