As Wal-Mart Stores Inc, Carrefour SA and other foreign retailers crowd into China, they are greeted with open arms by a government which, in this industry at least, shows few protectionist proclivities.
A major reason for the welcoming attitude is that the foreigners, for all their lofty ambitions and deep pockets, remain minor players in a giant market where 1.3 billion people are learning the joys of mass consumption.
"Excessive market share [by a foreign company] is not a concern for the government," said Candy Huang, an analyst with BNP Paribas in Shanghai. "The biggest player in China currently has only around a 5 percent national market share."
The foreigners are working hard to become bigger. Earlier this month, British retailer Tesco Plc said it would open 10 more outlets in China this year after its first store in Beijing opened last month.
With a 90 percent stake in Hymall -- a grocery brand under Taiwan-based Ting Hsin International Group (
Home Depot Inc of the US also recently signed an agreement to buy China-based retailer Homeway's 14 home furnishing stores to better compete with British rival B&Q, which has 52 stores in China.
"Consolidation is definitely the trend," Huang said. "In the end there will be only three or so big players -- but the retail market will definitely not be dominated by foreign names."
Local authorities will not allow foreign players to totally dominate and will support Chinese retailers as they move to improve their procurement and marketing practices to overseas standards, analysts said.
Chinese retailers, too, are trying to become bigger using takeovers.
One example is GOME Electrical Appliances Holdings Ltd's (
GOME's takeover of China Paradise would only be deemed truly successful following full integration of their operations and business styles, observers said.
"We really have to see whether GOME-Paradise works," said an analyst at a Hong Kong brokerage.
"There are thousands of employees [in GOME-Paradise] and hundreds of new stores, so the big question is how to standardize negotiating strategies with suppliers," said the analyst, who declined to be named.
Like GOME, retailers in China are often choosing non-organic expansion to attain greater reach, said Tiger Tong, an analyst with Singapore-based Asia Knowledge.
"Mergers are accelerating because the market is simply too fragmented, and bigger players hope to merge their way into attaining more effective `economies of scale' to boost margins," Tong said.
He noted that in certain "sensitive" sectors such as machinery, China has tightened rules on mergers and acquisitions but the retail sector was not an area where the government was trying to restrict foreign participation.
"In the retail sector, China is encouraging foreign mergers and acquisitions," Tong said.
A proposal last year by the central government to consider regulating the number of stores or the rate of expansion for foreign retailers is unlikely, if passed, to be strictly enforced in practice.
"In terms of real implementation it would be terribly difficult to carry out," Huang said.
"Bear in mind that regional governments want to boost their economies so they are more than willing to let foreign retailers come into their cities or provinces to open stores to solve unemployment problems," she said.
Regulators were trying to find a balance between ensuring the vitality of big domestic retail outlets and responding to foreigners' complaints about entry barriers and opaque acquisition rules, she said.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
ARTIFICIAL INTELLIGENCE: The chipmaker last month raised its capital spending by 28 percent for this year to NT$32 billion from a previous estimate of NT$25 billion Contract chipmaker Powerchip Semiconductor Manufacturing Corp (力積電子) yesterday launched a new 12-inch fab, tapping into advanced chip-on-wafer-on-substrate (CoWoS) packaging technology to support rising demand for artificial intelligence (AI) devices. Powerchip is to offer interposers, one of three parts in CoWoS packaging technology, with shipments scheduled for the second half of this year, Powerchip chairman Frank Huang (黃崇仁) told reporters on the sidelines of a fab inauguration ceremony in the Tongluo Science Park (銅鑼科學園區) in Miaoli County yesterday. “We are working with customers to supply CoWoS-related business, utilizing part of this new fab’s capacity,” Huang said, adding that Powerchip intended to bridge
Microsoft Corp yesterday said that it would create Thailand’s first data center region to boost cloud and artificial intelligence (AI) infrastructure, promising AI training to more than 100,000 people to develop tech. Bangkok is a key economic player in Southeast Asia, but it has lagged behind Indonesia and Singapore when it comes to the tech industry. Thailand has an “incredible opportunity to build a digital-first, AI-powered future,” Microsoft chairman and chief executive officer Satya Nadella said at an event in Bangkok. Data center regions are physical locations that store computing infrastructure, allowing secure and reliable access to cloud platforms. The global embrace of AI
Qualcomm Inc, the world’s biggest seller of smartphone processors, gave an upbeat forecast for sales and profit in the current period, suggesting demand for handsets is increasing after a two-year slump. Revenue in the three months ended in June will be US$8.8 billion to US$9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be US$2.15 to US$2.35 a share. Analysts had projected sales of US$9.08 billion and earnings of US$2.16 a share. The outlook signals that the smartphone market has begun to bounce back, tracking with Qualcomm’s forecast that demand would gradually recover this year. The San