Tuesday, August 30, 2011

China set to challenge global wind industry

Standing under the enormous swinging blades of the world’s most powerful wind turbine near the German city of Magdeburg, it is hard to imagine that Europe’s wind industry has much to worry about when it comes to foreign rivals.
The turbine, which is almost as high as the Great Pyramid of Giza, was built by Germany’s Enercon, the fifth-biggest turbine supplier in the world.
The biggest, Denmark’s Vestas, is six hours’ drive away. Germany’s Siemens, the ninth-largest, according to the BTM wind industry consultancy, is nearby. And Gamesa, the eighth-biggest is a few hours flight away in Spain.
Altogether, Europe’s manufacturers account for 89 per cent of their own region; 32 per cent of the US and 37 per cent of the global market, says the European Wind Energy Association.
But even in this stronghold of homegrown might, apprehension is growing about an emerging force in the global wind industry: China.
Five years ago, there was not a single Chinese wind turbine maker among the world’s top 10 manufacturers. Now there are four: Sinovel, number two behind Vestas; Goldwind, Dongfang and United Power.
Wind turbine graph
China is putting up new turbines at the rate of one an hour, says a report co-authored by the Global Wind Energy Council, which estimates the country’s wind power could be 13 times the capacity of the Three Gorges dam by 2020.
China overtook the US for the first time last year in terms of total installed wind generating capacity, as Beijing strives to address the country’s huge energy needs and pollution problems.
But as China’s electricity system struggles to absorb thousands of new turbines, the government has slowed the growth of new wind farms. Against that backdrop the country’s turbine makers – whose machines can be 30 per cent cheaper than western rivals – are increasingly looking abroad.
At Sinovel, “internationalisation” is a “top priority”, says company spokesman Tao Gang. “Overseas business deals will play a decisive role in making Sinovel a truly international company” and Europe is “undoubtedly one of Sinovel’s most important markets”, he says.
At Enercon’s Magdeburg plant, Ruth Brand-Schock, head of the company’s Berlin office, answers with a simple “yes” when asked if she is concerned about China.
“We see the solar example and their aggressive strategy to take over the world market,” she says, referring to China’s emergence as the world’s biggest supplier of solar panels. ”And in wind, this is only just the beginning.
“Their turbines are not yet as high-quality as the European ones. So this gives us some time, but not too much.”
So far, the progress of Chinese companies in Europe has been slow.
Goldwind bought into a German turbine designer, Vensys, in 2008 and Sinovel signed an agreement with Greece’s main power generation company, PPC, in April to develop wind power projects.
The most notable deal so far came in July when Sinovel announced a €1.5bn ($2.2bn) wind farm deal with Irish wind park developer, Mainstream Renewable Power.
Over a lunch of herring and fruit at Siemens Wind Power’s plant in Brande, Denmark, Henrik Stiesdal, the company’s chief technology officer, agrees that “you have to take the challenge from China and other low-cost countries seriously, that’s obvious”, though he adds that for now, “there is a gap in quality confidence”.
The quality of Chinese-made wind turbines has been a source of concern for the Chinese government, which launched an investigation into the issue last November and tightened certification requirements for turbines at the start of this year.
“There is an element of snobbishness and fear among western manufacturers,” says Colin Morgan, of GL Garrad Hassan, the renewable energy consultancy. The design of Chinese turbines is only “slightly behind” that of western companies, he says, and there is “a lot of commonality in the supply chains” for both Chinese and western turbines.
Mr Morgan also dismisses another argument frequently heard in the European wind industry – that the cost advantage of Chinese turbines disappears once they are shipped abroad.
While some of this advantage obviously declines because of transportation, the Chinese still have an edge because of their access to finance, he says.
Sinovel’s Ireland deal was financed by the China Development Bank, which has also made a $6bn credit facility available to Goldwind.
”For an onshore project, 80 per cent of the capital spend is on the turbine purchase,” says Mr Morgan. “If finance comes with the turbines, that clinches it really.”
(Source: Financial Times)

