Communications & Networks

CCID Consulting data shows that the size of China's video conferencing market reached 2.98 billion Yuan in 2007, up 28.26% over 2006. Government, financial services, energy, telecom, and other Chinese sectors that have capital and require secure communications have been the past drivers of growth. Much of the video conferencing in these sectors have been built out. Growth has slowed compared to previous years, but there are three video conferencing drivers to watch.

Growth Prospects in China's Tier 4 and 5 Cities

China's economic development continues to expand to smaller, more rural areas. China's government and commercial sectors will have the need to better its infrastructure, including video conferencing capabilities, into these Tier 4 and 5 cities. However, these locales are very price sensitive, so video conferencing products must be simple, low-priced systems.

Vendors focusing in this segment are Chinese domestic ones, which provide high price-performance and associated branding. These vendors include KEDACOM, DVISION and AVCON, and will be competitive relative to multinational vendors.

SMEs Drive Software-based, Desktop Video Conferencing Popularization

Eleven million SME's in China drive this segment, as they are realizing the benefits of more efficient communications through this type of video-conferencing. SMEs also have low budgetary requirements, and they also lack technical resources to maintain more sophisticated systems. Their usage rates may also be lower compared to government and large enterprise sectors.

Therefore, SMEs are adopting video conferencing systems that leverage their existing resources, such as personal computing assets, related software, and the Internet, with relatively little additional investment. And these resources are getting more powerful, with faster and more powerful broadband access, multi-core PCs, and graphics display cards. The characteristics of these desktop systems trend towards more collaboration by way of sharing documents, graphics, whiteboards, desktops, VoIP, and other files.

For China's software-based video conferencing market, vendors AVCON, Radfort, and V2 account for over 80% of the total market share, with AVCON leading at 36%.

Availability of High Definition (HD) Video Conferencing Systems

HD conferencing systems were introduced in China in 2005. Since then, China's original adopters of video conferencing, that of government, financial services, and power sectors, have started to test and construct long distance HD systems.

Technological improvements and price reductions have been drivers for more demand. The advent of H.264 standard enabled higher transmission of data rates to support higher resolutions. Based on H.264, AVCON launched 1080p systems in September 2007, and also a first in "telepresence" systems in China. HP and Cisco launched 720p telepresence systems in China as well.

Given the improved scale economies and supply chain of 1080p video products, prices have gone down rapidly. Lower prices for 1080p screens mean lower prices for overall video conferencing systems. Also, video processing chip providers, such as TI, have also cut prices. The overall effect is providing enough incentive to upgrade older, high-end systems to HD.

AVCON takes the lead in the HD video conferencing market, with a market share of 30% in 2007. Other leading vendors in China are Polycom, TANDBERG, and LifeSize.

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Unless otherwise specified, all information provided is sourced from CCID Consulting.

Ó 2008 CCID Consulting Co., Ltd.