Consumer Demand for Superior Performance Systems to Push Growth of Nascent Chinese Infotainment Market, but High Prices to Restrain Uptake

LONDON, February 1 -- The nascent Chinese in-car infotainment market is expected to surge from an estimated US$309 million in 2003 to an impressive US$5.6 billion in 2010. This is likely to be accompanied by a transition from an audio and entertainment-oriented market to a visual and info-communication-oriented one. However, even as strong overall market growth is forecast, high prices are likely to act as a major deterrent to wider uptake.

Rising consumer demand for higher quality sound and information has, fortuitously, been paralleled by a shift from analogue to digital technology. This has created opportunities for new, advanced infotainment technologies offering systems with more sophisticated performance levels.

However, excessive government controls on the use of advanced technology are threatening to hinder market development. For instance, while electronic maps play a key role in the development of advanced in-car infotainment technology, particularly in the application of navigation systems, their functions have been limited to monitoring and anti-theft as the Chinese Government proscribes sales of electronic maps with high accuracy.

Currently, competition has been focused on audio players and low-cost devices for safety and security purposes. The gradual penetration into cars of a range of new technologies, including video players, LCD displays, navigation, telematics and hands-free telephony is set to open up new areas of competition even as it creates considerable growth opportunities.

Revenue and unit shipments of all four categories in the infotainment market are expected to rise. In 2003, with a 66 per cent share, multimedia dominated the market, trailed by the emergent navigation, rear seat entertainment (RSE), telephony and telematics segments. In 2010, navigation is expected to account for a major share of the total market with 46.9 per cent followed by telematics with a 25.2 per cent share.

The prospect of high revenue growth over the long term is likely to attract a flood of new entrants. As in-car infotainment systems can be sold with considerable profit margin, an increasing number of vehicle manufacturers and infotainment manufacturers are poised to enter the market to leverage its immense revenue generating potential.

All entrants will need, however, to strategically address high market prices that have dampened uptake levels. "High retail prices have limited advanced infotainment systems to premium cars," notes Frost & Sullivan's (http://transportation.frost.com) Automotive Analyst Team. "With average system prices too high to be accepted by customers, it is expected that prices will drop down gradually to meet market needs."

Over the long term, the original equipment (OE) segment of the Chinese infotainment market is projected to grow faster than the aftermarket segment. Following the introduction of telephony with Bluetooth, voice instruction and telematics, the OE segment is poised to expand its revenue share of the total Chinese in-car infotainment revenues from 49.2 per cent in 2003 to 53.3 per cent in 2010. The aftermarket is also forecast to record strong growth rates although it is expected to lose revenue share to the OE segment.

Unlike the highly fragmented aftermarket, the OE market is highly consolidated with Huizhou Siemens VDO, Suzhou Toppower, Shengzheng Hangsheng, and Philips holding a combined 80 per cent of the OE share.

"Pushing systems integration, early adoption of new technologies and locating a qualified supplier in China for a potential joint venture/partnership will be critical to the success of an OEM," opines Frost & Sullivan's Automotive Analyst Team.

"For participants in the aftermarket, such as current market leader Pioneer, the key will be to prudently select potential partner automakers, target major cities with high personal income levels for aftermarket sales, develop a line of products from premium to economy vehicles with a focus on integrated systems, introduce rational pricing and ally with key Internet content providers (ICP) to expand aftermarket shares," adds Frost & Sullivan's Automotive Analyst Team.

Ultimately, though, competitive success in the highly lucrative Chinese infotainment market is anticipated to hinge on four key factors: product innovation, performance, integration and price.

If you are interested in a summary of this research service providing an introduction to the Strategic Analysis of the Chinese Infotainment Market, please send an email to Magdalena Oberland, Corporate Communications at magdalena.oberland@frost.com with the following information: full name, company name, title, country, contact telephone number, email. Upon receipt of the above information, the summary will be emailed to you.

Title: Strategic Analysis of the Chinese Infotainment Market

Code: 4997

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