《GoldmanChinaSmartphone》由会员分享，可在线阅读，更多相关《GoldmanChinaSmartphone（22页珍藏版）》请在金锄头文库上搜索。
1、25.931.62010-2011706025.0%October 13, 2010China: TechnologyResearch ReportAnalyzing Chinas smartphone market: Six main forces at workChina smartphone shipments to reach 28mn units in 2010EWe estimate that smartphone penetration in China will approach 14% inRATINGS AND TARGET PRICES2010E, three years
2、 behind North America, but ahead of most emergingStockTickerRating Price targetPricecountries. In China, Symbian currently leads in market share, the iPhone inMediatekHTC*2454.TW2498.TWSellBuyNT$370NT$1000410.0712.0mind share, but Android is taking a larger share and is probably theZTE (H share) 076
3、3.HK NeutralZTE (A share) 000063.SZ NeutralHK$29Rmb27most promising, in our view. We see six forces working on smartphoneLenovo0992.HKBuyHK$5.55.1growth price, OS, 3G, brand, distribution, and adoption of mobile apps.AAC Acoustic* 2018.HKMurata MFG 6981.OSBuyBuyHK$21560017.64495.0Qualcomm*BroadcomQC
4、OMBRCMBuyBuy$52$4444.835.7Price is key; distribution, brand, and adoption also necessaryLarganMarvell3008.TW NeutralMRVL BuyNT$650$22601.016.8Chinas handset market is very price sensitive, as evident from the inverserelationship between volume and ASP. The sweet ASP spot for revenue isUS$100-$125. T
5、o achieve 20% penetration, ASPs need to fall to $130, in ourview. However, price is not everything. The high-end iPhone today is sellingmuch better than the mid-end Lephone, which has outsold the low-end $150Android phone. We attribute slow adoption of the $150 Android smartphone toits limited distr
6、ibution channel, marketing, and the adoption of mobile apps,although we expect uptake of the $150 smartphone to improve in 12 months.*This indicates the stock is on a regional Conviction List.Note: All stock prices are as of October 8, 2010 except forUS-listed shares, which are priced as of October
7、7, 2010.Target prices for all stocks are on a 12-month basis, otherthan Marvell and Broadcom which are on a 6-month basis.Source: Goldman Sachs Research estimates, Gao HuaResearch estimates.CHINA SMARTPHONE GROWTH TO ACCELERATE INChina: three carriers, three 3G standards, one Wi-FiChina smartphone &
8、 penetration, 2006-2012ESmartphone Units (mn, LHS) Smartphone Penetration (%)30.0%25.0%In 2Q2010, GSM/WCDMA/TD/EVDO represented 51%/27%/19%/4% of total5019.0%20.0%smartphone shipments. In our view, Chinas three 3G standards have kept403014.0%60.015.0%its largest sub-group (i.e. China Mobile) from fu
9、lly enjoying the bestWCDMA smartphones, which should continue to outpace TD and EVDO in20109.07.0%9.0%13.010.0%15.010.0%17.028.042.010.0%5.0%cost reduction and variety. A potential unexpected outcome is rapid growth020062007200820092010E2011E2012E0.0%of Wi-Fi hot spots to alleviate network congestio
10、n and allow China Mobilessubscribers to access the Internet via WCDMA/Wi-Fi phones.Stock implications to handset and component makersWe expect Chinas smartphone market to grow in three phases, driven by: 1)the iPhone, Lephone and Nokias smartphone in 2010-2011; 2) the $100-$150Android phone in 2011-
11、2012; and 3) the sub-$100 Android phone after 2012.HTC is gaining traction in the $300 phone category. ZTE should benefit fromthe growth of both $150 smartphones and mobile bandwidth. Qualcommshould be a major chip beneficiary, especially in the $150 phone range, whileMediatek should benefit signifi
12、cantly from growth in the $100 smartphonesegment in 2012. We think Broadcom and Marvell should benefit frompotentially robust demand for Wi-Fi hot spots. Other component beneficiariesunder coverage include Murata, AAC Acoustic and Largan.Source: ThinkBank.Donald Lu, Ph.D SAC License No. S14201100300
13、05+86(10)6627-3123 Beijing Gao Hua Securities Company LimitedBeijing Gao Hua Securities Company LimitedBeijing Gao Hua Securities Company Limited and its affiliates do andseek to do business with companies covered in its research reports. Asa result, investors should be aware that the firm may have
14、 a conflict ofinterest that could affect the objectivity of this report. Investors shouldconsider this report as only a single factor in making their investmentdecision. For analyst certification, see the end of the text. Otherimportant disclosures follow the Reg AC certification, or contact yourinv
15、estment representative.Investment Research27101214172October 13, 2010China: TechnologyTable of contentsThe state of Chinas smartphone market and six forces at workNokia leads market share; iPhone dominates mind share; low-cost Android ramping up slowly, but looks mostpromising5Price is a key factor
16、for broad smartphone adoptionChinas mobile market three unevenly matched carriersThree 3G standards and one Wi-FiEarly adopters of mobile internet tend to be young and on low incomesImplications for handset and component makers under coveragePrices in this report are based on the market close as of
17、October 8, 2010.The state of Chinas smartphone market and six forces at workSmartphone shipments of 28mn & 14% China penetration in 2010EIn China, demand for smartphones accelerated in 1H2010 due to the introduction of mid-end smartphones priced at approximately US$300 and the introduction of the iP
18、hone.According to ThinkBank, a research consultancy, the smartphone shipment and penetrationrate (excluding overseas-sourced and white label goods, e.g. Mediateks phones) shouldincrease from 19mn and 10% in 2009 to 28mn and 14% in 2010E, respectively, according toThinkBank (Exhibit 1). IDC estimates
19、 smartphone shipments will reach 26mn in China in2010.ThinkBanks estimate is based on its bottom-up survey in sales channels and does notinclude overseas-sourced or 100% of Mediatek phones. For example, ThinkBank estimatestotal China handset shipments of 200mn in 2010, well below our estimate of 294
20、mn (whichincludes Mediateks total shipments in China).Anecdotal evidence suggests many Chinese have been purchasing smartphones such asthe iPhone in HK and the US and are bringing the phones into China. In addition, most ofthese overseas-sourced phones are mid- to high-end phones including smartphon
21、es.Therefore, we believe the “real” smartphone market should substantially exceed 28mn,though actual penetration could be slightly below 14% in China in 2010.Note: For the sake of data consistency, our analysis in this report is based on ThinkBanksestimates of smartphone handsets and total handsets
22、in China.Gao Hua Securities Investment Research3October 13, 2010China: TechnologyExhibit 1: Smartphone shipments to reach 28mn and penetration 14% in China in 2010EChina smartphone sales volume and penetration, 2006-2012E70605040China smartphone & penetration, 2006-2012ESmartphone Units (mn, LHS) Sm
23、artphone Penetration (%)19.0%25.0%30.0%25.0%20.0%3014.0%60.015.0%209.0%10.0%10.0%42.010.0%109.07.0%13.015.017.028.05.0%00.0%20062007200820092010E2011E2012ESource: ThinkBank.Adoption of smartphones may differ in emerging marketsChina is approximately three years behind North America in smartphone pen