Unilever extends ‘Shakti’ scheme to Africa

Unilever is transplanting its “Shakti” direct-to-consumer distribution scheme to Africa with one big difference: the vendor knocking on Nigerian village doors with sachets of shampoo and skin cream is as likely to be a man as a woman.
The move comes as multinationals tap into accelerating economic growth in Africa to sell shampoos, detergents and packaged foods to a population whose income is steadily rising. However, the dearth of formal retail networks – added to often ropey roads and railways – makes distribution tricky.
Unilever, the name behind Dove skin care and Flora margarine, is seeking to overcome this by replicating the model of employing tens of thousands of vendors that it developed in India in 2000.
The Shakti programme, which recruits women to sell to friends and family in remote villages, started in India with 17 “Ammas” (women) in two states and now boasts 45,000 women serving more than 3m households.
“We are kicking off the experiment as we speak in Nigeria and Kenya,” said Frank Braeken, who heads up the Anglo-Dutch conglomerate’s business in Africa, adding that it is at a very early stage.
In addition to the grittier issues of accessing remote villages and financing, he also reckons it will be tougher to recruit sufficient women, the backbone of the schemes in India and Indonesia.
“Women work full-time in Africa; they are the ones who really carry the agricultural economy. The men decide on the crop to plant and the women do the work. So that can make it more challenging for us to hire women along the lines of the Shakti Ammas,” he says. Instead, Nigerian teams are more likely to be a combination of men and women.
Nestle, the world’s biggest food group by sales, already operates similar distribution networks in parts of Africa. It has 1,500 ice cream vendors in South Africa – who are provided with bikes, uniforms and even washing machines – as well as 5,500 individual vendors in the central part of west Africa.
A similar scheme gathering pace in the Democratic Republic of Congo is targeting 100 first-time women entrepreneurs selling Nestle products in the streets of Kinshasa by the end of the year.
Unilever provides microfinance for its vendors and Mr Braeken sees this as a potential difficulty in Africa where banking infrastructure is less well-established than in India.
While the Shakti programme allows Unilever to distribute its products to far-flung places it could not otherwise reach, the conglomerate points out that it also provides a livelihood for people – especially women – who might otherwise struggle to find work. Instead, the scheme allows them to make a monthly profit of $15-$22, Unilever says.
(Source: Financial Times)

Barnes & Noble banks on e-reader business

Barnes & Noble, forecast that its e-reader business would double in size to $1.8bn over the next year, even as it reported another quarterly loss as its Nook device competes with Amazon’s Kindle in a capital-intensive battle for market share.
The US books retailer, which last month received a $204m investment for a minority stake from Liberty Media, championed the growth of its e-reader business on Tuesday while reporting that traditional book sales continued to decline.
 Barnes & Noble seeks to transform itself into a digital business with the Nook e-reader at its core. But it is locked in a fierce battle for customers with Amazon, which is extending its dominance of online commerce into e-books with its Kindle.
Barnes & Noble said that quarterly sales in its consolidated Nook business – encompassing the hardware, related accessories and e-books themselves – surged by 140 per cent to $277m in the three months to July 30.
“Nook has become a big and rapidly growing business for Barnes & Noble,” said William Lynch, the company’s chief executive.
Mr Lynch said its share of the US e-book market was 26 to 27 per cent. Amazon’s share is between 60 and 70 per cent, according to Benedict Evans of Enders Analysis, although definitive figures are not available.
On the Nook, Mr Evans said: “They’ve done better than everyone expected, partly due to the value of their in-store promotion … Others had neither a scalable route to market or a well-executed product.”
Barnes & Noble said it expected its consolidated Nook business to double to $1.8bn for the full-year to the end of next April, from $880m in its last financial year and $123m in 2010. However, the company forecast an annual loss for its whole business.
While Barnes & Noble has been able to promote the Nook at its bricks-and-mortar stores, Amazon has benefited from its ability to plug the Kindle online. Both are scrambling to sign up exclusive literary and magazine content for their devices.
Amazon has launched cut-price Kindle devices, including one sponsored by advertising and another by AT&T. The income streams from Amazon’s diversified business portfolio have increased its ability to invest in the Kindle.
In contrast, Mr Evans said: “Barnes & Noble has to sink or swim on sales of books.”
Alluding to its role in traditional book selling before e-commerce, he said: “The fundamental challenge for Barnes & Noble is that they’re going into a new [digital] market that is smaller, less profitable and where they have less share.”
For the past quarter, Barnes & Noble reported a net loss of $56m, compared with a loss of $62m in the same period last year.
Overall sales edged up 2 per cent to $1.4bn, even as in-store sales fell 3 per cent to $1bn.
Barnes & Noble forecast that it would gain a sales boost of $150m-$200m in the current financial year from the closure of Borders book stores, which went into liquidation in mid-July.
(Source: Financial Times)

China intensifies purchases of copper

Chinese companies and investors are stepping up their purchases of industrial commodities such as copper, in a show of confidence in the global economy that stands in contrast to the turmoil in western markets.
The wave of buying is providing support for metals and minerals prices after commodities prices fell this month at worries about a double-dip. Senior executives at trading houses, mining companies and banks said Chinese consumers had used the recent drop in prices to rebuild stocks.
 “China is significantly less pessimistic relative to people in the western world,” said Raymond Key, head of metals trading at Deutsche Bank. “On dips they are restocking, especially in copper.” An executive at an important Chinese trading house added: “There is no doubt some traders have been buying [copper] recently.”
The surge in copper buying benefits the largest exporting nations, including top producers Chile and Peru, and miners such as Freeport McMoRan Copper & Gold, BHP Billiton and Xstrata, and trading houses such as Glencore and Trafigura.
Copper prices fell to a 8-month low of $8,446 a tonne in early August, but since then prices have risen more than 9.0 per cent to $9,225 on Tuesday.
China accounts for 38 per cent of global copper demand, and as such has the power to almost single-handedly prop up the market even if companies in the west are holding back. Nonetheless, traders warned that Chinese buyers could rapidly step back from the market if they believed prices would fall further.
The buying by China marks a reversal of the trend in the first half of this year, when consumers in the country made minimal purchases of metals such as copper, choosing instead to run down their inventories as the government’s drive to tighten credit reduced their ability to import large volumes. China’s net copper imports in the first seven months of the year were down 37 per cent from the same period in 2010.
Glencore, the world’s largest commodities trader, said that so-called bonded warehouses stockpiles had seen a “significant drawdown”. It estimated that stocks have “at least halved” since the beginning of the year.
The strength of demand by China in the past four-to-six weeks has been buoyed by a jump in the strength of the renminbi, which makes importing commodities cheaper for Chinese traders. Western traders said that some large Chinese buyers had been able to access credit more easily, enabling larger purchases – although they cautioned that credit is still tight for smaller companies.
“We have seen our Chinese counterparties [have] been able to open significantly larger letters of credit than in the first half of the year,” a senior trading executive in Geneva said, referring to a typical financial instrument used on trading.
In a sign of China’s increased appetite for copper, the price of the red metal at the nearby hubs of South Korea and Singapore has in the past two weeks jumped relative to the benchmark London Metal Exchange’s price, brokers said.
(Source: Financial Times)

