SAN FRANCISCOMarket research firm Gartner Inc. has some advice for semiconductor firms: step up efforts to work with Chinese manufacturers in order to cash in on a rise in that country's domestic demand being driven by a government subsidy program for home appliances.
The Chinese central government has taken significant steps to counteract export declines arising from the worldwide economic slowdown, according to Gartner (Stamford, Conn.).
A trial subsidy program in China that offers farmers a 13 percent subsidy for electronic products purchases will likely increase sales of household electronics by 20 percent, Gartner said. The program 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, according to the firm.
"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, in a statement. "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, Gartner said. However, after several rounds of bidding, most of the providers can be found in the certified list, the firm said.
Gartner said electronics providers wishing to take advantage of the increase in product sales that the stimulus has generated should 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. International providers should try to lower costs and provide good after-sales service to farmers using their own or third-party services, Gartner advised.
Gartner is offering for sale a report titled "Chinese Government Stimulus Will Drive a 20% Increase in Home Electronics Demand," though the firm's web site.