PC giants target China

24 September 2009

BEIJING: Some of the world's biggest PC manufacturers, including Hewlett Packard and Lenovo, are aiming to increase their activity in rural China, and thus tap into a sizeable potential market.

According to the Chinese government, the average income in the countryside is just $700 (€474; £426) a year, but the Communist authorities are seeking to drive up consumption levels among this demographic.

More specifically, it has established an initiative, worth $586 billion, which aims to achieve this goal by offering a 13% reimbursement to shoppers who buy certain goods.

The Ministry of Commerce reported that a total of 414,000 PCs were sold under this scheme in August, with considerable room for further growth.

In-keeping with this development, several major PC makers are heightening their presence in these regions of the world's most populous nation.

Hewlett-Packard, for example, has a series of buses, fitted out with television sets, which it sends to less developed areas as a means of advertising its products.

Similarly, vans containing HP goods regularly drive to villages to sell its various offerings, and the company also sponsors shows and film screenings in small cities, where it demonstrates its products.

The American firm's share of the PC market in China reached 14% during the first six months of 2009, compared with just 5% in 2005.

In an effort to further improve its performance, it has now built up a store network of some 7,000 outlets nationwide.

Lenovo has also developed a range of low-price PCs, which are seen as ideal for consumers in less populous cities and in the countryside.

It is also opening some 700 new retail centres, and has been promoting its PCs as a wedding gift, with taglines such as "Buy a Lenovo PC, Be a Happy Bride."

Li Zhong, director of the company's consumer business in Beijing and Hebei, said these items were likely to appeal as wedding presents, as generosity is seen as paramount in China.
 "They like to give desktop PCs because the boxes are large. They deliver the computers to brides' families on trucks, which everyone can see. In these cases the bigger the box, the better," Li said.

Figures from the Ministry of Commerce suggest that 40% of computers bought via the government's subsidisation programme last month were made by Lenovo, with HP on just 1%.

David Wolf, ceo of Wolf Group Asia, the consultancy, said the Chinese countryside is "probably still the world's most promising market".

This is because it is home to large numbers of people, "who've never owned a PC before, who would like to own a PC and who have that capability."

Dell currently has an estimated 8% share of the total Chinese market, with Lenovo on 28%, and Founder on 10%.

Data sourced from Wall Street Journal; additional content by WARC staff