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Massive Chinese set-top box orders favour locals

But Cisco and Ericsson get a taste

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The magnitude of China Telecom‘s set top plans – with 3.6 million set tops being ordered in a variety of programs – shows how Chinese companies are likely to dominate the set top industry in the coming years and months.

The tender for this round of 2012 devices is just complete and will only take the giant operator through to June 2012, with more to be ordered down the road in 2012, and in almost every case the supplier is Chinese, although it is likely that the US majors will find a route into the IPTV supply chain by supplying either devices or designs to these groups. At this rate the Chinese market will eat up at least 6 million new devices in a single year, catapulting it close to the top of the IPTV leaderboard and giving its suppliers more and more influence, and opportunities to begin bidding overseas.

The set top tender results came out in late October, with the top five set top companies being designated as "class one" manufacturers, which will mean they get the majority of the supply contracts, some 80 per cent from each province, and a further five classified as "class two" manufacturers, picking up the rest of the orders.

The news came out of Marbridge Consulting, which has set up local Chinese coverage of a variety of technology issues, and covers 2.83 million IPTV standard definition devices and 880,000 high definition. In total 15 separate manufacturers competed for SD and 17 for the HD supply.

Huawei Technologies, Shenzhen Skyworth Digital Technology, Fiberhome Telecommunication and Shanghai DareGlobal Info Tech landed the class one deal for SD devices, all local public companies with their own product lines, while Qware Technology which is a Cisco Gold Partner and which has no current set top designs, is one of the HD suppliers, and this may allow Cisco to get its designs into these orders. Alongside in the HD contract are Huawei and Skyworth again, ZTE and Sichuan Changhong, which is one of the major TV makers in China which says that it is the largest manufacturer of set tops in China, but we can find no record of it having made an IPTV set top, so it could be up for partnering western companies for an IPTV design.

Alcatel Lucent one of the few western firms getting a piece of action

Alcatel Lucent is one of the suppliers in class two for SD set tops through its Shanghai Bell subsidiary, but it has no part of the HD contract.

It is joined in class two by Jiangsu Yinhe Electronics, which has made cable set tops since 2007; Sichuan Changhong again; Sunniwell Broadband Digital Science, which has been in HD IPTV set tops for years; and Chengdu 30Kaitian Communication Industry.

Interestingly, Ericsson has a part of the HD class two contract – although to our knowledge it does not supply IPTV set tops outside of China and the Asia Pacific. Alongside it is Fiberhome, Chengdu again, UTStarcom – which will be disappointed not to have landed more business out of this round of bids – and Shanghai DareGlobal again, which is really a home gateway company moving sideways into set tops.

Finally in HD class two is Chinese online video site LeTV, which we presume is not for a device, but for HD streaming delivery to some of these set tops. LeTV went public with some fanfare last year, so it may well have used the money to bring out its own set top at some point.

Meanwhile UTStarcom, a company that focuses entirely on IPTV services, delivered its third quarter results this week, showing revenue up 35.7 per cent over this time last year to $83.3m, showing what a world of difference it is supplying set tops in China and the Far East rather than Europe and the US right now. It had gross profit up 164.2per cent to $31.9m. Operating income was $14.2m, compared to an operating loss of $23.3m for the corresponding period of 2010. Net income for the company was $8m compared to a net loss last year in this quarter of $17.2m. The company has liquid assets of $305.9m.

The company said that sales were driven by more PTN (Packet Transport Network switches) in Japan and MSAN (multi-service access nodes) products in India and Japan, as well as the supply of set-top boxes in China.

Copyright © 2011, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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