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China/Hong Kong China Technology China Technology Weekly 31 May 2013 China Technology sector/company news for the week 25-31 May 2013 Top news. The one-year subsidy program for 360buy mall ranking (smartphones/tablets/PCs/TVs) energy-efficient home appliances expired on 31 May. Change Change According to the China Market Monitor (CMM), Top-8 smartphone models in rank Top-8 tablet models in rank energy-saving TVs surged from a 32.1% share of the 1. Nokia 1010 – 1. Apple iPad mini – PRC TV market in June 2012 when the subsidy 2. Apple iPhone 4 – 2. Apple iPad 4 (Wifi) – program was introduced, to an 88.5% market share 3. Samsung Galaxy Note II +1 3. Apple iPad 2 (Wifi) – by April 2013. CMM reported that within the one-year 4. Apple iPhone 5 -1 4. Huawei MediaPad (16g) +2 period, energy-saving appliances had generated 5. Samsung S75621 – 5. Samsung Tab 2 (10.1”) -1 RMB242.3b in sales revenue. 6. Xiaomi 2 – 6. Witcool X5 +2 7. Nokia 1000 -1 7. Samsung Tab 2 (7”) -2 Other highlights 8. Huawei G525 – 8. Galaxy NOTE N5100 – German Chancellor Angela Merkel said that Germany firmly opposes a trade probe initiated Change Change by the EU into imports of Chinese mobile Top-8 notebook models in rank Top-8 TV models in rank telecommunications products. 1. Sony SVE1512S7C – 1. Konka LED 32E320N – 2. Lenovo ThinkPad E430C – 2. Changhong LED32B2080 +2 Due to the rapid adoption of smartphone and 3. Acer E1-471G – 3. Sony KLV-32R426A +4 tablets, IDC expects global PC shipments to be 4. Lenovo ThinkPad E530C – 4. Changhong LED32538 – down 7.8% YoY in 2013F, lower than the previous 5. Lenovo ThinkPad E430 – 5. Hisense LED32K200 -2 estimate (down 1.3%). Global PC shipments in 6. Lenovo ThinkPad X230i – 6. Hisense LED50K320DX – 2014F are expected to decline 1.2% YoY. 7. Lenovo Y400M – 7. TCL L43F3310 – 8. Dell Ins14RR-3316B – 8. TCL L32E11 -1 IDC forecasts the size of the PRC “big data” market will expand from US$77.6m in 2011 to Top-10 free Android mobile Change US$617m in 2016F, representing a CAGR of apps download in rank 51.4%. 1. MM Mall – The Ministry of Commerce announced that total 2. Taobao – e-commerce transaction volume in 2012 3. Meituan.com – exceeded RMB8,000b in 2012, up 31.7% YoY. 4. qunar – PRC online retail transaction volume exceeded 5. Baidu news – RMB1,300b in 2012, up 67.5% YoY. 6. Huanle Majiang – 7. Sohu video – CCBIS observations and comments 8. Da Zhong Dian Ping – In our view, the expiry of the energy saving Source: 360buy.com, Mobile Market subsidy will only have a limited impact on leading PRC TV makers including Skyworth (751 HK, Outperform) and TCL Multimedia (1070 HK, Neutral). Upon expiry of the subsidy, we expect both leading TV makers to focus on cutting edge, higher-ASP and higher-margin products to enhance market share. Candy Tai We believe big data will be a key growth driver (852) 2844 3606 [email protected] for the China IT market and mobile internet. Tencent (700 HK, Not Rated) and Qihoo 360 Ronnie Ho (QIHU US, Not Rated) are enjoying first-mover (852) 2533 2486 advantages. [email protected] Please read the analyst certification and other important disclosures on last page China Technology Sector 31 May 2013 Sector news Communications sector Mobile will finish 1,200 units of 4G base station in Beijing by 2013F TD-FI devices will be installed in Beijing buses such that citizens with WIFI-equipped smart devices will be able to make use of the 4G network in the buses. http://tech.sina.com.cn/t/3g/2013-05-27/10388381738.shtml Samsung is leading the PRC smartphone market in 1Q13 (Strategy Analytics) Total 1Q13 smartphone shipments in the PRC reached 67.4m units, comprising a 32% share of global smartphone shipments. Samsung’s smartphone is leading the PRC market with shipments of 12.5m units, followed by 8.1m units from Huawei. Lenovo ranked third with 7.9m smartphone unit shipments, while Coolpad/ZTE/Apple shipped 7m/6.4m/6.1m smartphones in 1Q13. http://tech.sina.com.cn/t/2013-05-27/17568382555.shtml Germany opposes European Union (EU) probe into Chinese telecom products German Chancellor Angela Merkel said that Germany firmly opposes the trade probe initiated by the EU into imports of Chinese mobile telecommunication products. Merkel said Germany is ready to take firm action against the planned probe. http://tech.hexun.com/2013-05-28/154577717.html ZTE becomes the fastest-growing smartphone vendor in US According to Strategy Analytics, ZTE smartphone sales in the US surged 85.7% YoY in 1Q13. ZTE's growth in the US can be put down to the company’s increasing share of the no-contract phone market, achieved by leveraging ZTE’s close relationships with major carriers such as AT&T, Boost Mobile/Sprint, T-Mobile, MetroPCS, Cricket Wireless and Tracfone. In 1Q13, ZTE was the third-largest smartphone manufacturer in the US no-contract market with 