THIS APPLICATION PROOF IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Application Proof must be read in conjunction with the section headed ‘‘Warning’’ on the cover of THIS Application Proof. This document supersedes the Application Proof dated 15 April 2014. INDUSTRY OVERVIEW
Potential investors should note that ~Ipsos has been engaged by our Company to prepare the ~Ipsos Report to provide an overview of the development of the global consumer electronic devices and an analysis on demand in consumer electronic devices market, which will be used in whole or in part in
this ~prospectus.
The information and statistics set out in this section have been extracted from the ~Ipsos Report
compiled by ~Ipsos and other publicly available sources. Our Directors believe that the sources of this information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. Our Directors have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading. The information has not been independently verified by our Group,
the ~Lead Manager, the ~Sponsor, the ~Underwriters or any other party involved in the ~Placing and no representation is given as to its accuracy. Accordingly, such information should not be unduly relied upon.
DEMAND OVERVIEW AND ANALYSIS OF GPS PERSONAL NAVIGATION DEVICES IN THE MARKET Market Overview of GPS personal navigation devices in Europe
Accordingtothe~Ipsos Report, car navigation is the main business of GPS personal navigation device brand owners in the European market. GPS personal navigation devices are categorised into consumer usage devices and commercial usage devices, and are then further sub-categorised by functions. The key market players of GPS personal navigation devices in Europe are Garmin Ltd., TomTom (TOM2) and Mai-Tech Technologies Ltd (which owns two brands: Mio and Magellan). In addition, there are some European GPS personal navigation device brands, such as BOLERO, Falcom, Navman etc. The GPS personal navigation device market is Europe is fragmented. TomTom, Garmin, Mio and other small brands accounts for approximately 38%, 19%, 12% and 31% of market share, respectively. Market Overview of GPS personal navigation devices in Taiwan
Accordingtothe~Ipsos Report, in Taiwan, the main functions of GPS personal navigation devices not only can provide latitude and longitude information but also track locations of a person, a pet or a car. GPS personal navigation devices are also categorised as consumer usage devices and commercial usage devices. In Taiwan, most GPS personal navigation devices include integrated TV, tracker and video functions. The key players of GPS personal navigation devices in Taiwan are: Garmin Ltd., TomTom (TOM2) and Mio Technology. Total Retail Sales Value of GPS personal navigation devices Total Retail Sales Value of GPS personal navigation devices for Europe and Taiwan from 2008 to 2017 US$’ million 10,000 9,505.2 9,000 8,720.4 8,000.3 8,000 7,444.0 7,524.0 7,339.7 6,991.8 6,733.7 7,000 6,177.7 6,000 5,133.6 5,000 4,000 3,000 2,000 1,000 223.3 159.1 218.2 209.8 179.2 202.0 220.2 240.0 261.6 275.7 0 200820092010 2011 2012 2013 2014 2015 2016 2017 Forecast Europe Taiwan
Source: ~Ipsos Report
– 54 – THIS APPLICATION PROOF IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Application Proof must be read in conjunction with the section headed ‘‘Warning’’ on the cover of THIS Application Proof. This document supersedes the Application Proof dated 15 April 2014. INDUSTRY OVERVIEW
Due to the global financial crisis in 2008, the total retail sales value of GPS personal navigation devices for Europe declined by approximately 31.0% in 2009; meanwhile the total retail sales value of GPS personal navigation devices for Taiwan also reduced by approximately 29.0% in 2009. It may be said that in that year, people did not have budgets to purchase some high-tech products, such as GPS personal navigation devices.
ThegrowthrateofEurope’s total sales values increased slightly by approximately 0.9% from 2012 to 2013. The global GDP growth rate is expected to remain stable in 2013 to 2017, it is expected that the demand of GPS personal navigation devices will increase in Europe because of the growing number of tourists. One trend shows that more and more tourists like travelling in vehicles when they travel in Europe, thus the demand of automotive GPS personal navigation devices will rise. In Taiwan, in these two years, the prices of GPS personal navigation devices have become cheaper (less than US$100) and the penetration rate of GPS devices is also becoming higher. In other words, people can make their shopping decisions faster due to lower prices (low involvement products). Therefore the demand of GPS personal navigation devices is growing.
