Microsoft will sell its Xbox game console for less than NT$7,500 each in Taiwan in an attempt to take some market share from Sony's PlayStation2 (PS2), the most popular home gaming device in the world. The PS2 currently retails locally for around NT$8,800.
However, market watchers are divided about whether this strategy will work. "Microsoft used the strategy of price cuts in Europe to gain market share. I don't think this will work in Taiwan as game content is more important than price," Eve Jung (戎宜蘋) of ABN-AMRO told the Taipei Times yesterday.
"Taiwanese game players prefer the PS2 as they themselves are closer to Japanese culture. The PS2 is more user-friendly ? and gamers in Greater China prefer games from Sony. Microsoft's games are more for US and European players," she added.
But others feel that Microsoft's move may push Sony to cut its prices as well. "The Xbox design cannot reach the quality level of the PS2, but the economy is not so good at the moment so price cuts are essential to increase volume on the marketing and industrial side. Microsoft's price cut will put pressure on Sony to cut its price," said George Wu (吳裕良), an analyst at Primasia Securities Co.
Microsoft has awarded the distribution contract for the Xbox in Taiwan to Synnex Technology International Corp (聯強國際). Synnex may find larger markets outside Taiwan if Microsoft's price cut ploy works. "The price reduction should boost sales. In the beginning Synnex had to spend a lot of money on marketing to promote the Xbox and the company was quite concerned. Synnex has only signed an agreement with Microsoft to sell the Xbox in Taiwan. If it distributes well in Taiwan, it will give the company an advantage to distribute in other parts of Asia," Wu said.
Taiwanese hardware manufacturers have benefited from the popularity of game consoles. Microsoft's Xbox is made by Wistron Inc (緯創資通), Nintendo's GameCube by Q-Run Technology Corp (華升電子), a unit of Hon Hai Precision Industry Co (鴻海精密). Sony's PS2 is made by Hon Hai and Asustek Computer Inc (華碩電腦).
Asustek has seen an increase in orders from Sony already, and low-price-fueled sales could bring more orders its way. "The revenue contribution that Asustek receives from its manufacturing of the PS2 will increase from single to double-digit percentage points next year. A global price cut will benefit Asustek even further," Wu said.
Strategy Analytics, a global research and consulting company, predicts that by the end of this year Sony will sell 26.3 million PS2 units worldwide, or 63 percent of the total game consoles.
Sony has led the market with almost half the world market share until 2000, rising to over 50 percent last year. Cumulatively, Sony now has 72 percent of the market. Nintendo's GameCube comes in second with 16 percent and the Xbox trails at 12 percent.
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