Mandarin Chinese Most Useful Business Language After English

Mandarin, China’s official tongue, is also the top language worldwide for business other than English, according to Bloomberg Rankings.
Mandarin, spoken by 845 million people, scored highest in a ranking of languages, excluding English, based on business usefulness. The ranking scored languages according to the number of speakers, number of countries where the language is official, along with those nations’ populations, financial power, educational and literacy rates, and related measures.
French, spoken by 68 million people worldwide and the official language of 27 countries, was ranked second, followed by Arabic, which is spoken by 221 million people and is official in 23 nations. Mandarin is unlikely to supplant English soon as the primary language of business, said Leigh Hafrey, a senior lecturer in communications and ethics at the Massachusetts Institute of Technology’s Sloan School of Management.
“In much the same way that the dollar remains the preferred currency, English will remain the preferred language for the foreseeable future,” Hafrey said in a telephone interview.
Mandarin speakers can gain an advantage in doing business in China, Hafrey said.
“Speaking the language confers a huge advantage for anyone who wants to do business in a non-English-speaking country,” he said. “It gives you flexibility, knowledge that you need, and personal connections that can make a difference in the speed and effectiveness of your negotiations.”
Spanish, the official language of 20 countries and spoken by 329 million people, came in fourth, the rankings showed.
Spanish was the top foreign language studied in U.S. college classrooms in 2009, according to research from theModern Language Association in New York. Chinese tallied seventh by the number of U.S. students enrolled in classes that year, after Spanish, French, German, American Sign Language, Italian and Japanese, according to a December 2010 report by the association. Arabic was eighth.
(Source: Bloomberg)

Memory Chipmakers Must Choose Merger or Death

Memory-chipmakers ProMOS Technologies Inc. (5387), Powerchip Technology Corp. (5346) and Elpida Memory Inc. (6665), burdened by debt, losses and falling prices, are under increasing pressure to seek mergers or exit the industry.
Taiwan’s ProMOS, with 16 consecutive quarterly losses, andJapan’s Elpida, beset by $4.61 billion in debt, produce chips that sell for less than they cost to make, said Mike Howard, an analyst at El Segundo, California-based IHS ISuppli. Powerchip hasn’t had a profit or sales gain in three quarters.
Chipmakers struggle to match supply with demand in the $39 billion market for memory in personal computers, where plants take years to come online and can’t be shut down cheaply. The challenge is deepening as consumers shun PCs, cutting prices for dynamic random access memory, or DRAM, 26 percent in the past year. Some companies may not be able to go it alone, said Makoto Kikuchi, who runs Myojo Asset Management Japan Co.
“Consolidation is inevitable for survival in this industry,” said Kikuchi, chief executive officer at Myojo in Tokyo. “It’s in a runaway deficit.”
DRAM makers as a group have lost 19 percent of their market value this year, according to Bloomberg data. That compares with a 13 percent slide in the Philadelphia Semiconductor Index, which charts the performance of the broader chip industry. The Nasdaq Stock Market has slipped 2.9 percent this year.
A smaller number of big chipmakers would be better equipped than multiple providers in gauging demand and adjusting output as buying fluctuates, Steve Appleton, CEO of Micron Technology Inc. (MU), said at a conference last week.

‘Very Challenged’

Micron, based in Boise, Idaho, along with market leader Samsung Electronics Co. and Hynix Semiconductor Inc. (000660) are the only DRAM makers among the top eight generating a profit.
Elpida, ProMOS, Powerchip, Nanya Technology Corp. (2408), by contrast, are less able to afford the billions of dollars in upfront costs for new plants and machinery. Without upgraded equipment, it costs more to produce the thumb-nailed-sized semiconductors.
Powerchip and ProMOS, ranked by Gartner Inc. as the sixth-and seventh-largest DRAM makers, have already scaled back their reliance on the PC market. Still, they are the most vulnerable, said Mark Newman, an analyst at Sanford C. Bernstein & Co.
“I find it difficult to believe they are going to survive this downturn,” said Newman, who’s based in Hong Kong.“They’re very, very challenged right now.”
DRAM factories can cost more than $4 billion to construct and become obsolete within about five years. It’s so expensive to shut and restart the facilities that manufacturers keep them running 24 hours a day, regardless of market conditions.

