China Watch: Top Business News From the World's Second Largest Economy
Research firm IDC published its first-quarter China smartphone report
this week, which revealed that smartphone shipments grew 117% year-on-year to 78 million in Q1 2013.
Samsung Electronics Co., Ltd.
(OTCMKTS:SSNLF) was the industry’s top dog, with a market share of 19%.
“In China’s smartphone market, Samsung has switched its marketing focus from competing with Apple Inc.
(NASDAQ:AAPL) for high-end market to maintaining its high-end market share, and is starting to strive for market for products under USD 200, which has so far been dominated by domestic brands,” said Antonio Wang, Associate Director of Computing Systems Research Group of IDC China
According to IDC, Apple placed fifth in the quarter with a 9% share. Sales of the iPhone 4 soared 211% year-on-year, highlighting the success of its strategy of discounting older models in emerging markets. The strong iPhone 4 sales also bodes well for an lower-end iPhone should Apple choose to release that.
“Apple leverages the incentive policies for channels to inspire the shipments of iPhone 4, further expanding its user base,” noted Wang.
By the end of 2013, IDC predicted that the market share of smartphones with screens 5-inch and larger will grow from the current 7.5% to over 20% due to the halo effect from popular large-screen devices like Samsung’s Galaxy S and Note.
Lenovo Sets Its Eyes on Global Smartphone Market
With PC sales declining consistently, Lenovo Group Limited
(OTCMKTS:LNVGY), which derives 80% of its revenue from PCs, is turning toward the smartphone market in search of a new growth avenue.
"We must make another successful transition," Lenovo CEO Yang Yuanqing
told the Wall Street Journal
. "Smartphones are our new opportunity."
Lenovo is already the second largest smartphone company in China, trailing only Samsung, but the company wants to go global. Its lower-end smartphones can currently be found in a few emerging markets, but Lenovo also hopes to sell smartphones in the US within the next year.
The company’s smartphone division in China has turned a profit thanks to the strength of its in-house production capabilities, but finding success abroad against titans like Samsung, Apple, and Nokia Corporation
(NYSE:NOK) will require a sharp marketing strategy to differentiate the brand from its competitors.
"We know the importance of marketing, and we will strengthen that,” said Yang.
Rosneft Inks New Oil Deal With China
Russia’s Rosneft Oil Co
(OTCMKTS:RNFTF) will double oil supplies to China after signing a $270 billion deal this Friday, reported Reuters
Starting in 2015, Rosneft will supply China with 300,000 barrels of oil daily over 25 years, as the world’s biggest oil producer switches its focus from Europe to China. That figure is on top the 300,000 bpd that Rosneft currently ships to China.
According to Russian President Vladimir Putin, Rosneft will get $70 billion upfront, which analysts say is welcome news for the indebted company.
"If confirmed, this would be a transformational event for the company's balance sheet: Rosneft could even potentially be able to show a net cash position, though working capital would be negative. The prepayment could minimize financing risks for the leveraged state-controlled oil company," wrote JPMorgan analysts in a note.
Tencent Purchases Stake in Fab.com
E-commerce website Fab.com announced this week that it had raised $150 million from several investors in its latest round of funding. One of the investors included China’s Tencent Holdings Ltd
(HKG:0700), which said that it made a “minority investment” in Fab.com but did not disclose the value of the investment.
Tencent could come in to help Fab break into the Chinese e-commerce market, which is projected to notch 2 trillion yuan ($326 billion) in sales by the end of 2013.
"Fab is one of the leading online design retailers in the world. Tencent believes Fab has the potential to further develop under the wave of the global, social, and mobile transformation of the e-commerce industry," Tencent said in an email statement, according to Xinhua
With the latest financing, the New York-based Fab has raised some $310 million to date, and it is valued at $1 billion.
No positions in stocks mentioned.
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