Chinese Tech Stock Weekly Report (6/2 - 6/8)

Semiconductor

• Semiconductor Manufacturing International Corp. (SMI) Chief Executive Officer Richard Chang said the company is talking to as many as four investors about a partnership. The unprofitable company prefers to sell a stake to a strategic partner such as a customer, rather than a financial institution. SMIC said in March that it was in advanced talks with an unidentified investor after receiving proposals from private equity firms last year. Chang declined to identify the companies SMIC is talking with or say when he expects to reach an agreement.

Telecommunications

• China Unicom (CHU) will emerge as the biggest winner in China’s telecom industry's overhaul, but China Mobile (CHL) gets to keep its dominance of the wireless sector despite prospects of greater competition, analysts said. They said Unicom stands to gain the most as it sheds its CDMA mobile operations, focuses its attention and resources on GSM and new third generation mobile business and emerges as the second largest fixed-line operator after China Telecom. All players will benefit from the restructuring. The degree of benefit will be greatest for Unicom as it sells off its CDMA business and re-focuses its attention and resources on GSM and eventually, third generation (3G) businesses.

• China Telecom (CHA), which is in the process of buying China Unicom's CDMA business for US$15.9 billion, says it's ditching CDMA in favor of Long Term Evolution [LTE]. The plan by China Telecom to eschew Ultra Mobile Broadband [UMB], the presumptive 4G upgrade path for CDMA, has gone almost unnoticed, what with all the furor about the massive restructuring of China's telecom industry into three competing mega-companies. What China Telecom is doing mirrors what's happened at a string of CDMA carriers around the world, most notably at Verizon Wireless, resulting in what's emerging as a clean sweep for LTE in China.

• Wang Xiaochu, chairman and CEO of China Telecom, is confident that the newly acquired CDMA business will show a profit in 2012. China Telecom has agreed to buy China Unicom's CDMA business and forecasts the CDMA business would bring profits in 2012. China Telecommunications Corporation, the parent company of China Telecom, at the same time, will also buy CDMA network assets from the China United Telecommunications Corporation and Unicom New Century Telecommunications Corporation.

• China Telecom plans to have other telecom operators as strategic shareholders and is in talks with four to five large companies. Currently China Telecom has over 50 million PHS (PersonalHandy phone System) users and chairman and CEO Wang Xiaochu says one-third of the PHS userswill shift to CDMA services and another one-third will stay as PHS clients, and the remaining low-endcustomers will withdraw from China Telecom's service.

• China Tel Group announced the appointments of Colin Tay as President and Mario Alvarez as Chief Operating Officer. Both joined the Company's Board of Directors as of May 24th of thisyear and held previous executive positions with Trussnet USA, Inc., which was recently acquired byChina Tel. As company President, Tay has over 25 years of large infrastructural construction projectexperience working in the markets of Asia.

• China Telecom Group may receive up to 50 billion yuan (HK$7.2 billion) in subsidies to compensate for the high price it paid for China Unicom Group's CDMA mobile network. Sohu.com quoted unnamed sources as saying that the National Development and ReformCommission could grant a 30 billion to 50 billion yuan (US$4.3 billion to US$7.2 billion) subsidy tothe parent firm of China Telecom Corp to help develop the business.

Media, Entertainment and Gaming

• DataDirect Networks, the data infrastructure provider for more than 400 broadcasters and post production companies worldwide, announced that China Central Television [CCTV] has selected its Silicon Storage Architecture [S2A] platforms to support broadcast production of the 2008 Beijing Olympic Games. The 2008 Beijing Olympics are expected to be watched by arecord-setting 1.3 billion viewers in China this summer on CCTV's multiple channels which will alsoprovide feeds to numerous foreign broadcasters creating significant new requirements for databandwidth, throughput and scalability.

• Shanda Interactive (SNDA) has delayed the launch of Changchun Online, its major game title this year, because of the Sichuan earthquake. But analysts say the firm may also need the time to adjustits pricing strategy. Changchun, licensed from Korean game developer Wemade, is one of themainland's top 10 most anticipated games this year, according to an earlier survey by market researchfirm International Data Corp. Shanda said it would move the start of the game's open beta testingfrom the second quarter to the third in the wake of the quake.

Software

• NewMarket China grew revenue by 36 percent in 2007 to US$40 million with a net income growth of 83 percent. The company also announced its first contract for Latin America afterlaunching a regional sales initiative in Brazil and Chile in April. NewMarket China has been engaged tolocalize a Chinese telecommunications software package for use throughout Latin America. The projectis anticipated to contribute approximately US$1 million to NewMarket China's 2008 revenue.NewMarket China's client anticipates a major announcement later this year with the launch of newconsumer service offering based on the Chinese telecommunications software package.

Hardware

• Sales last year in China's digital photo frame market rose 80.4 percent to 175,000 units, said IT researcher CCID Consulting. China's Aigo, South Korea's Samsung and US' ViewSonic are the topthree vendors in China with two-thirds of the market.

• Dell (DELL) aims to release more low-cost models on the mainland later this year to meet growing demand from consumers and small businesses. The U.S. company said the strategy was in line withits efforts to establish a presence in 1,000 cities across the mainland. The No.4 personal computersupplier on the mainland, saw its sales performance in the country boost first-quarter revenue by 19percent year on year in its Asia-Pacific and Japan market. India and China led the region with revenueincreases of 52 percent and 30 percent, as well as unit shipment growth of 68 percent and 43 percent, respectively.