24、etration, butis ahead of most emerging countries except Brazil and Russia (Exhibits 2 and 3). In thefeature phone market, we note Chinese consumers have been less price sensitive thanconsumers in India, Africa, and Latin America. Chinese consumers have also been earlyadapters of multimedia phones. F
25、urthermore, Chinas mobile applications market is alsoattractive to developers because of Chinas large subscriber base. Therefore, we believeChina can be a good leading indicator of smartphone adoption in other emerging countries.In the 2G feature phone market, emerging and developed markets have dif
26、fered in demand,distribution channel, and vendors. Some features, such as dual SIM card, analog TV, andultra-long battery life, have essentially no demand in developed markets, but have becomevery popular in emerging countries. In many emerging countries such as China,distribution channel sells more
27、 phones than individual carriers. Meanwhile, the distributionnetwork in rural areas of emerging market is quite rudimentary in nature but complex instructure. Furthermore, emerging markets are often more price sensitive than developedmarkets.We believe these key differences have made Mediateks busin
28、ess model successful. Today,Mediatek dominates the feature phone market in emerging markets, while Nokia andSamsung still lead in developed markets. In the smartphone market, we believe thatemerging and developed markets also differ, and China is a good case study for thesedifferences.In this report
29、, we focus on six forces that we believe will determine smartphone growth inChina namely: price, operating system, distribution channel, brand, 3Gstandards, and the adoption of mobile applications.Gao Hua Securities Investment Research45%4October 13, 2010China: TechnologyExhibit 2: China is approxim
30、ately three years behind North America in smartphonepenetrationSmartphone penetration in North America and China80%Smartphone penetration (as % of handsets) in China and North America70%60%50%40%30%20%10%0%20062007200820092010E2011E2012E2013EChinaNorth AmericaSource: Company data, Gartner, Global Mo
31、bile, World Bank, ThinkBank, and Goldman Sachs Research estimates.Exhibit 3: China is ahead of most emerging countries in smartphone adoption, exceptBrazil and RussiaSmartphone penetration in China and other emerging markets50%Smartphone penetration (as % of handsets) in EM countries40%35%30%25%20%1
32、5%10%5%0%20062007200820092010E2011E2012E2013EBrazilRussiaIndiaChinaEastern EuropeMiddle East & AfricaSource: Company data, Gartner, Global Mobile, World Bank, ThinkBank, and Goldman Sachs Research estimates.Gao Hua Securities Investment Research5October 13, 2010China: TechnologyNokia leads market sh
33、are; iPhone dominates mind share; low-costAndroid ramping up slowly, but looks most promisingIn terms of operating system, Nokias Symbian has dominated the smartphone market inChina since 2009 and had over 55% market share in 1H2010 (Exhibit 4). We attributeNokias strength to its dominant brand imag
34、e (good durability and voice reception) in firstand second tier cities (where most early adopters reside), its massive sales network of over60,000 direct sales outlets, its relatively mature OVI market for music and map applications,and its moderately priced smartphones (Exhibit 5). All three best s
35、elling phones in Chinaare from Nokia (5230, E63, and 5233) and are priced below US$220.In 4Q2009, China Unicom started to sell Apples iPhone, bundling its WCDMA service inChina. ThinkBank estimates that total official iPhone shipments reached 571,000 in 1H2010.On September 25, China Unicom and Apple
36、 introduced the iPhone4 in China and sold over40,000 iPhone4 units on the first day. The iPhone is suffering supply constraints in China;the wait list at one of China Unicoms branch office in Beijing was over 1,400 according toour checks. China Unicom expects to sell 200,000 iPhone4 units by the sec
37、ond half ofOctober. Our channel checks indicate that Apple might introduce the CDMA iPhonethrough China Telecom in late 1Q2011 and look to ship 5mn CDMA iPhones to China in thefirst 12 months a figure which that seems optimistic, in our view. The current averageselling price (ASP) of a WCDMA iPhone
38、(16GB) is over US$860, targeting the ultra high-enduser and corporate gift market. Our limited survey indicates that many iPhone users areattracted to the phone itself and are not necessarily avid mobile application users.Windows Mobile-based smartphones are making limited progress in China. Coolpad
39、, alocal Chinese smartphone brand, is based on a revised version of Windows CE. ChinaUnicom has started to subsidize two Windows Mobile-based $150-$200 smartphones madeby Sony-Ericsson and Tianyu. Our channel checks, however, indicate that most handsetmakers are putting most of their resources into
40、the Android platform.On May 17, 2010, Lenovo and China Unicom introduced a WCDMA Android-basedsmartphone, Lephone. On September 28, 2010, Lenovo and China Telecom introduced theCDMA Lephone. We expect Lenovo to introduce the TD Lephone in the near future, asindicated by the company. We note that the
41、 Lephone differs from the iPhone and otherAndroid phones in four ways:It has superior hardware, including a 1GHz Snapdragon processor and AMOLEDscreen;Its $350 price is well below that of the iPhone and fits in a carriers need for a goodmid-end smartphone in China;Lenovo is developing its own app si
42、te for 1,000 most popular applications in order toimprove user experience; andLenovo sells Lephone through both China Unicoms branch and its own IT channel.Lenovo has over 20,000 sales outlets in China.Lenovo plans to ship 1mn and 3mn Lephones in the first 12 and 24 months afterintroduction, respect
43、ively.In 3Q2010, HTC, Samsung, Motorola, Lenovo, Sony-Ericsson, Huawei, and ZTE introducedseveral new Android models with ASPs ranging from $150-$700. We view the Rmb1,000(US$150) Android phones from Huawei and ZTE as an important milestone for low-costsmartphones because we believe that $150 is ver
44、y close to the sweet ASP spot of Chinashandset market (discussed in the next section). The two $150 phones are based onQualcomms chipsets and have benefited from strong support from both Qualcomm andGoogle. We believe the WCDMA Android phone is the most promising to bring down theGao Hua Securities
45、Investment Research6October 13, 2010China: Technologycost of smartphones in China for two reasons: the Android system is essentially free ofcharge and most Asia fabless semi companies are focusing on Android solutions. Mediatekis slated to introduce its WCDMA Android solution by mid-2011. Based on o
46、ur checks, wethink Spreadtrum and others will likely introduce their solutions in 2H2011. Meanwhile,Qualcomm has been proactive in defending its market position in China. We would not besurprised to see a $100 WCDMA Android phone in China by 2011.Interestingly, although important, price is not every