OVERVIEW OF GPS PERSONAL NAVIGATION DEVICE MANUFACTURING INDUSTRY IN CHINA
Overall Supply and Production
China has been one of the major production regions of GPS personal navigation devices due to low labour costs and lenient environmental regulations. OEM manufacturers, in the GPS personal navigation device manufacturing industry in China, tend to develop their own brands. Plenty of OEM manufacturers, such as Link-create (盈科創展), tend to produce GPS personal navigation devices under their own brands after they reach a certain production scale by providing OEM services.
Estimated Total Production Value of GPS personal navigation devices in China from 2008 to 2017
US$’ million 8,000
7,000 6,364.2 5,940.1 6,000 5,546.6 5,181.3 4,842.2 5,000 4,645.7 4,383.0 4,031.5 4,036.0 4,000 3,503.8
3,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 forecast Production value of GPS personal navigation devices in China
Source: ~Ipsos Report
It is expected that the total production value of GPS personal navigation devices in China will grow at a CAGR of approximately 7.1% from approximately US$4,842.2 million in 2013 to approximately US$6,364.2 million in 2017. Such expected increase is mainly due to the increasing popularity of GPS personal navigation devices amongst the consumers in China usage. Car navigation systems have become a kind of necessities, and have started to tap the mid-to-low-end vehicle users; while GPS personal navigation devices have been regarded as common consumer electronic products by the consumers.
The total production value of GPS personal navigation devices in China grew from approximately US$4,031.5 million in 2008 to approximately US$4,645.7 million in 2012.
– 55 – THIS APPLICATION PROOF IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Application Proof must be read in conjunction with the section headed ‘‘Warning’’ on the cover of THIS Application Proof. This document supersedes the Application Proof dated 15 April 2014. INDUSTRY OVERVIEW
With the recovery of the world’s economy in 2010, the automotive sector worldwide also recovered, whichhelpedChina’s GPS personal navigation devices production to grow and the total production value reached approximately US$4,036.0 million in 2010.
Total Number of GPS personal navigation devices Manufacturers in China from 2008 to 2012 Number 500 450 425 400 380
300 300 270
200
100
0 2008 2009 2010 2011 2012 Number of GPS personal navigation device manufacturers in China
Source: ~Ipsos Report
The growth in the total number of GPS personal navigation device manufacturers in the past five years was mainly attributed to the rising demand for GPS personal navigation devices in automotive segment. The booming automotive market in China attracted plenty of new entrants to enter the GPS personal navigation device manufacturing industry in China.
There are over 500 GPS personal navigation device brands currently active in China market in 2013. However, the brand owners tend to engage in product development and distribution, rather than in manufacturing. Hence, GPS personal navigation device manufacturers in China are mostly OEMs or ODMs and cooperate with several GPS personal navigation device brand owners simultaneously.
Historical Price Trend of Key Raw Materials in China
Historical LCD Panels and Price Trend of Electronic ICs in China from 2008 to 2012 US$/unit 25 22.8
19.0 18.7 20 16.7 13.9 15
10
5 0.90.8 0.8 0.8 0.9 0 2008 2009 2010 2011 2012
IC LCD Panels
Source: ~Ipsos Report
– 56 – THIS APPLICATION PROOF IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Application Proof must be read in conjunction with the section headed ‘‘Warning’’ on the cover of THIS Application Proof. This document supersedes the Application Proof dated 15 April 2014. INDUSTRY OVERVIEW
The price of LCD panels dropped significantly from approximately US$22.8 per unit in 2008 to approximately US$13.9 per unit in 2012. The significant price drop in price of LCD panels was due to the drop in the import price brought about by the increasing production capacity, more LCD panel makers and innovative production technology. The LCD panel price and the selling price of GPS personal navigation devices are negatively correlated, possibly due to the higher capacity of the ICs. The increase in the number of components resulting from a more powerful ICs could be the main driver of the price increase of the GPS personal navigation devices.
