/ FT.com Comment & analysis / Columnists - A show of strength in technologySkip to main content, accesskey 's' Homepage, accesskey '1' Financial Times FT.comCOMMENT & ANALYSIS ColumnistsCloseA show of strength in technology By Paul Taylor Published: July 13 2006 18:12 | Last updated: July 13 2006 18:12 Visitors to Chinas own version of the technophiles favourite shows would, like me, be struck by the contrast with such events in the west. Chinas International Sino-CES show last week lacked the sheer scale, glitz and glamour of CeBit in Hanover or the Consumer Electronics Show in Las Vegas. But while it suffers from the absence of the pizzazz of its western counterparts, Sino-CES does spotlight the countrys determination to become a global information technology powerhouse. An estimated 70,000 visitors, mostly buyers, attended the trade show and conference, which attracted more than 390 exhibitors, including 82 from overseas. While browsing among the booths it becomes apparent that Chinas swelling ranks of domestic information technology manufacturers are eyeing the worlds markets with growing interest, not least because of their perception that an international presence will drive innovation and help hone their marketing skills, which still have a long way to go. Many of the stands featured logos that would be too cutesy or obscure for western markets and occasionally products were even packaged in boxes adorned with images of underdressed (western) women. The information brochures (in Chinese) lack the weight and polish of documents handed out at events such CeBit. Now in its fourth year, SinoCES, held in Qingdou, a coastal city south-east of Beijing, brings together a potent mix of international exhibitors, such as Intel, Sony and Taiwans Benq, and emerging domestic giants such as Lenovo, the Chinese personal computer maker that acquired IBMs ThinkPad PC business 18 months ago, and Haier and Hisense, both leading domestic Chinese consumer electronics and white-goods appliance makers. Taking their cue from the Japanese, Taiwanese and Korean companies that have gone before them, domestic Chinese electronics companies have set their sights on building globally recognised brands supported by product innovation, research and development programmes and improved customer support. Most admit privately that competition in the domestic market lacks the sharpness of markets such as the US, where the retail sector is far more developed and margins are much slimmer. The US is the most competitive market in the world, nods one Chinese manufacturer, from her booth. Chinese consumer electronic equipment makers marketing skills also suffer from lack of direct contact with users of their products. Most companies including a big chunk of the exhibitors at SinoCES began operations as original equipment makers (OEMs), producing products under contract for big-name US and Japanese companies that badge them as their own. But a growing number of Chinese OEMs have begun to sell equipment under their own brand names. One is Hong Kong-based Top Victory Electronics (TPV), one of the largest liquid-crystal display television makers in China, which has manufacturing operations in Fujian and Beijing. TPV, which had television set sales last year of more than $5bn and has about a 30 per cent share of the fast-growing Chinese LCD television market, has been a big OEM supplier to companies such as Dell, Sony and Sharp. Now TPV has begun to promote its own brands, which include AOC and Envision, in overseas markets such as the US. Other Chinese companies have jump-started their global branding initiatives by forming joint ventures with established overseas vendors. For example, Hong Kong-based TCL became the worlds biggest television maker after forming a joint
venture with Thomson of France to build television sets and DVD players. TCL-Thomson sells products under the brand of TCL in Asia and other emerging markets, while using the Thomson and RCA brands in the European and north American markets. More recently, Ningbo Bird, Chinas biggest mobile phone maker, signed a joint venture agreement with Sagem Communication, the French telecommunications equipment group. Ningbo Bird, another big exhibitor at SinoCES, is hoping to quadruple its output following the deal. Other communications equipment makers, including Huawei and ZTE, have also begun to build their brands overseas, particularly in Europe. But, as yet, China has no counterpart to Koreas Samsung Japans or NTT. Some domestic Chinese IT companies such as Lenovo, which vaulted into third place in the global PC market when it completed its $1.75bn purchase of IBMs ThinkPad desktop and notebook PC business, are well on their way to establishing global brands. A study, Top 10 Executive Brands in China, published earlier this month by Chief Executive China magazine listed Lenovo alongside companies such as Finlands Nokia, Sony and Canon of Japan among the top 10 local and overseas brands. Other companies such as Hisense, one of the leading Chinese television makers, have begun to invest heavily in overseas manufacturing and distribution operations. Hisense has established more than 20 subsidiaries, including television manufacturing operations in Hungary and South Africa, 60 sales companies and more than 1,000 service operations. We export to more than 39 countries, says Yu Shumin, president, speaking outside the conference. However, she complains, her company is hampered by the anti-dumping policies adopt-ed by the US in particular: We are trapped between US retailers who demand the lowest prices and anti-dumping policies that force us to increase our prices. Haier, Chinas leading domestic appliance and television manufacturer, already ranks as the fourth largest white-goods producer in the world and among the top 100 international brands. In spite of abandoning a $1.3bn bid for Maytag of the US a year ago, its global presence has been boosted by substantial investments in overseas manufacturing and marketing operations, and expanded R&D spending, including contracts with several US universities. Marketing experts visiting the show say many Chinese companies would need to adjust their branding for international markets. They pick out Haiers corporate logo, featuring two swimsuit-clad children, as cutesy and inappropriate for western markets. They suggest that the packaging of many consumer electronics products lacks sophistication and is unlikely to be acceptable to Wal-Mart. Yang Mian Mian, Haiers president, acknowledges that the company faces challenges building a global brand: We are not as well informed about the US market, she admits, and asks for advice about marketing overseas. More critically, one US consular official attending SinoCES notes that Chinese companies are reluctant to spend money on services including public relations and marketing. They do not really value services, he says, adding that this could stymie Chinese consumer electronics companies as they attempt to build global brands. The land of opportunity As Chinese consumers purchasing power grows, so too does the opportunity for both domestic and international consumer electr...