17% market share. http://tech.hexun.com/2013-05-27/154559823.html 2 China Technology Sector 31 May 2013 China Mobile targets overseas growth as it prepares to launch a mobile Skype competitor In June, China Mobile is going to launch an in-house mobile VoIP and messaging app, called Jego. Jego targets international users with a need to keep in touch with friends, family and others in China. China Mobile International Business Development Manager, Derick Li, says the app is first and foremost a competitor to Skype. Jego provides free in-app text messaging along with number of other standard features, such as push-to-talk voice messages, photo sharing, video calling and multimedia sharing. Its core functionality is the ability to make voice calls to landlines and mobile phones. http://tech.sina.com.cn/t/2013-05-31/07278397866.shtml After only six years, Jingdong mall handset revenue was up 300 fold Handset sales revenue of Jingdong mall surged from RMB30m in 2007 to RMB10b in 2012. Jingdong expects the handset sales revenue to double in 2013F. http://tech.hexun.com/2013-05-31/154699108.html PC & tablet sector IDC lowered its global PC shipment target for 2013F Due to the rapid adoption of smartphones and tablets, IDC expects global PC shipments to be down 7.8% YoY in 2013, lower than previous estimate for a 1.3% decline. IDC expects global PC shipments in 2014F to be down 1.2% YoY. PC shipments in 2017F will be 333m units, down from 363m in 2011. http://tech.hexun.com/2013-05-29/154622291.html Foxconn, Mozilla Expected to Introduce Firefox Tablet on 3 June According to local news outlets, Foxconn is planning to announce a partnership with Mozilla on 3 June. Media sources have said the two companies will introduce a tablet that runs on the Firefox mobile operating system. http://digital.sina.com.hk/news/-7-1367807/1.html 3 China Technology Sector 31 May 2013 Technology sector Cisco will acquire energy IT management company JouleX for US$107m Cisco announced that it will acquire JouleX, the privately-held enterprise energy IT management company based in Atlanta, for US$107m. JouleX lets customers monitor energy use of all devices attached to a network. Reports on usage can stream in from a data center, rack, slot or business-unit level, among others. Customers can keep an eye on carbon emissions, set alerts based on energy use and enforce policies in order to lower costs. Cisco already has Energy Wise energy-management protocol for tracking energy use inside networks. JouleX will complement Energy Wise product, thus allowing IT managers to manage energy usage across the enterprise network without requiring device-side agents or special configurations. The acquisition is expected to close in the 4QFY13. http://tech.hexun.com/2013-05-30/154675974.html 1Q13 global server market revenue was down 7.7% YoY to US$10.9b (IDC) Per IDC, 1Q13 revenue from global server market was down 7.7% YoY to US$109b, making the fifth time in the previous six quarters that the server market has experienced a YoY decline. IDC noted every geographic region except Asia/Pacific experienced revenue contraction in the quarter. Server unit shipments decreased 3.9% YoY in 1Q13 to US$1.9m units. Volume systems logged a 3.1% revenue decline, midrange and high-end systems revenue was down 18.3% and 17.1% respectively. Hewlett-Packard held the top position in the global server market with a 26.9% revenue share for the quarter. IBM held the number two spot with 25.5% share. Dell maintained the third position with 18.5% share. http://tech.hexun.com/2013-05-30/154688096.html Kingsoft announced 1Q13 net profit of RMB211m, up 134% YoY 1Q13 revenue was up 56% YoY to RMB457m. Revenue from online game was up 40% YoY to RMB267m, contributing to 58% of company’s total revenue. The monthly average paying accounts was up 33% YoY to 1.77m. For the Internet security products, number of PC customers reached record high of 155m, while mobile customers reached 54m. http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0524/LTN2013052432 4.pdf 4 China Technology Sector 31 May 2013 Internet sector Yahoo may acquire two mobile and telecommunications companies Having already acquired Hulu and Tumblr, Yahoo is now planning to acquire two other mobile and telecommunications companies, with a total consideration for the two ranging from US$150m to US$200m. http://tech.hexun.com/2013-05-28/154581096.html The size of the PRC big data market will grow at CAGR of 51.4% for the next five years (IDC) IDC forecasts the size of the PRC big data market will expand from US$77.6m in 2011 to US$617.0m in 2016F, representing a CAGR of 51.4% http://tech.sina.com.cn/t/2013-05-29/13498391029.shtml PRC e-commerce transaction volume exceeded RMB8,000b in 2012 The Ministry of Commerce announced that total e-commerce transaction volume in 2012 exceeded RMB8,000b in 2012, up 31.7% YoY.