The price of ICs in China dropped slightly from 2008 to 2012, staying within the price range of approximately US$0.8 per unit to approximately US$0.9 per unit in these 5 years. The import price of ICs is more stable at an average approximately US$0.8 per unit in these 5 years. ICs is a common component found in most of the electronic goods; the market of which is rather mature and stable, which explains its stable price from 2008 to 2012.
COMPETITIVE ANALYSIS OF THE GPS PERSONAL NAVIGATION DEVICE MANUFACTURING INDUSTRY IN CHINA
Top 5 GPS personal navigation device Manufacturers in China in 2012
Market share Revenue in to the total Headquarter 2012 revenue in Factory Rank Name of company location (US$ million) 2012 (%) locations Product coverage
1 Fujitsu Ten Electronics (Wuxi) Ltd. (富 Tianjin 302 6.5% Jiangsu, Wuxi GPS devices and 士通天電子(無錫)有限公司) audio equipment for automotive
2 LG Electronics (Kunshan) Computer Beijing 261 5.6% Zhejiang, GPS devices, rear- Co., Ltd. Kunshan view mirror and audio (LG電子(昆山)電腦有限公司) equipment for automotive
3 Daren (Shanghai) Computer Co., Ltd. Tianwan 247 5.3% Shanghai Motherboards, GPS (達人(上海)電腦有限公司) devices, notebook computers, information appliances, and mobile phones
4 Kenwood Electrontics Trading Shanghai 128 2.8% Shanghai Audio and image (Shanghai) Co., Ltd. equipment, GPS (建伍電子貿易(上海)有限公司) devices, and communications equipment
5 Inventec Appliances (Pudong) Taiwan 119 2.6% Shanghai Computers, electronic Corporation (英華(浦東)集團) components, GPS devices and communications and network equipment
Others 3,589 77.2%
Total 4,646 100.0%
Source: ~Ipsos Report
– 57 – THIS APPLICATION PROOF IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Application Proof must be read in conjunction with the section headed ‘‘Warning’’ on the cover of THIS Application Proof. This document supersedes the Application Proof dated 15 April 2014. INDUSTRY OVERVIEW
DEMAND OVERVIEW AND ANALYSIS OF MOBILE INTERNET DEVICES IN THE MARKET
Market Overview of mobile internet devices in Europe
Overall Market
Apple and Samsung are the two key brands and brand recognition in mobile internet device market in Europe. There are some European mobile internet devices brands, such as Archos, Lexibook, Intel, Yarvik, Datawin and Ergo.
In 2012, the mobile internet devices with Android operating systems account for more than 60% of Western European mobile internet device market. Compared to Android mobile internet devices, Apple iOS mobile internet devices only account for approximately 35% of Western European tablet market.
One trend shows that more European consumers prefer mobile internet devices with multiple functions (include Wi-Fi, GPS navigator, SIM card slot for phone calls, blue-tooth, high definition camera, high resolution screen, be able to process office documents, supporting all kind of pictures files, audio files and 3D games). In addition, the consumers also like the mobile internet devices with basic functions (include WIFI, blue tooth, be able to process basic office documents, support basic type of picture files, basic type of audio files and built in flash game).
Market Overview of Mobile Internet Devices in Taiwan
The key market players of mobile internet devices in Taiwan are Asus, Acer and HTC. Asus, Acer and HTC are all Taiwanese brands. In 2012, Asus has the highest market share in mobile internet devices market and it accounts for more than 30% of mobile internet devices market share.
Total Import Value of Mobile Internet Devices
Due to the global financial crisis in 2008, the import value of mobile internet devices for Europe remained flat and increased by only approximately US$19.0 million. However, in 2010, with the world economy recovering from the recession, the total import value of mobile internet devices for Europe increased by approximately 5.7 times from 2009 to 2010. The growth rate of the total import value of mobile internet devices for Europe was approximately 5.0 times from 2010 to 2011 and approximately 1.6 times from 2011 to 2012.
In Taiwan, the growth rate of the total import value of mobile internet devices was approximately 3.3 times from 2009 to 2010, approximately 9.3 times from 2010 to 2011, and approximately 90.1% from 2011 to 2012.