Boom, Bust

The industry boosted output 87 percent in 2007 and 63 percent the following year, before the recession crimped demand for electronics and DRAM prices plunged, according to Micron research. Production rose a more modest 45 percent last year, and may gain 48 percent this year amid sluggish PC buying.
Acquisitions have already reduced the number of memory chipmakers. Japan’s Elpida is the product of a 1999 merger between NEC Corp. (6701)’s and Hitachi Ltd. (6501)’s memory businesses.
Micron, which tried and failed in 2002 to buy Hynix, has bulked up in memory in other ways. It bought a stake in Taiwan’sInotera Memories Inc. (3474) in 2008, becoming joint-venture partner with Nanya. Micron expanded in DRAM in 1998 by buying the memory operations of Texas Instruments Inc. (TXN), a pioneer in the field.
Dealmaking doesn’t always improve a company’s prospects. Hynix acquired LG Semiconductor in a 1999 transaction that loaded it with debt and forced it to get a bailout.

‘Poor Men Together’

“If traditional consolidation means that several companies combine into one, then it’s kind of difficult because everybody’s financial situation is quite severe,” said Eric Tang, a spokesman for Hsinchu, Taiwan-based Powerchip. “Two or three poor men together don’t make a rich man. You have to find your own way.”
Samsung, which has 38 percent of the market, according to Stamford, Connecticut-based Gartner, has $9.15 billion in cash. Yet, the Suwon, South Korea-based electronics maker has focused on organic growth. It may shun purchases, betting it can build plants more efficiently by itself, said Young Park, a Hong Kong-based analyst at Woori Investment & Securities.
While there is “another play or two to make” in the DRAM market, there are few opportunities left to buy assets cheaply that add significant scale to a company, Appleton said last week. Dan Francisco, a Micron spokesman, declined to elaborate.
Hynix, based in Ichon, South Korea, has no plans to acquire other DRAM companies, said James Kim, Seoul-based spokesman for Hynix, the No. 2 DRAM maker.

Getting Out of PCs

“Regardless of consolidation in the industry, we will stay focused on reading future product trends to gain a technology leadership,” he said.
James Chung, a Seoul-based spokesman for Samsung, declined to comment.
To cope, some smaller chipmakers are diversifying away from DRAM and looking for other ways to decrease expenses.
Powerchip aims to curtail production of chips used in personal computers and shift instead to other types of semiconductors, Tang said.
Taiwan’s ProMOS is asking creditors to exchange debt for company stock and then intends to seek new investors to pump in cash, according to company spokesman Ben Tseng.
Japan’s Elpida, which received $1.7 billion in loans from the government, its Taiwanese partner and banks to keep it afloat in 2009, is unlikely to revive a failed plan to acquire Taiwanese chipmakers, said Myojo Asset Management’s Kikuchi.

Elpida’s Constraints

The Japanese government’s interest in maintaining native supply of memory chips may mean Elpida isn’t allowed to sell itself to an overseas company. Instead, Toshiba Corp. (6502), which makes a type of memory used in mobile devices such as Apple Inc. (AAPL)’s iPad and iPhone, may be tempted to take it on, said Sanford C. Bernstein’s Newman.
Hiroki Yamazaki, a spokesman for Toshiba, declined to comment, as did a representative of Elpida. Both companies are based in Tokyo.
Nanya, which has reported a profit in one quarter since mid-2007, has no plans to buy rivals, said Pai Pei-lin, a spokesman for the Taoyuan, Taiwan-based company.
“We are focusing on decreasing the cost and increasing prices,” Pai said.
The number of DRAM providers may nevertheless need to drop to about three, IHS ISuppli’s Howard said.
“It’s still going to be an industry in bad shape, even if it consolidates,” because production won’t be taken offline, said Howard. “If the industry gets down to three players, hopefully saner minds prevail.”
Some businesses may be forced out of business, said Kim Chang Yeul, a Seoul-based analyst at Mirae Asset Securities Co.Germany’s Qimonda AG sought protection from creditors in 2009.
“No one will want to buy these money-losing chipmakers now, and it’s a matter of who’ll get out of the market,” Kim said.“Who’d jump into this market?”
(Source: Bloomberg)