47、thing in China. We believe demandfor low-priced smartphones is not nearly as strong as that for the iPhone. For example,China Unicom subsidizes the iPhone (high-end), Lephone (mid-end), and five sub-$200smartphones including Huawei and ZTEs $150 Android phones. China Unicom hasindicated that demand
48、is strongest for the iPhone, good for Lephone, and muted for sub-$200 phones.We attribute the relatively poor demand for the $150 Android phone to four factors. (1) ZTEand Huawei sell their phones only through carriers that have limited sales branches andlack dedicated salespeople; (2) compared with
49、 Nokia, ZTE and Huawei do not have thesame brand recognition and spend very little in marketing expenses likely because of theirsmartphones low prices; (3) the hardware performance and user experience of the $150Android phone is not yet satisfactory, in our view; and (4) China is still very early in
50、 itsadoption of mobile Internet and mobile applications.An HTC salesperson in Beijing commented that only a third of HTC customers understandmobile applications. We believe that market education and adoption of mobile applicationswill take time. It could take another 12 months before the market is r
51、eady for the $150Android phone, in our view, and that meaningful ramp up of sub-$100 smartphones willprobably occur in late 2012, after all six forces are in play in second-tier cities. We note thatthe inflection point of wide adoption of multimedia feature phones happened whenmultimedia feature pho
52、nes represented over 50% of Nokias shipments to China. Webelieve the same rule also applies for smartphones. Smartphones currently represent 17%of Nokias total handset shipments in China based on our estimates.Exhibit 4: Nokias Symbian still dominates operating systems while Android is taking shareC
53、hina smartphone market segmentation by operating system100%90%80%70%0.3%9.5%17.0%0.3%9.1%14.4%4.4%10.8%18.5%4.5%0.7%3.5%9.9%26.4%4.2%1.4%5.6%5.3%25.7%60%50%40%30%73.2%76.2%66.3%55.1%57.7%20%10%0%2Q20093Q20094Q20091Q20102Q2010Symbian & MeeGoWindows MobileLinuxIOSAndroidOthersSource: ThinkBank.Gao Hua
54、 Securities Investment Research7October 13, 2010Exhibit 5: The top three smartphones are all from Nokia, with ASPs below $215Ten best-selling smartphones in China in 1H20101,000China: Technology1.6%9008001.4%1.3%8641.4%1.2%7006005001.0%5341.0%0.8%4003002002152151923030.6%3450.5%0.4%2570.4%3890.4%0.4
55、%2090.3%0.6%0.4%10000.2%0.0%NOKIA 5230 NOKIA E63 NOKIA 5233 NOKIA E71NOKIA5800WNOKIA N97 NOKIA 5530 NOKIA E72MINIIPHONE3GSMOTOROLAA1210ASP (US$)market shareSource: ThinkBank.Price is a key factor for broad smartphone adoptionPrice is key; the sweet spot for ASPs is $100-$125In the previous section w
56、e discussed the importance of factors such as brand recognition,sales network, operating systems and price. Turning our attention to the latter, China, likeother emerging countries, is very price sensitive in both handset ASP and ARPU. Accordingto a survey by ThinkBank, sales volume is inversely pro
57、portional to ASP, almost a straightline instead of a typical Gaussian distribution (Exhibit 6). Sales volumes started to pick upsignificantly when ASPs fell below $175. Another inflection point is when ASPs fell below$140. Roughly 53% of total handsets sold have ASPs below $80. To achieve 15% or 20%
58、smartphone penetration, we believe ASPs would have to fall to as low as $150 or$130, respectively (Exhibit 7).Meanwhile, the value market peaks at an ASP range of $100-$125 (Exhibit 8). We believethat ThinkBanks survey, like other surveys in China, does not fully capture the white labelMediatek phon
59、es, which are mostly priced in the $40-$70 range. Adding the white labelMediatek phone, the market would be even more heavily weighted to low ASP phones.That said, we also believe that consumer spending patterns could evolve over the years, interms of an increase in disposable income due to the weal
60、th effect and more interest insmartphones, though change in consumer behavior has been very gradual in the pastdespite the introduction of multimedia feature phones.We think Chinas high degree of price sensitivity is also demonstrated by the relativelypoor reception that Mediateks high-end EDGE feat
61、ure phone received. Following itsintroduction in July 2009, this particular phone represents only 10% of Mediateks totalhandset shipments today. Meanwhile, its low-end 6223 chips have faced supply constraints.According to Mediatek, other emerging countries such as India are even more pricesensitive
62、than China.Gao Hua Securities Investment Research$0$100$110$120$130$140$150$160$170$180$190$200$210$220$230$240$10 $20 $30 $40 $50 $60 $70 $80 $908October 13, 2010Exhibit 6: Chinese consumers are very price sensitiveHandsets: annual sales volume (survey sample) versus ASP in China in 2006-20094,500C
63、hina: Technology4,0003,5003,000$100150Range(7001000Rmb)Critical Points for3G Penetration2,5002,0001,5001,000105% increasein sales volumeFrom $150 to $100$175 (1200Rmb)sales booming500-Source: ThinkBank.Exhibit 7: Over 53% of handsets sold in China had ASPs below $80 in 2006-2009% cumulative unit shi
64、pments up to a certain ASP110%100%90%80%70%60%50%40%30%20%10%0%$0$20$40$60$80$100$120$140$160$180$200$220$240Source: ThinkBank.Gao Hua Securities Investment ResearchHandsetAnnualSales($mn)9October 13, 2010China: TechnologyExhibit 8: The handset value market peaks at an ASP range of $100-$125 in Chin
65、aHandset annual value (survey sample) versus ASPs in China in 2006-2009300275250225200175150125100755025-$0$25$50$75$100$125$150$175$200$225$250China handset retail ASP (USD)Source: ThinkBank.ASPs today and tomorrow; $150 Android unit near the sweet spotExhibits 9 and 10 show historical smartphone A
66、SPs and ASP by 3G standard in Chinathrough 2Q2010. Smartphone ASPs have declined, but are still well above the mass marketacceptance level. TD-SCDMA, CDMA1X, and EVDO phones have much higher ASPs thanGSM and WCDMA standards because of the high royalty costs and less well developedsupply chain, a phe
67、nomenon that is likely to continue, in our view.In terms of operating systems, among the five $150-$200 WCDMA smartphones that ChinaUnicom promotes, two are WinMo handsets made by Sony-Ericsson and Tianyu (a low-cost Chinese vendor), one is a Nokia phone, and two are Android phones made by Huaweiand
68、 ZTE. Our analysis above (see page 7) indicates that the $150 smartphone could drivethe penetration rate in China to 15% in 2010E, above our estimated penetration rate of 14%in 2010.Going forward, we believe that Mediatek is likely to be a major force in the sub-$100WCDMA Android market because of i
