What's the Next Big Score?
Risking razor-thin profit margins, "bandit"electronics makers are diversifying and innovating. What business opportunities will Taiwanese manufacturers with a daring "bandit spirit"dig up next in China?
What's the Next Big Score?By Benjamin Chiang
From CommonWealth Magazine (vol. 411 )
In China, cool, low price "bandit cell phones"are invading the market with gusto and have quickly captured market share nationwide. Since they dare to use the latest technologies and hottest functions, the bandit mobile phones have become the icon of youth subculture.
In a nutshell, the bandit spirit encompasses a strong innovative drive, a brazen disregard for loss of face and a willingness to risk thin profit margins. It seeks to put as many functions as possible into one product and goes to great lengths to satisfy consumer needs.
The bandit spirit has by now become engrained in the minds of China's 1.3 billion consumers. The slogan "Manufacturers learn from the bandit spirit"can be heard everywhere in China, and the concept has started to apply to non-electronic product categories such as cars, homes, bags, or celebrities...
The big question that everyone asks now is which product is likely to repeat the resounding success of bandit mobile phones? Where will be the next "bandit"business opportunity?
C.W. Chen, chairman of Taipei-based market research agency Topology Research Institute, thinks he knows the answer. "Bandit notebook computers will be the next hot business opportunity," he predicts. Bandit mobile phones have already changed consumer attitudes. They now expect to get "high quality at a low price."Chen estimates that the market for low-price notebooks in emerging countries is worth NT$481.8 billion.
Since all parts and components contained in a notebook computer are mass produced and standardized and have low brand value, notebooks can easily be developed as a bandit product that emphasizes low price and special functions.
The trend that Chen anticipates seems already under way, since the first bandit notebook hit the shelves in China earlier this year: Hasee Computer of Shenzhen rocked the industry with the release of a 1,999 renminbi notebook.
Copying the Mediatek Model
Crucial for the sudden rise of bandit mobile phones were the mobile phone chipsets and platforms by leading Taiwanese IC design house Mediatek.
What Mediatek did for mobile phones, Via Technologies, another leading Taiwan-based IC design house, could do in the notebook computer segment. Via has been present in China for years developing energy saving, low-power processors for use in Chinese notebook computer brands.
The showroom at the company's China headquarters displays the low-power processors that have been developed over the past years, gradually getting smaller in size. Tom Hsu, chief administrative officer at Via China, explains, "With each generation the processor size shrank by 50 percent. Now processors can fit into a computer that is smaller than a business-card box, so there is a wide array of applications.”
In October Via brought together 15 electronics firms including Microsoft, ITE Tech, AMI, and SanDisk in the Global Mobility Bazaar, an industry alliance for the development of affordable netbooks and notebooks. VIA will supply the processors, while the other alliance members will supply hardware and software equipment. Contract manufacturers will produce the computers. Presently, Via is already supplying Chinese computer makers Tsinghua Tongfang and China Great Wall Computer, as well as display maker TPV Technology.
"The Global Mobility Bazaar has greatly shortened downstream manufacturers' time to market,"says Hsu in describing the benefits of the alliance.
"Over the past few years we've honed our skills with ultra-mobile PCs, and we've fully supported the Chinese brand makers,"Hsu says with pride. Now that many Chinese cities have completed wireless broadband networks and 3G communications systems, bandit notebooks with their emphasis on low power consumption are all set for rapid development.
Bandit Notebooks Enter the Education Market
China's burgeoning education market is another engine for popularizing bandit products. China has more than 200 million students in grades 1 to 4 of elementary school, according to statistics by China's Ministry of Education. Considering the great importance Chinese parents attach to education, huge business opportunities loom in that area.
Bandit notebooks and mobile phones come just at the right time to provide the 200 million elementary school students with digital learning platforms.
Shanghai Jingcheng High-tech, a digital equipment maker for education under the Ministry of Education, has also smelled the potential of these hidden business opportunities. At the end of this year, Jingcheng will release a white subnotebook similar to the Asus EeePc.
Steward Shyu, CEO of the China branch of Taiwan-based learning software provider L Labs International, reveals that Jingcheng will have Foxconn manufacture the subnotebooks, which will have a 80 gigabyte hard disk at a price of less than 3,000 renminbi. The company expects to ship more than 1 million subnotebooks within a year.
Taiwanese Makers Get into Mobile Learning
Mobile phone learning is expected to become the next killer application in the bandit mobile phone field. Experts project that demand for mobile phones that can be used in learning and teaching will top 5 million per year, reason enough for Taiwanese entrepreneurs to actively expand into this market segment. Taiwanese IT company Global View, which has made itself a name with electronic dictionaries, began five years ago to move into mobile learning. Joining hands with handset manufacturers such as Lenovo, Motorola, Malata, and TCL, Global View started to develop distance learning and back-end services for mobile phone learning.
To cite an example, after a student buys one of the mobile phone models that support e-learning, he only needs to key in basic information and his school grade and activate the system. Then the relevant learning software will immediately be downloaded and the remote computer database will automatically transfer the newest teaching materials to the student based on his grade and individual progress.
Recently Hong-Plus Education and Technology, in which Global View has invested, entered into cooperation with Motorola to release comprehensive educational services for junior high school students via mobile phone. The services will cover nine subjects including math, history, geography, physics and chemistry.
Furthermore, L Labs specializes in English listening and speaking practice for junior and senior high school students via mobile phone, the first company to provide such services in China. English language teachers can directly contact the student and help them to solve problems online. So far L Labs has sold more than 200,000 mobile learning phones.
The makers of bandit mobile phones have been under fire for seizing the consumer market with cut-throat prices and for ignoring intellectual property rights.
"But the low cost and low technological barrier of hardware development allow companies to devote more energy to satisfying consumer needs that haven't been met yet,"L Labs' Shyu believes. "Providing more and better services is definitely the advantage that comes with bandit products,"Shyu contends, sincerely offering a buoyant forecast: China's bandit spirit will soon sweep the emerging markets of the world.
Translated from the Chinese by Susanne Ganz
Chinese Version: 下一個山寨商機在哪裡？