Global tobacco glut to result in crop size

With global stocks of tobacco piling up and Indian Tobacco Association's (ITA) insistence on buying less next year, tobacco farmers will have to reduce acreage by at least five per cent for the first time in the last five years.
The Tobacco Board is planning to use this bleak demand situation to reduce the crop size that would also help the country meet FCTC (WHO Framework Convention on Tobacco Control) norms.
The Production Committee of Tobacco Board has recommended reduction of crop size by at least 5 per cent to 162 million kg as against the usual 170 m kg in Andhra Pradesh. A similar reduction is likely to be imposed for crop in Karnataka, which grows 100 m kg, as well, after it completes auction in the next few weeks. The market also absorbs unauthorised produce of 50 m kg.
In all likelihood, the Board would ratify the Committee recommendation at the upcoming meeting on September 9, 2011, keeping in view the hostile market conditions.
“The ITA wrote to us that they cannot buy not more than 120 m kg. But the board convened a meeting with them and asked them to revise the figure. As a result, they agreed to buy 140 m kg,” Mr G Kamala Vardhana Rao, Chairman of Tobacco Board, told Business Line.
The industry was sitting on a pile-up of 250-300 m kg and had no appetite to add more. In turn, the ITA had cut its procurement estimates. As it did, the association had indicated that it was not going to buy produce from Central Black Soils and Northern Black Soils that produced 7 m kg.
Most of the crop size cuts might come up in regions that covered Krishna and Guntur districts in Andhra Pradesh.
(Business Line)

Crispy days over for starch makers

Demand dip, high input cost weigh on margins; manufacturers forced to sell at reduced prices.
High input costs, coupled with low demand from industrial users, have forced starch makers to scale back production volumes of starch and liquid glucose.
Demand from major consuming industries, including textiles and food processing, has taken a beating due to an overall industrial slowdown. According to industry insiders, the demand for starch and liquid glucose has dipped by 25 per cent in the past three months. The industry was also bleeding due to steep cost escalation of key inputs like maize.
“The input cost is hitting our margins. On the other hand, the demand from domestic and international markets is weakening. Manufacturers are forced to sell their produce at reduced prices. This is no longer viable for the industry. We have demanded an immediate ban on export of maize and reduction in excise duty on starch from five per cent to two per cent,” said Vishal Majithia, president, All India Starch Manufacturing Association.
Manufacturing capacities are also on the rise, with several new projects lined up for commissioning in the next two-three years. “We are also concerned about the new capacities being added. This will increase the maize grinding capacity from 1,500 tonnes per day (TPD) to about 3,000 TPD,” said Majithia, who is also managing director of Sahyadri Starch and Industries.
Persistently high input costs and low demand has led starch makers to incur losses. Some units have started downsizing production fearing further losses. “We are selling at much lower price just to stay operational. Starch prices have dipped to Rs 18 per kg recently from Rs 25 per kg two or three months back. There are no visible signs of revival in the near future. Hence, we are considering a in production by about 30 per cent for at least two months,” said Gautam Chaudhary, MD, Santosh Starch Products in Ahmedabad.
With the cost of raw materials, coal, logistics and labour high, starch makers are finding it tough to compete in the international market as well. West Asia, African countries and Southeast Asia are major starch consuming markets, where Indian starch players are facing stiff competition from French, German and Chinese suppliers.
However, some starch makers are comfortable even in the current scenario. BSE-listed Anil Limited sees no threat from a rise in new capacities and said the demand for starch products will increase in domestic and international markets.
“There has been no impact on demand for our products, as we mainly cater to paper, food, pharmaceutical and other industries besides textile. There is a marginal decline in demand from composite mills and more from the decentralised sector in the textile industry, but as we cater mostly to composite units, there has been only a nominal decline in our sales to textiles. Overall, the demand scenario for us is quite good,” said Amol Sheth, CMD of the company.
The stock prices of the company have, however, witnessed a fall on the bourse in the past one month (August 1 to August 30) — down almost 19 per cent in the past one month. Share prices of other starch makers have also witnessed a dip during the period — Riddhi Siddhi Gluco Biols Ltd lost 17 per cent, while Sukhjit Starch and Chemicals Ltd fell 14 per cent during the month.
“We are heading towards over-capacity in the starch industry. At such a crucial stage, the government needs to consider banning corn exports, even though there are attractive prices in the international market. The domestic industry should not be starved to cater to international buyers,” said Priyambhai Mehta, CMD, Maize Products.
As many as 12 projects are to be commissioned in the next two-three years. “What is attracting them to starch making is still a mystery for us but there had been a perception of corn being yellow gold for the processing industry. But the days are no longer the same, and the rising competition and high input costs is spoiling the pot for all,” said Mehta.
(Source: Business Standard)