69、ts unique business model (please see our report“Mediateks odyssey to the top of the handset IC market; raise TP,” dated July 1, 2009). TheWinMo operating system currently lacks support and still demands royalties that aresubstantial relative to mainstream handset ASPs in China. Our channel checks in
70、dicatemost Chinese handset makers such as Huawei, ZTE, China Wireless, TCL, and Tianyu are focusing on the Android solution to capture the mainstream smartphone market inChina. Huawei and ZTE plan to introduce a $100 Android phone in 2011, while some whitebrand makers appear set to introduce sub-$90
71、 Android phones in 2011. Several handsetmakers have indicated that Googles potential block of API in Android 3.0 will help tocommoditize Android handsets and drive down prices.Gao Hua Securities Investment Research10October 13, 2010Exhibit 9: GSM and WCDMA categories are moreaffordable than TD-SCDMA
72、 and EVDOSmartphone ASP by 3G standards 2Q2009-2Q2010China: TechnologyExhibit 10: TD-SCDMA, CDMA1X, and EVDOsmartphones are pricier than GSM and WCDMA phonesSmartphone ASP distribution by 3G standardsUS$900800837100%90%80%7%29%31%7006005004003002001000610552504318707524506343326643511453458311656525
73、45640928466049744536127470%60%50%40%30%20%10%0%31%33%56%29%14%1%79%15%6%19%40%11%81%18%1%2Q20093Q20094Q20091Q20102Q2010GSMCDMA1XEV-DOWCDMATD-SCDMAGSMCDMA1XEV-DOWCDMATD-SCDMA= 440 US$Source: ThinkBank.Source: ThinkBank.Chinas mobile market three unevenly matched carriersThree carriers with uneven sub
74、scriber bases and channel influenceChinas three major telco carriers China Mobile, China Unicom, and China Telecom had564mn, 160mn, and 80mn mobile subscribers as of August 2010, respectively. As thelargest carrier, China Mobile also has the highest mobile ARPU of Rmb72 (US$11) in1H2010, versus Rmb4
75、2.9 (US$6.3) and Rmb58.1 (US$8.5) at China Unicom and ChinaTelecom, respectively. China Mobile also has the strongest sales network in China, with53,000 direct sales branches. In comparison, China Unicom has 19,000 and China Telecomhas 17,000 direct sales branches in China.Unlike in the US where 80%
76、 of the handsets are sold by carriers with subsidies, 80% of 2Ghandset sales are through open channels and only 20% are through carriers in China. ChinaMobile also has more influence over its channel partners. For example, Funtalk, a leadingChinese handset distributor, indicated that China Mobile re
77、presents approximately 60% ofits total sales and leverages this scale to pay a lower commission than China Telecom andChina Unicom. Meanwhile, China Telecom pays the highest commission because of its lowsubscriber base, and China Unicom has raised its commission level to lure support from itschannel
78、 partners.We believe sales networks and channel strength are vital in the introduction of newproducts such as smartphones in China because of geographical footprint and the need tohave real people to educate consumers. For example, Tianyus Chairwoman has indicatedthat Tianyu currently contracts over
79、 4,000 salespeople to introduce its smartphones toconsumers. Nokia has direct access to 60,000 sales outlets and sells its products throughover 100,000 outlets, one of the strongest handset distribution networks in China. Wewould attribute Nokias relatively strong performance in $200 smartphones par
80、tially to itsstrong network in China. In comparison, Huawei and ZTEs $150 Android phones were soldonly through carriers that often lack special sales staff dedicated to educating consumers.Gao Hua Securities Investment ResearchCT11October 13, 2010Exhibit 11: A brief introduction to Chinas three telc
81、osChina: TechnologyChina MobileChina UnicomChina TelecomTotal mobile subs (000)Total fixed line subs (000)Total broadband subs(000)Blended mobile ARPU2G technology3G technology564,356NANA72 Rmb (US$ 11)GSMTD-SCDMA160,223100,11145,36442.9 Rmb (US$ 6.3)GSMWCDMA79,940179,07060,06058.1 Rmb (US$ 8.5)CDMA
82、CDMA2000 1x EV-DOOver 600K (including 153K 3G base stations, 110K 3G base stations,Number of base stations115K TD stations) 306K 2G base stations 80K 2G base stationsNumber of proprietary sales outletsOver 53K19K17KNote:(1) Subs numbers are as of August 31, 2010.(2) Blended mobile ARPUs and number o
83、f base stations and outlets are as of 2Q2010.Source: Company data.Millions being spent on subsidiesChinese carriers especially China Mobile and China Telecom are spending millions ofdollars on handset subsidies each year (Exhibit 12). In China, subsidies not only reducehandset costs for consumers, b
84、ut are also a necessary incentive for handset vendors todevelop TD and CDMA2000 smartphones. Our channel checks indicate that China Mobilesnew handset strategy focuses on low-cost CMMB TD feature phones and low-cost CMMBTD smartphones. CMMB is a Chinese standard for mobile TV. The Chinese government
85、currently allows only TD handsets to carry the CMMB feature. China Telecom is pushing a$150 smartphone and is likely to start selling CDMA iPhones in late 1Q2011, based on ourchannel checks.We use China Unicom as an example here. China Unicom subsidizes three levels ofsmartphones in China: high-end
86、(e.g., iPhone 3GS with an ASP of $735), mid-end (e.g.,Lephone with an ASP of $350), and low-end (e.g., ZTE X850 with an ASP of $150). SinceJuly 2010, China Unicom has started to subsidize five low-end smartphones (Nokia 5235,Sony-Ericsson M1i, ZTE X850, Huawei U8110 and K-Touch W366).Exhibit 12: Chi
87、na Telecom has led in subsidies, but China Mobile has more resourcesavailableComparison of handset subsidy and subsidy as a % of sales among three Chinese telcosUS$ mn1400120010008.0%7.0%6.0%5.0%8004.0%6003.0%40020002.0%1.0%0.0%1H092H091H102H10ECUCMas % of total sales - CUas % of total sales - CTas
88、% of total sales - CMSource: Company data, Goldman Sachs Research estimates.Gao Hua Securities Investment Research12October 13, 2010China: TechnologyThree 3G standards and one Wi-FiThree 3G standards are preventing the largest subscriber group from fully enjoyingthe best smartphoneThe three Chinese
89、carriers each use a different 3G standards. China Mobile uses TD-SCDMA, a home-grown standard in China; China Unicom uses WCDMA, arguably the mostpopular and mature 3G standard in the world; and China Telecom uses CDMA2000.As of mid-2010, TD, WCDMA, and CDMA2000 have 10.46mn, 7.56mn, and 7.18mnsubsc
90、ribers, respectively, but the quality of their subscribers varies (Exhibit 13). TD has thelowest ARPU at Rmb50, considerably below China Mobiles average ARPU of Rmb72. Weattribute the poor TD ARPU to a low activation rate and high mix of fixed wireless phonesfor home use. China Mobile has indicated
91、that handset and fixed/data cards represent 60%and 40% of its total TD subscribers as of 1H2010, respectively.However, data cards represent two-thirds of the total 3G traffic. China Telecom indicatedthat its CDMA2000 data card and handset ARPU are Rmb140 and Rmb80, respectively,indicating that its C
