Computers & Peripherals

In 1Q 2008, China added over 5 million new broadband users to reach a total of 71.5 million users. This growth has supported broadband applications such as video sharing and gaming, and is also good news for the router market. 1Q08 router revenues reached 1.9 billion Yuan, up 8.7% YOY.

Telecom operators have initiatives and technologies that drive growth.

Such factors include:

• FTTH (Fiber-To-the-Home) initiatives by China Telecom and China Unicom drive high-speed, high-capacity router growth;
• Broadband business development, such as VoIP, drives VoIP integrated routers.
• Anticipated 3G commercialization drive high performance routers.

Security is a major concern of business enterprises, driving opportunity for integrated router functions which include security.

Users demand has shifted from basic needs to functionality that include VPN, AAA authentication, NAT and VLAN. Large telecom, financial services, and education enterprises will demand not only performance, but also integrated and matching solution sets.

Moreover, the growth of web marketing and e-commerce by Chinese business enterprises will drive mid- to high-end router growth. Network security, stability and capacity will be key requirements; integrated, feature rich routers will be the mainstay.

Wireless routers are the new favorites for the SME and consumer sectors.

Wireless broadband adoption has developed rapidly in China by SMEs and consumers, and such routers will be vendors' competitive focus in the midrange and entry-level markets.

Cisco continues to dominate the high-end while Chinese domestic vendors dominate the midrange and entry-level by competing on price.

The combined market shares of Cisco, Huawei and Juniper exceeded 70%. Cisco's 1Q08 launch of its technologically advanced ASR 1000 router helped maintain Cisco's dominancy in the high-end. Huawei and Juniper had focused on feature-rich products to also maintain their positions in the high-end.

While domestic Chinese vendors have dominated the midrange and entry-level market by competing on price, stronger domestic vendors have made forays into the high-end. In 4Q07, Maipu launched its MP7500 to compete strongly against Cisco's 7600 series and Huawei's NE 40 products. Shanghai BDCOM also launched, in 2007, its R7600, R7208 and R7208E, competing on price performance. The result has been downward pressures on price and profit.

All data sourced from CCID Consulting, April 2008.

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Unless otherwise specified, all information provided is sourced from CCID Consulting.

Ó 2008 CCID Consulting Co., Ltd.