Coolpad Group Ltd (酷派) plans to use a new joint venture to quadruple online smartphone sales in China this year and help narrow the gap with leader Xiaomi Corp (小米).
The venture with Qihoo 360 Technology Co (奇虎360), owner of China’s second-biggest search engine, would boost online sales of Dazen-brand (大神) smartphones to 20 million units this year and drive an increase in total sales of about a third, Qihoo 360 Technology chief financial officer Jiang Chao (蔣超) said in an interview. Coolpad has a target of moving up one level to second place in China Internet sales this year, Jiang said at the company’s Shenzhen headquarters on Monday.
Qihoo agreed in December last year to buy a 45 percent stake in the e-commerce operations for US$409 million, as Coolpad brought in a partner with more skills in Internet services after Xiaomi’s surging online business cut into shipments. Coolpad, which had relied on wireless carrier outlets for sales, established the Dazen brand for Internet orders last year, and plans to open 20,000 of its own stores to bolster retail demand.
“Our company didn’t have wireless application teams and we didn’t know how to develop mobile software,” Jiang said. “Now Qihoo has come into this new joint venture so we can use Qihoo managers and R&D employees to develop very good wireless software.”
Hitting the online sales goal would boost Coolpad’s total smartphone sales to more than 60 million units, up from 45 million handsets last year, Jiang said. Xiaomi chief executive officer Lei Jun (雷軍) has set a goal of boosting total sales to 100 million smartphones this year, from 61 million last year.
Coolpad fell to fifth place in China’s smartphone market last year, with 9.4 percent market share, from third place in 2013 when it held 10.7 percent, according to International Data Corp (IDC).
Traction in Coolpad’s online sales push has been slow, because its previous focus on sales through operators made it weak in marketing and branding, Singapore-based IDC analyst Tay Xiaohan said.
“The tie-up with Qihoo will help Coolpad to a certain extent, since Qihoo has a strong base of users and stronger branding than Coolpad,” Tay said.
Qihoo only entered the Internet search-engine market in 2012, taking on leader Baidu Inc (百度). By the third quarter of last year, Qihoo had captured 16.7 percent of searches, according to data from Bloomberg Intelligence. That cut Baidu’s share to 75.8 percent, down from 84.1 percent in the third quarter of 2012, when Qihoo entered the market.
Coolpad could use the lift.
The stock is rated hold or sell by 11 of the 18 analysts tracked by Bloomberg, and only seven recommend investors buy it. In the next 12 months, the shares are projected to climb 15 percent to HK$1.72 in Hong Kong trading, from Monday’s close of HK$1.50, according to 12 analysts’ price estimates. The shares fell 1.3 percent to HK$1.48 by 10:28am in Hong Kong yesterday.
Coolpad would also target Xiaomi offline, Jiang said. The company plans to invest 300 million yuan (US$47.9 million) to open 20,000 stores to sell its phones by the end of next year, Jiang said. Coolpad plans to open the first 5,000 Ivvi brand shops by the end of the year, with another 15,000 planned for next year, he said.
The outlets would carry three brands of devices made by the company: Coolpad, Dazen and Ivvi, Jiang said. Having a retail presence would complement the online push, he said.
Instead of targeting new stores in first-tier cities such as Beijing, where high-income consumers gravitate toward Apple Inc and Samsung Electronics Co, Coolpad plans to focus on third and fourth-tier cities, where those brands do not reach consumers with lower incomes. The retail shops might sell between 5 million and 10 million devices this year, Jiang said.
“People like to see things online, but they also want to be able to see and experience the real phone offline as well,” Jiang said. “Online-to-offline is the future.”
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to