Martin Feldstein: China's new currency policy

China’s government may be about to let the renminbi-dollar exchange rate rise more rapidly in the coming months than it did during the past year. The exchange rate was actually frozen during the financial crisis, but has been allowed to increase since the summer of 2010. In the past 12 months, the renminbi strengthened by 6 per cent against the dollar, its reference currency.
A more rapid increase of the renminbi-dollar exchange rate would shrink China’s exports and increase its imports. It would also allow other Asian countries to let their currencies rise or expand their exports at the expense of Chinese producers. That might please China’s neighbours, but it would not appeal to Chinese producers. Why, then, might the Chinese authorities deliberately allow the renminbi to rise more rapidly?
There are two fundamental reasons the Chinese government might choose such a policy: reducing its portfolio risk and containing domestic inflation.
Consider, first, the authorities’ concern about the risks implied by its portfolio of foreign securities. China’s existing portfolio of some $1.6 trillion worth of dollar bonds and other foreign securities exposes it to two distinct risks: inflation in the United States and Europe, and a rapid devaluation of the dollar relative to the euro and other currencies.
Inflation in the US or Europe would reduce the purchasing value of the dollar bonds or euro bonds. The Chinese would still have as many dollars or euros, but those dollars and euros would buy fewer goods on the world market.
Even if there were no increase in inflation rates, a sharp fall in the dollar’s value relative to the euro and other foreign currencies would reduce its purchasing value in buying European and other products. The Chinese can reasonably worry about that after seeing the dollar fall 10 per cent relative to the euro in the past year — and substantially more against other currencies.
The only way for China to reduce those risks is to reduce the amount of foreign-currency securities that it owns. But China cannot reduce the volume of such bonds while it is running a large current-account surplus. During the past 12 months, China had a current-account surplus of nearly $300 billion, which must be added to China’s existing holdings of securities denominated in dollars, euros and other foreign currencies.
The second reason China’s political leaders might favour a stronger renminbi is to reduce China’s own domestic inflation rate. A stronger renminbi lowers the cost to Chinese consumers and Chinese firms of imported products as expressed in renminbi. A barrel of oil might still cost $90, but a 10 per cent increase in the renminbi-dollar exchange rate reduces the renminbi price by 10 per cent.
Reducing the cost of imports is significant because China imports a wide range of consumer goods, equipment and raw materials. Indeed, China’s total annual imports amount to roughly $1.4 trillion, or nearly 40 per cent of gross domestic product (GDP).
A stronger renminbi would also reduce demand pressure more broadly and more effectively than the current policy of raising interest rates. This will be even more important in the future as China carries out its plan to increase domestic spending, especially spending by Chinese households. A principal goal of the recently presented 12th Five-Year Plan is to increase household incomes and consumer spending at a faster rate than that of GDP growth.
The combination of faster household-spending growth and the existing level of exports would cause production bottlenecks and strain capacity, leading to faster increases in the prices of domestically produced goods. Making room for increased consumer spending requires reducing the level of exports by allowing the currency to appreciate.
Looking back on the past year, the 6 per cent rise in the renminbi-dollar exchange rate might understate the increase in the relative cost of Chinese goods to American buyers because of differences in domestic inflation rates. Chinese consumer prices rose about 6.5 per cent over the past year, while US consumer prices rose only about 3.5 per cent. The three-percentage-point difference implies that the “real” inflation-adjusted renminbi-dollar exchange rate rose 9 per cent over the past year (that is, 6 per cent nominal appreciation plus the 3 per cent inflation difference.)
Although this is how governments calculate real exchange-rate changes, it no doubt overstates the relative change in the prices of the goods that Americans buy from China, because much of China’s inflation was caused by rising prices for housing, local vegetables and other non-tradables. The renminbi prices of the Chinese manufactured products that are exported to the US may not have increased at all.
The renminbi-dollar exchange rate is, of course, only part of the story of what drives China’s trade competitiveness. While the renminbi has risen relative to the dollar, the dollar has declined against other major currencies. The dollar’s 10 per cent decline relative to the euro over the past 12 months implies that the renminbi is actually down by about 4 per cent relative to the euro. The Swiss franc has increased more than 40 per cent against the dollar — and therefore more than 30 per cent against the renminbi. Looking at the full range of countries with which China trades implies that the overall value of the renminbi probably declined in the past 12 months.
The dollar is likely to continue falling relative to the euro and other currencies over the next several years. As a result, the Chinese will be able to allow the renminbi to rise substantially against the dollar if they want to raise its overall global value in order to decrease China’s portfolio risk and rein in inflationary pressure.
(Source: Business Standard)

Data to comprise 30% share of telcos revenue by 2016: Qualcomm

With the rising popularity of smartphones and tablets, data services would contribute about 30% of the revenues of telecom operators in India by 2016, mobile chipset maker Qualcomm said today.
"Data in terms of overall revenue is still less, 15%, but this would grow to 30% in 2016. This is an opportunity but also a challenge," Qualcomm Chairman and CEO Paul Jacobs said at its signature event - India On 2011.
He said challenges like upgrading of networks, increasing efficiencies and improving customer experience would hold the key to this growth.
Other industry players at he event also said that data services would be the next phase of growth of telecom players, especially with the availability of 3G and BWA spectrum.
While operators such as Airtel, Vodafone and Idea have launched 3G services, Boradband Wireless Access services are yet to take off.
Operators are also betting big on the upcoming tablet segment. With tablets now available for as low as Rs 5,000, data consumption on mobile devices (including laptops and mobile phones) is only set to rise, industry officials said.
Meanwhile, a host of announcements were made on the sidelines of the event.
HTC has launched EVO 3D mobile phone, based on Snapdragon S3 mobile processor, which offers consumers 3D viewing without the use of specialised glasses. It is priced at Rs 35,990.
"We are proud to collaborate with Qualcomm to present... the first smartphone available in the Indian market offering a superior 3D viewing experience without glasses," HTC India Country Head Faisal Siddiqui said.
Sony Ericsson also launched two new devices -- Xperia ray and Xperia active.
CDMA services provider Sistema Shyam TeleServices (SSTL), which operates under the brand name MTS, also launched two Android-based smartphones priced below Rs 5,000.
Mapping device maker MapMyIndia announced the launch of its CarPad, priced at Rs 22,990.
The 3G, seven-inch display tablet device is powered by Qualcomm's Snapdragon S1 processor and is loaded with 3D and connected GPS navigation interface.
"The device just doesn't offer navigation features but entertainment, connectivity and productivity features as well to everyone in the car. We see CarPad heralding a new era of the smart, connected car...," MapmyIndia MD Rakesh Verma said.
The device will be available for sale from September 15, 2011.
(Source: Business Standard)

