A week in tech, June 9 - 15

China

Internet
• ZCOM, an e-magazine platform developer in China, announced that it has signed an agreement with 23 Chinese publications that will allow it to launch the online versions of these magazines. With over 60 print magazines working on the e-versions of their products using the technology of the company, ZCOM is considered to be one of the largest e-zine platforms in China. It has a combined circulation of more than 3 million subscribers. A top official of the company looks to the launching of these 23 e-magazines to boost their company’s content and popularity.

Mobile/Wireless
• CEC Telecom, the mobile-phone manufacturing subsidiary of electronics firm Qiao Xing Universal, announced its plans to seek a Nasdaq listing. The company said it aims to raise some $150 million by the fourth quarter of this year and that it would use it for research and development of 3G-handsets. CEC disclosed that it has secured $60 million from private equity funds. In November 2005, Qiao Xing said CEC had an unaudited gross profit of $24.6 million for the first nine months of last year, representing a 91 percent rise from a year earlier. Qiao Xing first bought 65 percent of CEC, partly from China Electronics Corp, in March 2002, for Rmb316 million ($39.4 million), followed by 25 per cent in May 2004, and the remaining 10 per cent at the end of last year. CEC competes with other mainland brands such as TCL, Konka and Ningbo Bird for a share of the country's handset market, which saw 22.3 million units sold in the first three months of this year.

• eBay and Tencent Holdings' Paipai.com announced they are entering into an alliance that will enable them to offer a free mobile online auction and purchase service. The partnership is expected to boost the chances of the two mainland companies to obtain a large share of the market from Taobao.com, the present market leader. Paipai.com revealed its plan to keep the auction free of charge for at least three years, with eBay offering a service that will enable users to purchase directly from the portal, but not to bid online. According to iResearch, Taobao.com holds a market share of 57 percent in the first quarter this year, with eBay holding 28 percent and Paipai.com 14 percent. Paipai.com has more than 17 million registered users at present.

Media, Entertainment and Gaming
• China Mobile Group announced that it would indeed take 19.9 percent of mainland broadcaster Phoenix Satellite Television Holdings from Rupert Murdoch's Star Group. The move signals its initial incursion into the media. Even as the two firms would not disclose details of the financial transaction, other sources state that the stake was sold at about HK1.4 billion ($180.3 million). With the transaction, China Mobile eases out Star as the second-largest shareholder of the broadcaster, with Star owning 17.6-percent stake. Under the deal, China Mobile and Phoenix will form an alliance to explore business opportunities in mobile media globally in areas such as the development, production and distribution of wireless services such as music, social networking and other value-added services.

• CCTV, China's State TV station is predicting an audience of 10 billion for its World Cup coverage. With full coverage of all 63 matches, CCTV is expecting an audience that will come up to more than the combined total of 7 billion in the year 2002. Even as the Chinese national team is not playing, having not qualified for this year’s World Cup, CCTV believes that this would not significantly affect the interest of the Chinese audience. The time difference of the coverage is not crucial also to deter the audience from tuning in to the coverage. A poll conducted by Global Market Insite Inc. found that up to 70 percent of the Chinese respondents said they would watch all the World Cup Games, despite the time difference. About two-thirds said they planned to call in sick or take leave from work to watch the matches that would come out in China in the early hours of the morning.

• Sohu.com announced it is setting up a wholly owned entertainment company, Sohu Entertainment and Culture Media Co., Ltd., a move that marks its entry into the entertainment sector. A top official of the Chinese Internet portal said that the new company is not expected initially to bring in profit although they expect to gain experience and learn lessons from the new venture. The registered capital of the new company has not been disclosed although Sohu said it has never made such a large investment on a side business like this entertainment company. In a separate development, “The Time of Our Lives’, the official song of the 2006 FIFA World Cup, was released in China by Sohu.com. Sohu.com Inc. has entered into a cooperation agreement with Sony BMG, the official music copyright owner of the FIFA World Cup 2006 Germany.

Hardware
• Fujitsu said it is looking to expand computer hardware sales in the mainland and Hong Kong up to $500 million by 2008. The company said it can only achieve its global business goals if it succeeds in China and thus looks at the move as a marketing move beyond Japanese multinationals and into Chinese enterprises. Fujitsu defines its strategy as including the establishment of platform solutions centers that would enable customers to test systems in Shanghai. Already, a center of this type has been set up in Shanghai, with one in Hong Kong to be opened soon and another in Beijing slated to be built in March 2007. The company looks to its sales of PCs to post $200 million and its servers and storage systems to reach $300 million by 2008, growths ascribed to steadily growing technology investments of businesses. The company said its sales of the group’s computer hardware products reached $200 million in 2005 in the mainland and Hong Kong. Fujitsu for a long time said it has concentrated on providing for the IT requirements of Japanese multinationals in the mainland and Hong Kong. Gartner said IT spending in the mainland this year would reach $62.3 billion, of which $14 billion would consist of hardware. In Hong Kong, enterprise technology investments are forecast to hit HK$50.5 billion ($6.5 billion) this year, with hardware accounting for HK$8.4 billion ($1 billion), according to Gartner.

Semiconductor
• Semiconductor Manufacturing International Corp (SMIC), China's largest maker of made-to-order microchips, said it would consider buying two government-owned plants so it could expand production capacity. The expansion is a response to the rising global demand for chips. SMIC earlier disclosed its plans to rent the plants in Wuhan and Chengdu from the government, with the intention of acquiring them in three to five years. The Wuhan plant would be built this year and was expected to start production at the end of 2007. The Chengdu plant was expected to start production of 8-inch wafers in the first quarter of next year but no output targets were given. SMIC said it has secured a deal with a group of banks for a new $600-million loan, which will be used to pay off earlier loans and in part to expand its Shanghai wafer plant. The 18-bank consortium includes ABN Amro and Bank of China.

Telecommunications
• An industry source said that China Netcom Group Corp (Hong Kong) and its parent firm will receive $402 million in cash from the sale of its undersea cable carrier Asia Netcom to three private equity funds, which include London-based Ashmore Emerging Markets, Liquid Investment, Spinnaker Global Opportunity Fund, and New York-based Clearwater Capital. A banking source revealed that the negative book value of the service and sales unit would make China Netcom record a one-off gain from the sale. Parent China Network Communications Group Corp, which owns the undersea cable network, is seen as receiving $233 million for its assets. Ashmore, which holds a range of telecommunications assets in Asia, is the biggest fund out of the three with $20 billion assets under management. Matthew Burlage, a banker at investment bank IRG representing the three private equity investors, said the new shareholders would give Asia Netcom three years before they decided whether to inject more capital so it could acquire other companies, or exit via an IPO.

Information Technology
• International Data Corporation (IDC) forecasts China as getting a 24-percent share in the regional technology-services market share by 2010, which will result to the country overtaking Australia as the largest market for professional IT services in the Asia-Pacific, excluding Japan. IDC points to increasing domestic demand and with business leaders in China shifting to IT services as the reason for the rise of China in the field. IDC estimates the technology services market in Asia Pacific, excluding Japan, to post a 10-percent growth annually to hit $48.3 billion in 2010 from $29.5 billion last year. The mainland technology services market last year totaled $5.1 billion, a figure that represents a 17.2 percent regional market share, compared with Australia's IT services market last year worth $9 billion. IDC said the mainland technology services market consists of three sub-markets, namely outsourcing, consulting, system integration, and technical product support.

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