The demands of mobile internet devices are increasing every year in Europe since 2008. The mobile internet device market in Western Europe (such as the UK, France, Germany, etc.) is as mature as North American mobile internet device market. It can be said that Western Europe is the key market which has driven much of the market growth of mobile internet devices in the past decades. The retail sales value of mobile internet devices for Europe has grown from approximately US$128.2 million in 2009 to approximately US$13,266.8 million 2012. It is projected that the value will grow further to US$24.2 billion in 2017.
In Taiwan, the demands of mobile internet devices are also growing every year since 2008. In Taiwan, the penetration rate of mobile internet devices usage was still lower than 25% in 2012. It means that the total potential sales value of mobile internet devices will continue increasing in the next few years.
– 58 – THIS APPLICATION PROOF IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Application Proof must be read in conjunction with the section headed ‘‘Warning’’ on the cover of THIS Application Proof. This document supersedes the Application Proof dated 15 April 2014. INDUSTRY OVERVIEW
OVERVIEW OF THE MOBILE INTERNET DEVICE MANUFACTURING INDUSTRY IN CHINA
Overall Supply and Production
Taiwanese electronics manufacturers dominated approximately 90% mobile internet devices manufacturing market in the world. They all have setup manufacturing facilities in China taking advantage of local production cost and abundant labor force. So, China produced approximately 80% of mobile internet devices in the world.
Key international tablet brands that have their production outsourced to China include Apple, Samsung, Amazon, Lenovo, Microsoft and Google, with Apple, Samsung and Amazon being the first-tier international tablet vendors selling their products at approximately US$500 to US$600 per unit. Chinese brands include Teclast (台電), Newsmy (紐曼), Ramos (藍魔), FNF (五元素), Onda (昂達), Vido (原 道), Cube (酷比魔方), Eben (E人E本), HASEE (神舟), with Eben (E人E本), Malata (萬利達)beingthe first-tier Chinese vendors, selling their products at approximately US$200 to US$400 per unit; and Whitebox tablets, which are brandless tablets, cater to the low-end market at a price approximately US$75 to US$150.
Distribution
Mobile internet device brand owners have to gather software and hardware before the OEM production. Hardware suppliers include IC suppliers and screen panel suppliers. Software suppliers include operation system suppliers.
The finished products include, but are not limited to, tablets and ebooks. These devices will be sold in both domestic and international markets.
In both domestic and international market, mobile internet device brand owners deal with distributors, which put the devices in different retail channels, such as online stores (Amazon.com), electronics stores (Fortress and Wal-mart) and computer markets (Huaqiangbei and SEG Electronics Market), where consumers make their purchases.
Branded mobile internet devices are mainly exported to the North American, European and Asia pacific markets. Lesser-known brands are mainly exported to the Middle-eastern, Southeast Asian and South American markets.
– 59 – THIS APPLICATION PROOF IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Application Proof must be read in conjunction with the section headed ‘‘Warning’’ on the cover of THIS Application Proof. This document supersedes the Application Proof dated 15 April 2014. INDUSTRY OVERVIEW
Total Production Value of Mobile Internet Devices in China
Estimated Total Production Value of Mobile Internet Devices in China from 2008 to 2017
US$’ million 60,000 50,342.7 50,000 44,682.646,384.5 39,390.0 40,000 35,226.9
30,000 24,442.4
20,000 12,911.9
10,000 3,980.0 36.5 261.3 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 forecast Production value of mobile internet devices in China
Source: ~Ipsos Report
The total production value of mobile internet devices in China increased from approximately US$261.3 million in 2009 to approximately US$3,980.0 million in 2010, up by approximately 1,423.2%. It continued to grow significantly and reached approximately US$24,442.4 million in 2012. The enormous growth in the total export value of mobile internet devices was primarily due to the following reasons:
. In 2010, the iPad launched and got popular globally. The iPad brought new experience to the consumers due to its innovative design as well as its functions. This drove the global demand for mobile internet devices.
