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China 2016: CATEGORIES IN BRIEF | Technology

BRANDS SPEED OVERSEAS GROWTH, ESPECIALLY SMARTPHONE MAKERS

The technology category increased 32 percent in the BrandZ Top 100 Most Valuable Chinese Brands 2016. In ranking order, the 10 technology brands in the BrandZ China Top 100 are: Tencent, Baidu, Huawei, Lenovo, Letv, NetEase, 360, ZTE, Youku Tudou, and Sina.

These brands comprise 10 percent of the brands in the BrandZ China Top 100, and 27 percent of the ranking’s total value, making technology the largest value contributor, ahead of the 19 percent that banks represent. With this year’s entrance of smartphone maker Huawei, at rank seven, three of the BrandZ China Top 10 brands are in technology.

The rapid growth and high value of China’s technology brands is significant for several reasons: (1) it mirrors the rise of market- driven brands; (2) it identifies innovation as a characteristic of rising Chinese brands; and (3) it signals the transition of China’s economy from production-driven to consumption-driven.

In addition, despite the enormous size of the potential consumer market in a country of over 1.3 billion inhabitants, successful technology brands are looking beyond China for opportunities. Typically, Chinese brands expand first to neighboring countries or emerging markets, but many of the technology brands are challenging western competitors. 
 

In the dominance of technology as a brand value contributor, the BrandZ China Top 100 resembles the BrandZ Global Top 100, where technology, primarily US brands, comprise about 30 percent of value. In contrast, the financial category makes up less than half of the BrandZ India ranking, and technology’s contribution is negligible.

The Chinese government’s unique ability to define and implement national priorities helps drive technology. As in most industrialized countries, China’s technology brands are developing new products and services that integrate the Internet, the cloud, mobile, big data and the Internet of Things. In China, the government advances these commercial goals with a national economic growth plan, launched in 2015, and named Internet+.

SMARTPHONES AND OVERSEAS EXPANSION

Among the factors that drove the rise of Huawei into the BrandZ China Top 100 are overseas sales, particularly in Western Europe. Huawei, originally a maker of telecommunications equipment, built a smartphone business by o ering quality products at more a ordable prices than Apple or Samsung. The brand shipped over 100 million smartphones in 2015, a 44 percent year-on-year improvement. In an e ort to close the gap with Apple, Huawei reportedly plans to introduce its first PC during 2016.

Other Chinese technology brands also are developing smart phone businesses and enjoying sales outside China, including giant PC maker Lenovo. The 2014 purchase of Motorola Mobility, from Google, accelerated Lenovo’s efforts to become a global smartphone competitor. The acquisition fits with the plan to grow revenue outside of the core PC business by restructuring the business into three areas: PCs, smartphones, and enterprise.

In a joint venture, 360, a supplier of mobile security products, also launched a new line of mobile phones, with special security features. Initially targeted for the Indian and Indonesian markets, 360 planned to expand to Brazil, Russia and Turkey. Letv is active in the smartphone business, too. The brand, originally a streaming video site, is developing an ecosystem to connect TV, smartphones, video and,
ultimately, energy-saving cars. 

Meanwhile, ZTE, a maker of network equipment and a ordable smartphones, introduced a mid-priced smartphone aimed specifically at consumers in North America. NetEase, a gaming leader, announced plans to market certain games in North America. The brand also invested in an e-commerce platform designed to speed delivery of products purchased online by Chinese consumers from overseas vendors.

MAINTAINING LEADERSHIP

China’s most valuable brand, Tencent, continued to leverage its key strength – ubiquity. It increased the number of monthly users of WeChat, its messaging and caller app, to over 600 million. And the brand leveraged WeChat’s functionality to promote its payment system, which can be used for purchasing at physical locations and online.

Tencent partnered with JD.com, China’s second largest e-commerce site, to o er marketing and branding services. The initiative, called Brand-Commerce, combines Tencent’s social networking data and JD.com’s online shopping data to reach targeted buyers in the most appropriate online channel, with ease of purchase.

At the same time, Tencent monetized its high penetration, doubling online and video advertising revenue. The brand also investigated ways to increase its gaming revenue by introducing its games abroad. Tencent rose 24 percent in brand value, after almost doubling in value a year ago. 

Baidu, China’s largest search engine, continued to enjoy strong advertising revenue from search, although it is rapidly shifting to mobile, which is less profitable. The brand worked on building O2O revenue by connecting some of its online search functions, such as mapping, with o ine purchasing opportunities.

Sina, the Internet portal, gained revenue through its many vertical channels, such as entertainment and sports, and it grew revenue on Weibo, its micro-blogging site. And the brand worked to adjust to the rapid shift to mobile.

Youku Tudou, the popular video site, similar to YouTube, entered the BrandZ China Top 100 for the first time, following its acquisition by Alibaba, as part of the e-commerce leader’s attempt to expand into digital media.