Chinese Government Stimulus Will Drive a 20 Percent Increase in Home Electronics Demand
Semiconductor vendors should increase their efforts to work with Chinese manufacturers to benefit from the rise in domestic demand that is being driven by the Chinese government’s subsidy program for home appliances, according to Gartner, Inc.
The Chinese central government has taken significant steps to counteract export declines arising from the worldwide economic slowdown. The trial subsidy program, literally translated as Electronics Go to Farmers (EGF), was extended from three provinces in late 2007 to all of China in February 2009, and product categories that have now been certified and approved include TVs, refrigerator/freezers, washing machines, mobile phones, PCs, heaters, induction cookers and microwave ovens. Gartner estimates that the 13 percent subsidy that farmers receive for electronic products purchases will likely increase sales of household electronics by 20 percent.
“The 20 percent increase in sales is likely to make up for the reduction in exports to overseas markets hit by the economic downturn,” said Oliver Xu, principal research analyst at Gartner. “Sales figures show that farmers are using the subsidy to select higher-specification and higher-cost products, and with the average income of Chinese farmers on the rise, this trend looks set to continue.”
The program only provides the subsidies to approved product models from certified providers via a public bidding procedure. However, after several rounds of bidding, most of the providers can be found in the certified list. Although there are no explicit requirements about production locations, the selected providers are largely local ones.
Overseas providers have not addressed the rural areas as well as local providers in terms of price range and service coverage, so most lose out in the bidding procedure. However, recent announcements from the government promised to lift the highest price limits and include a wider range of product models according to the specific demands in different areas, and this trend will offer more opportunities to international brands as some are in a better position to offer midrange products than local providers.
Gartner advises electronics providers, wishing to take advantage of the increase in product sales that the stimulus has generated, to develop specific features in products for farmers, such as coping with the wide range of power supply voltages, better moisture protection, and rodent-proofing measures. In addition, international providers should try hard to lower costs and provide good after-sales service to farmers using their own or third-party services.
Additional information is available in the Gartner report “Chinese Government Stimulus Will Drive a 20% Increase in Home Electronics Demand." The report is available on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=1050213&subref=simplesearch.
Gartner, Inc. (NYSE: IT) is the world's leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior information technology (IT) leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to supply chain professionals, digital marketing professionals and technology investors, Gartner is the valuable partner to clients in more than 10,000 distinct enterprises. Gartner works with clients to research, analyze and interpret the business of IT within the context of their individual roles. Gartner is headquartered in Stamford, Connecticut, U.S.A., and has almost 9,000 associates, including 1,900 research analysts and consultants, operating in more than 90 countries. For more information, visit www.gartner.com.
Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an "as-is" basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.