. Witnessed the success of iPad, other brands such as HP, Samsung, Asus etc. entered into the mobile internet device market consecutively in these 2 to 3 years (2011–2013). Taiwanese manufacturers (OEMs and ODMs), who set up their factories in China due to the cheaper labor force, became the leading players in the mobile internet device manufacturing industry. They produced mobile internet devices for different brands such as Apple, HP, Microsoft, Amazon etc.
For the five largest mobile internet device manufacturers in China, their revenue from mobile internet device manufacturing also boosted by approximately 98.9% on average between 2011 and 2012.
It is expected that the total production value of mobile internet devices in China will experience a stable growth from approximately US$35,226.9 million in 2013 to approximately US$50,342.7 million in 2017.
Consumers’ demand for mobile internet devices will continue to grow in the next 5 years because mobile internet devices can be widely used in different industries such as business, education, media, etc. It is because more different types of applications have been and will continue be invented for mobile internet devices with different operating systems.
In 2012, there were approximately 70–80% of mobile internet devices produced in China that the mobile internet device manufacturers in China played an important role to global mobile internet device market. It is expected that China will still be the major production base of mobile internet devices in the global market in the next 3 to 5 years.
– 60 – THIS APPLICATION PROOF IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Application Proof must be read in conjunction with the section headed ‘‘Warning’’ on the cover of THIS Application Proof. This document supersedes the Application Proof dated 15 April 2014. INDUSTRY OVERVIEW
Total Number of Mobile Internet Device Manufacturers in China from 2008 to 2012
Number 1,500
1,200 1,100 1,000
900 800
600
250 300 180
0 2008 2009 2010 2011 2012 Number of mobile internet devices manufacturers in China
Source: ~Ipsos Report
The total number of mobile internet device manufacturers in China grew from approximately 180 manufacturers in 2008 to approximately 800 manufacturers in 2012, purely driven by the surging domestic demand for unbranded mobile internet devices. Therefore, inexperienced market entrants benefited from the pre-built device ‘‘packages’’ and it was easier for them to offer mobile internet devices in the market.
Historical Price Trend of Key Raw Materials in China
Historical LCD Panels and Price Trend of ICs in China from 2008 to 2012
US$ 25 22.8
20 19.0 18.7 16.7
15 13.9
10
5 0.9 0.8 0.8 0.8 0.9 0 2008 2009 2010 2011 2012
IC LCD Panels
Source: ~Ipsos Report
The price of LCD panels dropped significantly from US$22.7 per unit in 2008 to US$13.9 per unit in 2012. The significant price drop of LCD panels was primarily due to the drop in the import price brought approximately by the increasing production capacity, more LCD panel makers and innovative production technology. The significant drop in LCD panel price has not had a noticeable impact on the selling price of mobile internet devices, possibly due to the particular pricing strategy of the mobile internet devices, which is benchmarked against competitors, rather than priced based on raw material costs.
– 61 – THIS APPLICATION PROOF IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Application Proof must be read in conjunction with the section headed ‘‘Warning’’ on the cover of THIS Application Proof. This document supersedes the Application Proof dated 15 April 2014. INDUSTRY OVERVIEW
The price of ICs in China dropped slightly at a CAGR of only approximately 0.8% from 2008 to 2012, staying within the price range of US$0.8 per unit to US$0.9 per unit in these 5 years.
The import price of ICs is more stable at an average approximately US$0.8 per unit in these 5 years. ICs is a common component found in most of the electronic goods; the market of which is rather mature and stable, which explains its stable price from 2008 to 2012. The stable price has not had a noticeable impact on the selling price of mobile internet devices, possibly due to the particular pricing strategy of the mobile internet devices, which is benchmarked against competitors, rather than priced based on raw material costs.
COMPETITIVE ANALYSIS OF THE MOBILE INTERNET DEVICE MANUFACTURING INDUSTRY IN CHINA
Top 5 Mobile Internet Devices Manufacturers in China
Top 5 Mobile Internet Device Manufacturers in China in 2012
Market share Revenue in to the total Headquarter 2012 (US$ revenue in Rank Name of company location million) 2012 (%) Factory locations Product coverage
1 Hon Hai Precision Ind. Taiwan 18,330 75.0% Chengdu, Shenzhen, IT, communications, Co., Ltd. Brazil and automation (TWSE stock code: 2317) devices; tablets, connectors, casings, radiators, etc.
