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White-box, China brand electronics captivate emerging markets

Entry-level mobile handsets with China brands are making inroads in developing economies, while shipments of white-box tablet PCs to these regions are surging.

China’s exports of inexpensive yet multifunction unbranded or white-box mobile phones and tablet PCs to emerging countries are rising steadily. Some larger players, meanwhile, are emphasizing OBM in an effort to differentiate themselves.

In combination switches, the selection now includes a number of designs that support controls for automatically turning headlights on and off depending on ambient lighting conditions. These enable front illumination systems to activate instantly at nighttime and under poor weather conditions.

One of the biggest export destinations for white-box mobile handsets is India. According to the Indian Cellular Association, imports are expected to rise 90 percent to 38 million units in 2011. From 5.5 million units in the financial year 2007-2008, shipments jumped four times to 20 million units in 2009-2010.

Apart from India, customs statistics show that in Q1 2011, China’s exports to a number of other emerging markets registered steep increases.

Brazil’s imports of mobile phones jumped by 295 percent y-o-y, Kenya saw a rise of 540 percent while Ukraine’s purchases climbed 400 percent. Overseas shipments to other developing countries including Pakistan, Venezuela, Peru, Turkey, Argentina, Nigeria, Sri Lanka and Zambia rose by 50 to 100 percent in the same period.

In fact, legitimate white-box mobile devices are capturing retail markets in many developing economies. In Vietnam, generic handsets taken as a group account for 40 percent of mobile phone sales, with Nokia in second place with a 39 percent market share. In Indonesia, these comprise 21 percent of total sales, while in India, their share is the third-largest at 12 percent.

Data on end-user sales from market research firm Gartner, Inc. also indicates rising global demand for white-box mobile communication devices.

According to the company, Q2 2011 worldwide end-user sales of ‘other’ mobile devices, which include white-box products, had a market share of 35.8 percent with 153.6 million units sold. This is an increase of 7.7 percentage points in market share from a year ago. In terms of units sold, this category registered an emphatic increase of 48.5 percent from 103.4 million in Q2 2010.

The ‘other’ category has in fact been registering steady growth in the past two years. In Q1 2010, the category had a global market share of 19.20 percent with sales of 60.4 million units, up 34 percent from the same period in 2009. One of the reasons for growth in this category, according to Gartner is “the rise of white-box manufacturers from Asia.”

Mobile phone makers push OBM

While new suppliers continue to enter the line, a few of the larger mobile handset makers in China are differentiating themselves by promoting their own brands in emerging markets.

One of these makers is Hong Kong-based G’five International Ltd. The company made its debut into Gartner’s list of top 10 vendors in Q1 2010 with a 1.4 percent market share of global mobile communication device retail sales.

The company focuses on exports to emerging markets, including South Asia, Southeast Asia, Middle East, Africa and South America. Its own brand is sold in India, Dubai, Latin America, Pakistan, Egypt and Africa.

Wingtech Group is another supplier promoting its in-house brand in developing regions. According to the company, it has experienced better-than-expected sales in India since 2010. The maker also caters to OEM and ODM clients.

China suppliers of both branded and unbranded phones are developing market-specific models in their attempt to expand sales. For the India market, handsets usually come with two batteries because of the frequent power outages there. Models bound for Africa, meanwhile, have an additional amplifier as consumers like listening to music. People in Iran have a preference for red phones. Two- or even three-SIM card handsets are bestsellers in many emerging countries, including India.

As OBM shipments increase, some makers are considering setting up production facilities in these destinations to shorten time to market.

The Shenzhen Mobile Communication Association recently arranged for 12 of its member companies to visit India to explore the possibility of establishing factories there. The association projects China suppliers could produce more than 10 million mobile phones in India if they set up shop there.

However, the lack of a mature supply chain and inadequate infrastructure are big challenges for these businesses. A handful of companies are shipping semi-finished mobile phones to India and assembling finished products there. This helps reduce transportation costs, especially for high volume shipments.

White-box tablet PCs gaining share

In 2010, Apple’s iPad spurred the production of white-box tablet PCs in China. Just one year later, there are already hundreds of companies offering inexpensive alternatives catering to the midrange and entry-level market, particularly in emerging regions such as Latin America and Eastern Europe.

Available from $60 to $85, typical white-box tablet PCs from China have 7 to 10 inch screens, adopt ViaTech’s WM8650 solution, run on Android OS and support 720P video. Even though they perform most basic functions of their branded counterparts, the battery life is generally shorter. The performance of the display and touch screen may also not be at a par with high-end models.

Some China suppliers are now developing the next generation of tablet PCs. These will range in size from 5 to 11 inches. Front and back cameras, 3G and GPS navigation are some of the features that will be more prevalent in coming months.

According to industry estimates, 7 inch tablets will account for 60 percent of demand in the near future, while 8 inch and 9.7 inch models will make up 15 percent and 10 percent of sales.

Data from research firm DisplaySearch shows global shipments of white-box tablet PCs surged sharply by 235 percent from 567,000 pieces in Q4 2010 to 1.9 million pieces in Q1 2011.

This is despite the fact that overall shipments in the line (including branded and white-box products) decreased by 5.2 percent to 9.7 million pieces.

China accounted for 44 percent of the world’s white-box tablet shipments.

More than 60 percent of suppliers offering netbooks and portable multimedia players have jumped on to the slate bandwagon. It is estimated that output will increase by 20 to 30 percent by the end of this year as more makers join the line.

By the end of 2011, an oversupply could result in a decrease of 5 to 10 percent in quotes as suppliers try to undercut each other to grab orders. And as more large companies increase investment in R&D and produce better tablets, some of the smaller companies will be squeezed out of the line.

Note: This article "White-box, China brand electronics captivate emerging markets" was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.

All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.

Disclaimer: All product images are provided by the companies interviewed and are for reference purposes only. Those product images featuring products with trademarks, brand names or logos are not intended for sale. We, our affiliates, and our affiliates' respective directors, officers, employees, representatives, agents or contractors, do not accept and will not have any responsibility or liability for product images (or any part thereof) which infringe on any intellectual property or other rights of a third party.

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