Singapore Airlines to launch low-cost carrier

Facing stiff competition from low fare air-carriers, Singapore Airlines is all set to introduce a low-cost carrier soon, a top official said here today.
"We are looking for a low-cost carrier. It will be used in the short, medium and long haul routes," Singapore Airlines Southern India Manager Richard Tan said.
He said the launch of carrier would add to the existing operations of Tiger, Silk Air and Singapore Airlines cargo.
Declining to give further details on the carrier, he said the company recently appointed a CEO to head the LCC vertical.
Stating that the routes connecting Singapore were yet to be announced, he said the airline would not compromise on "quality" and "service".
On their India operations, he said the airline planned to introduce bigger aircraft and also increase frequency.
Admitting that their costs were marginally higher than private airlines, he claimed Singapore Airlines provides quality service, particularly for a passenger who has to connect another international flight.
"We make sure the passenger does not miss the connecting flight. This is one of the critical issues in this industry," he said.
He claimed the airline occupancy ratio was 80% to between India and Singapore and that most passengers opt to visit the city state during the month of May.
At present, Singapore Airlines connects Trivandrum, Cochin, Coimbatore, Hyderabad, Bangalore, Chennai along with Silk Air.
(Source: Business Standard)

China yuan could challenge dollar role in a decade

Here's a bold prediction to feed Western worries that power is shifting inexorably to the East: China's yuan could overtake the US dollar as the world's principal reserve currency as soon as next decade.

Beijing has been promoting the use of the yuan beyond its borders since 2009 to settle trade transactions. The resulting build-up of deposits in Hong Kong has spawned a thriving yuan bond market.

Internationalising the yuan, also known as the renminbi (RMB), brings with it a host of financial and political benefits. Notably, it allows China to build up claims on the rest of the world in yuan rather than increasing exposure to foreign currencies, especially a dollar that it distrusts.

But the consensus has been that China, as is its wont, would tread gingerly. The ruling, risk-averse Communist Party would keep capital controls in place, thus retaining its grip over the exchange rate and interest rates but preventing the yuan from becoming a truly international currency.

Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics, a Washington think tank, sees things differently.

"Chinese economic dominance is more imminent and more broad-based -- encompassing output, trade, and currency -- than is currently recognised," he writes in a new book, 'Eclipse: Living in the Shadow of China's Economic Dominance'.

Using an index of country shares in the world's gross domestic product, trade and net exports of capital stretching back to 1870, Subramanian calculates China is already on the cusp of overtaking the United States as the world's leading economy. On conservative assumptions, it will soon carve out an unassailable lead.

"By 2030, this dominance could resemble that of the United States in the 1970s and the United Kingdom around 1870. And this economic dominance will in turn elevate the renminbi to premier reserve currency status much sooner than currently expected," he writes.

Indeed, that time could come in a decade, based on the conclusion of prominent economic historian Barry Eichengreen that the dollar displaced sterling as the main global currency within about 10 years of the United States surpassing Britain as the world's dominant economic power.


In a telephone interview, Subramanian said the rise of the renminbi was not pre-ordained. Critically, China would need to scrap curbs on foreigners' access to the yuan for purely financial purposes; it would also have to win the trust of international investors by making its domestic markets deeper and more transparent.

Subramanian acknowledged that China's reformers were not yet winning the argument; Beijing remained wedded to a pro-export model that had successfully powered strong economic growth and thereby conferred legitimacy on the Communist Party.

But he said the costs of pursuing mercantilism were increasingly apparent: millions of Chinese factory workers lost their jobs when exports collapsed in late 2008, and inflation is rising in part because the yuan is being artificially held down.

Subramanian's key insight is that building on the current yuan liberalisation experiment and eventually making the renminbi convertible would offer China's leaders a political exit from mercantilism.

"Exporters will be kicking and screaming when the exchange rate goes up, but at least the leadership can say 'look at the huge gains: we have the RMB eclipsing the dollar and the world's number one currency'. It seems to me that that nationalistic card they can play is a very important one from the point of view of domestic politics," Subramanian said.

