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Digital Homes Getting Closer to Chinese Consumers
Apr 13, 2007
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CCID Consulting, a Chinese consulting and IT outsourcing service provider, forecasts that digital home sets will get closer to Chinese consumers in 2007.

The year 2006 was an extremely important for the development of digital homes in China. A series of major events in the fields of policy environment, development of standards and technological evolution are producing a profound impact on the future development of digital homes in China. The digital home is now gradually entering consumers' lives. Shanghai Telecom was the first to pilot digital home services among 5,000 ADSL users.

CCID Consulting's statistics show that by 2006, digital home users in China had reached 13.726 million. These included cable digital TV users, IPTV users and intelligent home users. Compared with 2005, the overall number of users grew by 244.8 percent.
In 2006, the overall conversion to digital TV gathered pace. The structure of cable network operators underwent a period of transformation as former city-centered cable TV network companies started to integrate towards provincial networks in an effort to improve the regional competitiveness of their cable TV networks. With the introduction of several digital TV standards in 2006, the whole industry was placed under a clearer development direction and entered a period of fast growth. Industry cooperation and service innovations have provided a powerful driving force for the development of IPTV. Although intelligent homes are still in a starting stage, the overall market will gradually enter a stage of industry integration, while products will develop along the practical, convenient and modular lines, eventually made suitable for common consumers.

The digital home industry chain mainly consists of chip, OS and other core component firms, whole system firms, content providers, network operators and end users. Among these 4 major areas, core component suppliers and operators have obvious industry monopoly and the entry threshold is rather high. Relatively speaking, whole terminal system firms and contents providers are distributed in a wide range of industries, and the entry threshold is rather low. Particularly in the whole terminal firm link, leading color TV and PC makers have relatively mature technologies. It will not be too difficult for them to grasp future customer demand, connect with the upstream and downstream links and introduce some products to attract attention from consumers.

Currently, there are 3 major development bottlenecks for digital homes in China: non-unified standards, high cost and low customer cognition. The biggest problem in the promotion of digital homes is lack of unified industry standards. All standard alliances and their member firms have their own strategic intentions and starting points. To a certain extent, too many industry standards hamper the further development of the industry. Currently, the overall price of digital home products is still very high. In a price- sensitive consumer electronics market, high prices are not good for products to achieve a high penetration rate. Many consumers are not very receptive or enthusiastic about digital homes. The different concepts introduced by vendors in their promotion have made consumers have an ambiguous understanding.

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