China in the first quarter posted the fastest growth in broadband subscribers of any global region, as presented in the attached figure. The country accounted for 37 percent of new worldwide subscribers during the quarter in the first quarter, as presented in the figure.
Source: iSuppli, USA.Based on the performance in April and May, the blistering growth should continue in the second quarter, with an estimated 5.5 million net new subscribers added when final figures are tallied.
Growth isn’t expected to slow down as the Chinese government in April approved a stimulus plan for building fiber broadband networks through seven government ministries. Overall, the stimulus plan calls for $22 billion in total investment in fiber networks that will establish more than 80 million fiber broadband ports by the end of 2011.
iSuppli’s predicts China’s broadband subscribers will rise to 183.9 million by 2014, up from 103.2 million in 2009.
“While some believed that the poor performance in the fourth quarter of 2009 would signal a slowdown to the stimulus in China for broadband, this doesn’t seem to be the case,” said Lee Ratliff, senior analyst for broadband and the digital home at iSuppli. “Along with the stimulus program, first-half subscriber growth indicates that the broadband market in China is still going strong and will likely remain the dominant for years to come—assuming the economy remains stable.”
Get stimulated
China’s decision to inject $22 billion into fiber deployment shows a high level of commitment from the government to develop a strong base for fiber access in China.
The seven ministries that will participate in the broadband stimulus program to provide new fiber deployments across the country include the Ministry of Industry and Information Technology (MIIT), the National Development and Reform Commission, the Ministry of Science, the Ministry of Finance, the Ministry of Land, Housing and Urban-Rural Construction, and the State Administration of Taxation.
To increase deployment of the technology, the stimulus program will provide tax incentives and subsidies to domestic fiber broadband equipment manufacturers as well as to vendors of optical chips and optical modules.
Unlike previous stimulus programs, this new policy directly targets and benefits the equipment manufacturers.
Who benefits?
The current expansion in the broadband market and its projected growth due to the stimulus program will continue to fuel the upward movement of Chinese telecom OEMs as well, particularly those with a large stake in the optical market.
The most likely winners from this blistering growth in the broadband space are Huawei Technologies, ZTE, Shanghai Bell Alcatel and FiberHome. Similarly, optical vendors Source Photonics, WTD, NeoPhotonics, AcceLink and WXZTE will see some benefit.
Western vendors that are looking for a piece of the pie from this stimulus program will likely need to partner with local companies or deepen relations with Tier 1 domestic vendors and OEMs in order to take advantage. And for vendors without a long-term strategy for China, they must develop one quickly or risk being left out of one of the most significant broadband markets in the world.
Source: iSuppli, USA.
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