Doing Business in China - IT

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Doing Business in China- IT Electronics

• Hong Ye
• Steve Gu
• Lili Fan

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Topics today

• IT Industry Overview
• - Case Study UTStarcom
• Electronics Overview
• - Case study TCL
• Relationship Development in China
• - Case study TI

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China High-Tech Industry

• Revenue US227 billion (2003), including
  Telecom/Computers, Electronics/Semiconductor
• Compared with 2002, 34 growth (Source MII
  Annual Statistics)

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Industry Structure
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IT Sector

• Hardware US 28.8 billion, 13 Growth
• Software US 4.83 billion, 15.8 Growth
• IT Service US 65.78 million, 26.7 Growth

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Market Players

• Foreign players IBM, HP, Dell, Microsoft etc.
• Local players Legend (Leveno), UFSoft Kingdee
  ( Finance Software)

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Telecom Sector

• Revenue, US(292.7 Billion) vs China (26.13
  Billion)
• 397 Million subscribers, including fixed-line and
  mobile, largest in the world (As of September
  2003)
• Mobile Service has surpassed fixed line service
  and account for 52 of revenue.

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How the pie is divided

• Telecom equipment
• - Rising local players!
• Telecom Service
• - Domestic deregulation
• - Impact of WTO, opportunity?
• WAR OF STANDARDS

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Case Study UT Starcom

• We know 3G, but PHS?
• Why a no future technology grows at 83.6 and
  generates US169.7 Million a year?
• What is the lesson learned here?
• - Understand your customer needs
• Takeaway Knowledge of China Market!

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Consumer Electronics Sector

• Color TV HDTV
• TV sets 330 million
• Cable TV subscribers 90 million
• 2003 sales 71.5 million sets
• Rear Projection TV
• 2003 sales about 330,000 sets
• HDTV is the future Digital broadcast for 2008
  Beijing Olympics

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EC Cotd.

• DVD/VCD players
• 2003 sales 34.67 million sets
• Loyalty fee issue
• Shift to DVD recorders
• Major players TCL, Changhong, Haier and Konka
• CE market dominated by locals

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Case Study TCL

• TCL acquired RCA
• - 18 Million TV sets annual sales
• - Global No.1 TV maker, 10 of global market
• - North America RCA Europe Thomson Asia
  - TCL
• Successful story of TCL
• Stated-owned to privatization
• CAGR 47, US3.75 billion
• Diversified business model Household, IT,
  Communications and Electrical
• Takeaway Globalization is Two-Way!

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Semiconductor Sector

• A large IC consumption market
• 2003 -- US22 billion 2007 -- 54 b

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Foreign Companies Dominates!

• Major IC suppliers
• Intel 80 of microprocessor
• Toshiba No.1 in digital logic ICs
• ST leading in analog ICs
• TI No. 1 in DSP and analog
• Motorola leading in MCUs
• Foundry Taiwan Fabs shift to Mainland

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Case Study TI

• Why is TI so successful in China?
• Zero distance communication with designers
• Develop future customers
• University Program
• 10,000 college students per year
• 47 universities and 50 DSP Labs
• Lock-in strategy

Takeaway New Way of Relationship Development in
China!
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Key Takeaway

• Knowledge of China Market
• Two-way Globalization
• New way of Relationship Development