2 Quanta Computer Inc. Taiwan 1,800 7.4% Shanghai, Jiangsu, Notebook computers, (TWSE stock code: 2382) Changshu, tablets, devices for Chongqing home entertainment, mobile communication, automotive electronics, etc.
3 Pegatron Corporation Taiwan 1,003 4.1% Taiwan, Jiangsu, Motherboards, (TWSE stock code: 4938) Suzhou, Shanghai, desktop computers, Chongqing, Mexico, notebook computers, Czechia tablets, broadband, wireless systems, game consoles, networking equipment, Set-top boxes, multimedia, LCD TVs, etc.
4 Wistron Corporation Taiwan 380 1.6% Guangdong, Notebook computers, (TWSE stock code: 3231) Zhongshan, desktop computers, Zhejiang, Kunshan, tablets, servers, Jiangsu, Taizhou, storage, LCD TVs, Sichuan, Chengdu, and handheld devices, Chongqing, etc. Malaysia, Mexico, Czechia
5 Compal Electronics Inc. Taiwan 285 1.2% Taiwan, Zhejiang, Notebook computers, (TWSE stock code: 2324) Kunshan, Sichuan, ultrabook computers, Chengdu, tablets, and LCD Chongqing, products, etc. Vietnam, Brazil
Others 2,644 10.7%
Total 24,442 100.0%
Source: ~Ipsos Report
– 62 – THIS APPLICATION PROOF IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Application Proof must be read in conjunction with the section headed ‘‘Warning’’ on the cover of THIS Application Proof. This document supersedes the Application Proof dated 15 April 2014. INDUSTRY OVERVIEW
SOURCES OF INFORMATION
~Ipsos Report
We commissioned ~Ipsos, an Independent Third Party, to conduct an industry analysis of and produce the ‘‘ ’’ ~Ipsos Report. The INDUSTRY OVERVIEW section contains information extracted from the ~Ipsos Report for the purpose of this prospectus at a fee of HK$378,000.
~Ipsos, an Independent Third Party, is the subsidiary of ~Ipsos S.A., a global market research company headquartered in Paris, France and was listed on the Paris ~Stock Exchange. In October 2011, ~Ipsos S.A. has acquired Synovate Limited, a global market research firm, from Aegis Group plc. After the combination, ~Ipsos became the third largest research company in the world which employs approximately 16,000 full time personnel worldwide across 85 countries. ~Ipsos conducts research on market profiles, market size, share and segmentation analyses, distribution and value analyses, competitor tracking and corporate intelligence.
Research Methodology
The information contained in the ~Ipsos Report was undertaken through both primary and secondary research obtained from various sources. Primary research involved interviews with key stakeholders and industry experts including associations and experts, key competitors, brand owners, exporters, distributors and retailers of consumer electronic devices. Secondary research involved desk research conducted by ~Ipsos including, but not limited to, specialised industry literature, government/regulatory sources, online data sources, third-party reports and surveys, industry reports and analyst reports, industry associations and the database maintained by ~Ipsos. Intelligence gathered has been analysed, ’ assessed and validated using ~Ipsos in-house analysis models and techniques. ~Ipsos Report may be affected by the accuracy of these assumptions and the choice of these parameters.
Reliability of information and future forecast in the ~Ipsos Report
We are of the view that sources of information used in this section, which are extracted from the ~Ipsos
Report, are reliable and not misleading as ~Ipsos is an independent reputable professional research agency with extensive experience in their profession.
Some of the analytical conclusions extracted from the ~Ipsos report cover future forecasts. The ~Sponsor and we consider such information to be reliable, accurate and not misleading after taking into account the following factors:
(a) ~Ipsos is an independent reputable research agency with extensive experience in their profession; and
(b) although the ~Ipsos Report includes forecasts of the development of the consumer electronic devices industry, they do not contain performance forecast of our Company.
Our Directors confirm that, to the best of their knowledge, after taking reasonable care, there is no material adverse change in the market information since the date of the ~Ipsos Report which may qualify, contradict or have an impact on the information in this section.
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