92、DMA2000 subscriber base is 50/50 data card and handset. ChinaUnicom has had a higher handset ARPU and mix, driven by its popular WCDMA networkand partially attributable to its iPhone subscribers, which totals nearly 500,000 with anaverage ARPU of more than Rmb225 (US$33) by our estimates.China smart
93、phone shipments had primarily been GSM models until 2Q2010, but webelieve WCDMA will gradually take share because of a lack of new GSM models. GSM andWCDMA smartphones had 51% and 27% market share, respectively, well above those ofTD and CDMA/CDMA2000 at 19% and 4% in 2Q2010, respectively (Exhibit 1
94、4). From 3Q2009to 2Q2010, 2G GSM smartphones had 69% market share and went mostly to ChinaMobiles subscribers, by our estimates. We believe that WCDMA smartphones willcontinue to outpace TD and CDMA smartphones in terms of variety and cost reduction.China Mobile has 70% and 80% share of total handse
95、t subscribers and high-end handsetsubscribers in China, respectively. This large subscriber group clearly has need forsmartphones, but cannot fully enjoy the benefits of the best smartphone (i.e., WCDMAsmartphones, which are carried by China Unicom).Exhibit 13: 3G subscribers and ARPU comparisons by
96、 3G standards in China at the end of2Q201012,00010,46125.010,00019.720.08,0007,56016.27,18015.06,00010.04,0002,00007.45.00.0TD-SCDMA (China Mobile)WCDMA (China Unicom)CDMA2000 (China Telecom)subscribers (K)ARPU (US$)Note:1) 3G subs numbers are subs for all 3G terminals, including fixed wireless term
97、inals.2) 3G ARPUs are blended ARPUs for 3G handsets users and data card users.Source: Company data, Goldman Sachs Research estimates.Gao Hua Securities Investment Research13October 13, 2010China: TechnologyExhibit 14: WCDMA should gradually take share due to the lack of new GSM modelsSmartphone sale
98、s volume and share by technologySmartphone sales volume (K units) & share by technology6,5006,0005,5005,0004,5004,0004,607K8254 461565,137K56525734076,279K4014431437416,291K32121019316743,5003,0002,5002,0001,50042694076391231821,00050003Q094Q091Q102Q10GSMWCDMAEVDOTDCDMA1XSource: ThinkBank.One Wi-Fi
99、could enjoy robust growth in ChinaAn unexpected consequence of having three 3G standards could be accelerated growth ofWi-Fi hot spots in China. Rapid data traffic growth from data card usage has put pressureon network capacity and quality at China Mobile and China Telecom. We believe Wi-Fi canallev
100、iate this pressure. In addition, some of China Mobiles high-end subscribers havealready purchased or will purchase WCDMA smartphones such as the iPhone. Wi-Fi wouldallow these users to access the Internet near Wi-Fi hot spots and help China Mobile toretain these subscribers, in our view. A previous
101、hurdle for Wi-Fi deployment was theChinese governments restriction on Wi-Fi in support of WAPI, a Chinese Wi-Fi standard.The government has recently become more flexible on Wi-Fi, provided that the handset isalso WAPI compatible. We believe that Broadcom, Marvell, and Mediatek have alldeveloped Wi-F
102、i chips that are compatible with WAPI.Our channel checks indicate that China Mobile is working actively with some chip andsystem vendors to develop a seamless Wi-Fi connection and billing system that wouldallow only China Mobile subscribers to easily log onto its Wi-Fi network and enjoy afavorable b
103、illing rate for Internet access. According to our channel checks, the systemshould be completed by the end of 2010, a trial should start in 1H2011, and widerdeployment could start in 2H2011.Gao Hua Securities Investment Research14October 13, 2010China: TechnologyExhibit 15: China Mobile and China Te
104、lecom are likely to accelerate the number of Wi-Fihotspots in 2011Numbers of Wi-Fi hotspots by three Chinese carriers140,000120,000100,00080,00060,00040,00020,00002008China Mobile2009China Unicom2010EChina TelecomSource: iSuppli, Goldman Sachs Research estimates.Early adopters of mobile internet ten
105、d to be young and on lowincomesChinese carriers wireless data revenues currently comprise a lower percentage of wirelessservice revenues compared with AT&T (Exhibit 16). These wireless data revenues are alsomostly from value-added services (SMS, MMS, etc.) rather than mobile Internet access(Exhibit
106、17). While all three Chinese carriers have reported strong growth of mobile Internetusage, especially CU and CT, we have very limited knowledge of user profiles (Exhibit 18).One clue is that China Mobile and China Telecom have reported that data card users areresponsible for most of the data traffic
107、. China Mobile reported that its 3G users representonly 2% of its total subscriber base, but 30% of total traffic. Meanwhile, 3G data cardsrepresent well below 40% of the total 3G subscriber base, but accounted for 20% of totaltraffic in the company in 1H2010. China Telecom also indicated that its m
108、obile internet datatraffic is used also mostly from data card users. We estimate that approximately 50% ofChina Telecoms CDMA2000 subscribers are data card users. This all indicates thatsmartphone applications are still not primarily responsible for mobile Internettraffic at China Mobile and China T
109、elecom.A recent survey of 860,000 mobile phone users by Sina shows that most current 3G usersare young and have relatively low incomes (Exhibit 19 and 20). Over 90% of 3G users in thesurvey are below 30 years old and over 73% of them have monthly incomes below US$370.We note that this survey was con
110、ducted in early 2010, before China Unicom began toaggressively sell iPhones. Meanwhile, this survey may not be comprehensive enough tocover the high income population. However, we believe this survey highlights the long-term potential of the $100-$150 Android smartphone because todays young and rela
111、tivelylow-income consumers are likely to be early adopters of mobile apps as their affordabilityfalls in the $100-$150 category. The survey results are also consistent with Lenovoscomments that students are a major user group for its Lephone.Gao Hua Securities Investment Research15October 13, 2010Ch
112、ina: TechnologyExhibit 16: China carriers wireless data revenues as a percentage of wireless servicerevenues are lower than that of AT&T, which mainly comes from internet accessWireless data revenues and as % of wireless service revenues comparison between Chinacarriers and AT&T in 1H2010US$ mn9,000
113、8,00033%25%35%30%7,0006,0005,0004,0003,0002,0001,000016%19%25%20%15%10%5%0%AT&TChina MobileChina UnicomChina TelecomWireless data revenueData as % of wireless service revenueNote: The chart shows SMS and non-SMS data revenues for CM. 2G & 3G data revenues for CU and mobile data revenuesfor CT are Go
114、ldman Sachs estimates.Source: Company data, Goldman Sachs Research estimates.Exhibit 17: Mobile internet access revenues contributed only 24% of total data revenuesfor CMCM data revenue breakdown in 1H20108%24%22%46%SMSKey data businessMobile internet accessOthersSource: Company data.Gao Hua Securit
