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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 169

China Business Intelligence No. 169

Samsung Economic Research Institute Beijing Office

Aug. 12, 2010

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Highlights:

I. Industry

As a part of a nationwide project, China has speeded up efforts to build a smart grid. Modernized electricity networks that support communication information platforms and enable "smart control" will be built in stages. Building FTTH (Fiber to the home) will play an important role in building smart grids. As FTTH is built, the functions of electricity grids will be upgraded to smart grids. In addition, building FTTH will integrate network resources, thereby facilitating the three-network convergence. As of now, in China, the structure of networks (fixed-line TV networks and computer networks) and resources exist independently. Thus, the construction of overlapping networks is a serious waste of resources. Building FTTH will realize joint construction and sharing of networks and address the issues of poor infrastructure faced by the three-network convergence.

II. Market

The focus of competition in the home electronics industry has shifted from size and price to marketing with the stress on consumer experience. The change was sparked by the financial crisis, which prompted division of consumer classes. Retailers set up display stores for consumer experience and had professional sales people serve consumers. Customers can enjoy classified products into luxury, middle price, and low price goods at such stores where products are arranged based on based on their role in the house, i.e. in the kitchen or living room. The movement in the Chinese home electronics industry seems to largely affect the industry overall. Retailers have bigger say in negotiation with wholesale companies while manufactures are left with fewer opportunities to have a direct contact with consumers.

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