By increasing efforts to work with local Chinese manufacturers, semiconductor vendors could reap the rewards of growing domestic demand for home appliances, according to tech research firm Gartner Inc. Driving the demand is a Chinese government subsidy program, translated as Electronics Go to Farmers (EGF).
With the program, farmers receive a 13% subsidy for electronic products purchases. EGF, which extended from trial status to all of China in February 2009, provides subsidies only to certified and approved products such as TVs, refrigerator/freezers, washing machines, mobile phones, PCs, heaters, induction cookers, and microwave ovens. Gartner estimates that the subsidy will likely boost household electronics sales by 20%.
So far, electronics providers are mostly local. Overseas providers haven’t 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 (the program only provides subsidies to approved product models from certified providers via a public 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 specific demands in different areas. This trend should offer more opportunities to international brands, because they may hold an advantage when it comes to midrange products versus local providers.
For interested electronics providers, Gartner advises them to develop specific features in products for farmers (e.g., better moisture protection). They should also attempt to lower costs and offer good after-sales service.
For more information, see Gartner’s report “Chinese Government Stimulus Will Drive A 20% Increase In Home Electronics Demand,” at http://www.gartner.com/DisplayDocument?ref=g_search&id=1050213&subref=simplesearch.