115、ies Investment Research.16October 13, 2010China: TechnologyExhibit 18: Robust growth of mobile Internet revenues has been driven mostly by datacards and not smartphone usersMobile Internet revenues of three China carriersUS$ mn250020001500100050001H09China Mobile2H09China Unicom1H10China TelecomNote
116、: The chart shows mobile internet access revenue for CM, 2G GPRS & GS estimated 3G data revenue for CU andinternet access revenue for CT.Source: Company data, Goldman Sachs Research estimates.Exhibit 19: Over 90% of 3G users are under 30 years oldAge structure of 3G users in ChinaExhibit 20: Over 50
117、% of 3G users have monthly incomebelow Rmb2,500 (US$370)Monthly income structure of 3G users in China4.50%6.92%22.84%21.97%43.77%Above US$ 1470US$ 735 - US$ 1470US$ 370 - US$ 735US$ 220 - US$ 370below US$ 2203.83%4.17%18.50%17.83%32.83%below 20 years old21-25 years old26-30 years oldCurrently no sta
118、ble income22.83%31-35 years oldabove 35 years old0%5%10% 15% 20% 25% 30% 35%Source: White paper on mobile phone users by 3G.cn.Gao Hua Securities Investment ResearchSource: White paper on mobile phone users by 3G.cn.17October 13, 2010China: TechnologyImplications for handset and component makers und
119、er coverageZTE (0763.HK, 000063.SZ, Neutral)ZTE should benefit from the growth of both smartphone and mobile data traffic in China.ZTE and Huawei are the first globally to offer $150 Android 2.1-based smartphones for bothWCDMA and CDMA2000. Our checks indicate that demand for this low-cost smartphon
120、e iscurrently not as strong as that for the iPhone or Lephone in our view, likely because ofthe limited distribution channel, lack of marketing and consumer education, and moderatehardware performance. We believe demand for this kind of $150 Android phone will startto rise in late 2011, during the s
121、econd phase of smartphone adoption in China.In addition, as mobile Internet traffic increases, ZTE should benefit from the growth ofwireless and Wi-Fi equipment demand. However, we believe ZTEs current valuationalready reflects its optimistic growth potential. Meanwhile, we are cautious on its 3Q201
122、0results, as the bidding for the fourth phase of TD is still not complete and the Indiabusiness just resumed late last month.We maintain our Neutral rating and 12-month TP of HK$29 (Rmb27 for the A-shares), basedon 22X/24X NTM P/E, respectively. Risks: upside better-than-expected overseas demand;dow
123、nside Rmb appreciation and muted China demand.Lenovo (0992.HK, Buy)Lenovo owns one of the strongest IT brand names and distribution channels in China, buthas primarily sold what we believe are the least profitable products, PCs. We believe thatLephone and potentially Lepad will be the companys first
124、 group of differentiated and highmargin products in China. We are positive on Lenovos Lephone strategy because it hasleveraged its advantage in China. Lephone offers superior hardware specification and isconsistent with Lenovos brand image in China. Lenovo has also demonstrated to Chinesecarriers th
125、at Lephone users are more likely to be early adopters of mobile Internet and appsthan iPhone users because Lephones have much lower costs, and early mobile appadopters in China are young people on moderate incomes. As such, Lephone is enjoying“strategic” subsidies from all three Chinese carriers. Fi
126、nally, Lenovo is selling Lephonethrough both carriers channels and its own over 20,000 IT stores with strong on-site salesservice. Lenovo targets to sell 1mn and 3mn Lephone in the first 12 and 24 months afterintroduction, respectively. We estimate Lephone and Lepad to represent approximately10% of
127、total gross profits at Lenovo in FY2012 (ending in March).We maintain our Buy rating and 12-month TP of HK$5.50, based on 17X NTM P/E. Key riskis intensifying competition in Chinas PC market.HTC (2498.TW, Buy, on the Conviction Buy List)HTC will focus more on promoting brand and channel expansion in
128、 China than on drivingstrong volume in the next 1-2 years, as China is still not an ideal smartphone market forhigh-end players due to competitive pricing and less differentiated mobile Internet featuresthat set the industry barrier. We estimate that HTCs China contribution is less than 3% in2010E a
129、nd could remain below 10% in the next 1-2 years.We maintain our Buy (Conviction list) rating and 12-month TP of NT$1,000, based on6.2X2011E P/B (implying 13X 2011E P/E). Key risk: severe component shortages.Gao Hua Securities Investment Research18October 13, 2010China: TechnologyMediatek (2454.TW, S
130、ell)We believe smartphone growth in China will progress through three phases. We arecurrently in the first phase, which is characterized by high demand for smartphones withrenowned brands and good distribution such as iPhones, Lephones, and Nokia phones.In the second phase, mobile apps will start to
131、 become more prevalent to drive demandfor improved $150 Android phones. We believe this second phase will start in 2H2011.In the third phase, mobile apps will likely become a necessary part of peoples everydaylives as is the US and smartphone penetration will exceed 30% in China, driving strongdeman
132、d for $100 or sub-$100 smartphones. We believe that Mediatek is one of fewcompanies that can provide good-quality sub-$100 Android phones because of its uniquebusiness model (please refer to our report “Mediateks odyssey to the top of the handset ICmarket,” dated July 2, 2009). To date, Mediatek doe
133、s not have any direct competitors forsmartphones in Taiwan and China. Nevertheless, we believe that the third phase will nottake place until 2012. We think smartphones are unlikely to account for 10% of Mediateksrevenues or become a meaningful earnings driver until 2H2012. Meanwhile, Mediatek isfaci
134、ng intensifying competition in the 2G feature phone market and is likely to deliverminimal earnings growth in 2011 at best.We maintain our Sell rating and 12-month target price of NT$370 based on 12X NTM P/E.Key risks are faster-than-expected ramp-up and adoption of Android solution.Qualcomm (QCOM,
135、Buy, on the Conviction Buy List)While the Chinese baseband chipset market is extremely competitive with formidablechipset competitors such as Mediatek, we believe Qualcomms strong leadership insmartphones, 3G, and 4G will allow it to establish a solid presence in the Chinese handsetmarket, particula
136、rly as smartphone adoption grows. We believe there is already evidenceof this with both Huawei and ZTE using Qualcomm single-chip solutions (MSM7225 andMSM7227) for their $150 Android 2.1-based WCDMA smartphones at 528MHz and 600MHzprocessor frequencies, respectively. In addition, Huawei and ZTE hav
137、e also introduced $150CDMA2000 Android 2.1-based smartphones with Qualcomms MSM7627 at 600MHzprocess frequency. We view higher smartphone adoption in China as a net positive toQualcomms chipset ASPs and margins in this region, which historically were a drag oncorporate margins, given that China was
