Abstract

With many cities and regions in China switching over to digital TV, the Chinese cable STB industry has grown rapidly. The leading players in the industry include specialist STB manufacturers such as DVN, Jiuzhou, and Coship, as well as home appliance vendors such as Skyworth, Haier, and Changhong. The cable STB industry has recently undergone some significant transformations, resulting from factors that include the adoption of new sales models, the building up of economies of scale, product line upgrading, and patent royalty issues.

Specialist STB vendors such as Jiuzhou and Coship were able to secure first mover advantage by being the first companies to develop the Chinese cable STB market. However, the consumer electronics vendors that have joined the fray enjoy significant advantages in terms of distribution channels and financial resources, and have as a result been able to take market share away from the specialist STB makers. By the end of 2006, the consumer electronics vendors were winning a larger share of new contracts than the specialist STB manufacturers; Haier's performance has been particularly impressive.

Chinese cable STB vendors' businesses are largely confined to application software development and device assembly; only Haier has its own in-house STB IC design capability, and none of the other STB vendors have developed their own CAs or middleware. Overall, the Chinese cable STB vendors have only limited R&D capabilities and resources.

Chinese cable STB vendors product lines are still dominated by value-line, basic models. The industry is largely oriented towards the Chinese domestic market; to meet policy targets, Chinese cable TV operators have been focusing on securing rapid subscriber growth. At the same time, restrictions on content imposed by the government have slowed the development of new digital TV services. Even so, some cable STB vendors have begun to roll out high-definition STBs and PVR-enabled STBs.

In developing the Chinese domestic market, Chinese cable STB vendors have employed three main strategies. The first strategy involves the use of the "collaborative staged payment" model. With this model, the cable STB vendor sell products to the cable TV operator, and share operation cost and funding with the cable TV operator; in return, the STB vendor takes a share of the subscription fees and the revenue from value-added services. This strategy is used mainly for sales to smaller cable TV operators, which have limited financial resources and tend to be risk-averse. The second model is single-payment purchase, where the cable TV operator makes a single cash payment for the STBs; this model can be used with cable TV operators that have larger financial resources and are better able to bear the risk involved in switching over to digital. With the third strategy, the cable STB vendor sells its products directly to consumers. In areas where conversion to digital cable TV has already been completed, such as Qingdao and Nanjing, subscribers can purchase a second STB directly from a cable STB vendor; however, the STB must be approved by the local cable TV operator. It is anticipated that, once the conversion to digital has been completed throughout China, this third sales model will gradually become the mainstream model for STB sales. The consumer electronics vendors, which have their own extensive distribution networks, will then enjoy a significant advantage over the specialist STB manufacturers.

Appendix

List of Companies