138、primarily a 2/2.5G market. Recall that stabilizingASPs are a key part of our bullish thesis on Qualcomm, and view higher China smartphoneadoption as a key supporting element of this thesis. There is no change to our Buy rating (on the Conviction List) or 12-month price target of $52,based on a sum-o
139、f-the-parts analysis. Downside risks are unfavorable license negotiations,lower-than-expected ASPs, macroeconomic weakness, and increasing competition.Broadcom (BRCM, Buy)We believe Broadcom has the potential to benefit in several ways from the adoption ofsmartphones in China: (1) increased baseband
140、 share at Nokia and Samsung; (2) greaterpenetration of connectivity (including Wi-Fi, GPS, and Bluetooth) as smartphone pricesdecline; and (3) proliferation of Wi-Fi access points for Internet access and data offload bycarriers. We believe that Broadcom is poised to reach over 13% global handset uni
141、t shareexiting 2011, largely as a result of its penetration of Nokia and Samsung, which combinedrepresent over 60% of the smartphone market in China. Given Broadcoms position as adominant provider of combo connectivity devices (including Wi-Fi, GPS, and Bluetooth),we expect it to gain approximately
142、$3-$4 in incremental dollar content for everysmartphone that cannibalizes a feature phone. Finally, we believe that Broadcom (alongGao Hua Securities Investment Research19October 13, 2010China: Technologywith Marvell and Mediatek) is poised to benefit from the proliferation of Wi-Fi access pointsbas
143、ed on the WAPI standard.There is no change to our Buy rating or 6-month price target of $44, which is based on a20X multiple applied to our normalized EPS of $1.95, plus $5 in net cash/share. Risksinclude a slower cellular ramp, weak demand, and excess inventory.Marvell (MRVL, Buy)We see Marvell as
144、a beneficiary of two smartphone-related trends that are specific toChina: (1) integrated basebands and software developed specifically for China MobilesOPhone platform, including TD-SCDMA and TD-LTE baseband chips; and (2) proliferationof Wi-Fi access points for Internet access and data offload by c
145、arriers. Marvell has had aclose relationship for some time with China Mobile, whereby it has developed single-chipbaseband solutions specifically for the TD-SCDMA standard and for China MobilesOPhone platform (a variant of Android developed specifically for China Mobile).In addition to Marvell being
146、 named as a preferred supplier for the first generation ofOPhones, it is also now sampling an advanced chip developed specifically for the emerging4G standard in China (TD-LTE). We also believe that Marvell (along with Broadcom andMediatek) is poised to benefit from the proliferation of Wi-Fi access
147、 points based on theWAPI standard.There is no change to our Buy rating or 6-month price target of $22, which is based on aP/E multiple of 16X applied to normalized EPS of $1.20 (ex interest), plus c.$3 in cash/share.Murata MFG (6981.OS, Buy)Murata has strategically made efforts to obtain product spe
148、cification verification andapproval for hi-end smartphones (especially Apple) in the last 1-2 years. Murata has alsobeen expanding its local handset manufacturers business (white box market) in China.Murata is in an advanced position compared to competitors in terms of taking strategicaction to grow
149、ing customers/market, in our view.In order to restructure the production into a low-cost production system, Murata hasimproved efficiency for domestic production (cutting temporary employees) and enhancedlocal production system in China (Wuxi factory). In the event of a Chinese handset marketshift f
150、rom low-end handsets to US$100-$150 smartphones, we believe demand growth ofMuratas MLCC and WiFi-related hi-frequency ceramic components would be positive forthe company.We maintain our Buy rating and 12-month target price of 5,600 based on Directors Cut.Risks are yen appreciation and MLCC supply/d
151、emand.AAC Acoustic (2018.HK, Buy, on the Conviction Buy List)AACs expertise in integrating and packaging different acoustic and non-acoustic partstogether (the multi-function device) will likely help some key customers such as Nokiameaningfully lower their cost structure and drive the smartphone ado
152、ption to themainstream ahead of our expectations. Nokia provides 35%-40% of AACs revenues.We maintain our Buy rating (on the Conviction List) rating and 12-month target price ofHK$21 based on 4.4X 2011E P/B, implying 14X 2011E P/E. Key risk is increased competitionfrom China peers.Gao Hua Securities
153、 Investment Research20October 13, 2010China: TechnologyLargan (3008.TW, Neutral)Nokias push of low-end smartphones in China could be incrementally positive to Largan,as Largans dominant position in the EDoF (extended depth of field) camera lens marketshould help Nokia reduce its material costs (no v
154、oice-coil motor needed for auto focus).The incremental spec upgrade from VGA to a 3MP camera in China due to risingsmartphone penetration could also be positive for Largan. Nokia provides 25% of Largansrevenues.We maintain our Neutral rating and 12-month target price of NT$650, based on 4.4X2010E/11
155、E P/B, implying 18.5X NTM P/E. Up/downside risks are stronger smartphonedemand and in-house VCM delay.Other disclosureResearch written by Donald Lu on companies listed in Taiwan is written by him in hiscapacity as consultant to Goldman Sachs (Asia) L.L.C. Any other research is written in hiscapacity
156、 as employee of Beijing Gao Hua Securities Company Limited.Gao Hua Securities Investment Research21October 13, 2010China: TechnologyReg ACI, Donald Lu, Ph.D, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company orcompanies and i
157、ts or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specificrecommendations or views expressed in this report.Investment ProfileThe Investment Profile provides investment context for a security by comparing key attributes
158、of that security to its peer group and market. The fourkey attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on composites of severalmethodologies to determine the stocks percentile ranking within the regions coverage universe.The preci
159、se calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:Growth is a composite of next years estimate over current years estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregateof various return on capital
160、 measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividendyield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.QuantumQuantum is Goldman Sachs proprietary database
161、 providing access to detailed financial statement histories, forecasts and ratios. It can be used forin-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.DisclosuresCoverage group(s) of stocks by primary analyst(s)Donald Lu, Ph.D: China Tec
162、hnology.China Technology: Advanced Semiconductor, Advanced Semiconductor (ADR), AsiaInfo-Linkage, ASM Pacific Technology, AutoNavi Holdings Ltd.,Camelot Information Systems, Lenovo Group, Longtop Financial Technologies, Mediatek, Siliconware Precision, Siliconware Precision (ADR), TSMC(ADR), TSMC, U
163、FIDA Software Co., United Microelectronics (ADR), United Microelectronics Corp., ZTE Corporation (A), ZTE Corporation (H).Company-specific regulatory disclosuresThe following disclosures relate to relationships between Goldman Sachs Gao Hua Securities Company Limited (Goldman Sachs Gao Hua) andcompa
164、nies covered by the Investment Research Division of Beijing Gao Hua Securities Company Limited (Gao Hua Securities) and referred to inthis research.Goldman Sachs Gao Hua has received compensation for investment banking services in the past 12 months: Lenovo Group (HK$5.09), ZTECorporation (A) (Rmb26
165、.15) and ZTE Corporation (H) (HK$31.80)Goldman Sachs Gao Hua expects to receive or intends to seek compensation for investment banking services in the next 3 months: Lenovo Group(HK$5.09), ZTE Corporation (A) (Rmb26.15) and ZTE Corporation (H) (HK$31.80)Goldman Sachs Gao Hua had an investment bankin
166、g services client relationship during the past 12 months: Lenovo Group (HK$5.09), ZTECorporation (A) (Rmb26.15) and ZTE Corporation (H) (HK$31.80)There are no company-specific disclosures for: AAC Acoustic (HK$18.12), Broadcom Corporation ($36.73), HTC Corp. (NT$699.00), Largan Precision(NT$581.00),
167、 Marvell Technology Group Ltd. ($16.98), Mediatek (NT$401.00), Murata Mfg. (4,400), Nokia (7.86) and QUALCOMM, Inc. ($44.79)Ratings, coverage groups and views and related definitionsBuy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investmen
168、t Lists. Being assigned a Buyor Sell on an Investment List is determined by a stocks return potential relative to its coverage group as described below. Any stock not assigned asa Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review Committee manages various regiona
169、l Investment Lists to aglobal guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular coveragegroup may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists represent investme
170、ntrecommendations focused on either the size of the potential return or the likelihood of the realization of the return.Return potential represents the price differential between the current share price and the price target expected during the time horizon associatedwith the price target. Price targ
171、ets are required for all covered stocks. The return potential, price target and associated time horizon are stated in eachreport adding or reiterating an Investment List membership.Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and cover
172、age group athttp:/ The analyst assigns one of the following coverage views which represents the analysts investment outlookon the coverage group relative to the groups historical fundamentals and/or valuation. Attractive (A). The investment outlook over the following 12months is favorable relative t
173、o the coverage groups historical fundamentals and/or valuation. Neutral (N). The investment outlook over the followingGao Hua Securities Investment Research22October 13, 2010China: Technology12 months is neutral relative to the coverage groups historical fundamentals and/or valuation. Cautious (C).
174、The investment outlook over thefollowing 12 months is unfavorable relative to the coverage groups historical fundamentals and/or valuation.Not Rated (NR). The investment rating and target price have been removed pursuant to Gao Hua Securities policy when Goldman Sachs Gao Hua isacting in an advisory
175、 capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS).We have suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis for determining, or thereare legal, regulatory
176、or policy constraints around publishing, an investment rating or target. The previous investment rating and price target, if any,are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). We have suspended coverage of this company. NotCovered (NC). We do not cover
177、 this company. Not Available or Not Applicable (NA). The information is not available for display or is not applicable.Not Meaningful (NM). The information is not meaningful and is therefore excluded.General disclosuresThis research is disseminated in China by Gao Hua Securities.This research is for
178、 our clients only. This research is based on current public information that we consider reliable, but we do not represent it isaccurate or complete, and it should not be relied on as such. We seek to update our research as appropriate, but various regulations may prevent usfrom doing so. Other than
179、 certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals asappropriate in the analysts judgment.Goldman Sachs Gao Hua, an affiliate of Gao Hua Securities, conducts an investment banking business. Gao Hua Securities, Goldman Sachs Gao
180、 Huaand their affiliates have investment banking and other business relationships with a substantial percentage of the companies referred to in thisdocument.Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and ourpro
181、prietary trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our proprietary trading desks andinvesting businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research.Gao Hua Securities and its
182、 affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or shortpositions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.This research is not an offer to sell or the solicit
183、ation of an offer to buy any security in any jurisdiction where such an offer or solicitation would beillegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs ofindividual clients. Clients should consider whet
184、her any advice or recommendation in this research is suitable for their particular circumstances and, ifappropriate, seek professional advice, including tax advice. The price and value of investments referred to in this research and the income from themmay fluctuate. Past performance is not a guide
185、to future performance, future returns are not guaranteed, and a loss of original capital may occur.Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.Certain transactions, including those involving futures, options, and oth
186、er derivatives, give rise to substantial risk and are not suitable for all investors.Investors should review current options disclosure documents which are available from Gao Hua sales representatives or athttp:/ Transactions cost may be significant in option strategies calling for multiple purchase
187、 andsales of options such as spreads. Supporting documentation will be supplied upon request.Copyright 2010 Beijing Gao Hua Securities Company LimitedNo part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the priorwritten consent of Beijing Gao Hua Securities Company Limited.Gao Hua Securities Investment Research