Alicia Garcia-Herrero, chief emerging markets economist at Spanish bank BBVA in Hong Kong, agreed that the yuan could attain the status of a reserve currency, widely used by central banks and other official institutions, sooner than expected.

By analogy with Thailand and its currency, the baht, she said the yuan could become freely convertible even if China did not dismantle all its capital controls.

"If China avoids massive inflows it could happen within five years. Five years ago, you couldn't have imagined what has happened with the RMB bond market," Garcia-Herrero said. "The trend is very clear."

In promoting the yuan's use overseas, China's leaders are seizing an opportunity to gain a foothold in Asia at the expense of the United States, Europe and Japan, all weakened by the global financial crisis, Garcia-Herrero said.

But she said Beijing was also making preparations for the distant day when an ageing China, now the world's biggest holder of foreign-exchange reserves, would become a net debtor.

"If you have a reserve currency, the stronger your currency in terms of international use, especially official use, the better chance you have for others to lend you money. We've seen that with the U.S.," Garcia-Herrero said.

"That is the important lesson in the long, long run, and so you have to start well in advance."

In the meantime, China-watchers expect more and more of the country's trade to be invoiced and settled in renminbi.

Simon Freemantle and Jeremy Stevens, economists at Standard Bank, Africa's largest, believe 40 percent of Sino-African trade will be settled in renminbi by 2015. That would amount to $100 billion -- more than total two-way trade in 2010.

"China will start the programme by targeting African partners which are destinations for sizable Chinese exports, regional heavyweights and have mature financial markets: first Nigeria and South Africa, then Kenya, and afterwards Angola and Ghana," they said in a report.

Rosy projections of the unstoppable rise of China, or of emerging markets in general, invite the objection that extrapolating past trends into the indefinite future is fraught with danger.

Subramanian duly laces his book with caveats but nevertheless concludes that the economic world in 2030 will be unrecognisably different from what it is today as poorer, more populous countries grow faster than advanced economies.

"A key message is that the dominant West will have to start readjusting to the new reality of relative but not necessarily absolute decline," he writes. "In particular, the economic dominance and hegemony of the United States will be under challenge from a rising China."

(Source: Reuters)

Developing world has to stabilise core of global economy

Habits die hard. For too long the world has looked West for cues. It is after all not that long since the sun never set on a particular western empire and even shorter since the US led the world in almost every sphere - technology, economic, finance and military.

In 1988, the developed world made up 83% of world GDP and even as recently as 2000 this share was 80%. Today the share has fallen to 65% and in another five years will fall below 60%. Thereafter? Modest extrapolations suggest that in another 15 years, it will drop further to 50%. The developing world will have the other half. Is this inevitable? Of course not - nothing ever is.

The late economic historian Angus Maddison estimated that in 1700 both India and China accounted for a quarter each of world GDP. What happened thereafter was not just the success of colonial conquest, but also the abysmal failure of the colonised to protect their interest.

The opportunities that present themselves today to India, China and the rest of developing Asia and Africa are as much a consequence of the heroic struggles of their peoples for freedom, the painstaking and slow construction of a modern economy and an educated society, as it is of the relatively easier access to technology and markets today, a product of a globalised world and the enterprise of developing economy businesses.

It is three years since the global crisis broke on the failure of Lehman Brothers over the weekend of September 12-14, 2008. This columnist was, if memory does not fail, the only one who dated the crisis to this turning point. Over the years, it has slowly become the consensus. US Federal Reserve chairman Ben Bernanke, in his Jackson Hole speech last weekend, noted that "we meet here today almost exactly three years since...."

He called it "since the most intense phase of the financial crisis", but in truth what it was "since" the Federal Reserve and the US Treasury failed to anticipate what letting Lehman go would bring in its aftermath. Some $3.5 trillion of federal debt later, three years of lost growth later, three years of unemployment at 9% plus later and with a difficult near-term future ahead - it looks like a measly and ill-considered decision - an avoidable discontinuity.

There is a clear and present danger of triumphalism in those economies that did not dive alongside the West. In Asia there were plenty of smirks, a sense of self-congratulatory satisfaction. One saw that here and I saw it in China - more abundantly there and here. But that may just have been the manner of articulation.

China, with national output of $6.5 trillion, is ahead of us ($2 trillion), but both of us (more we than them) are far away from where we need to be so that the majority of our population can even begin to think of themselves as citizens of a moderately developed economy.

In the past decade, all emerging countries benefited from the stability that was lent to world trade, investment and finance by the comfort of a prosperous West. However, today that comfort does not exist and therefore neither does the calming hand in global waters. The seemingly obvious thing that should happen when the engine of growth begins to switch from the West to the developing world is that investment and finance increasingly flows to the latter.
However, gradual shifts and disruptive ones are hugely and meaningfully different. Gradual shifts would have meant that incremental flows on investment and finance would have moved direction in line with increments to global output that was located in the developing world. But with disruptive change, it is not only the increments that are affected, but also the stock.

The not unexpected (in my view, but a nasty surprise to most it seems) slowing down of the US economy (1% in the quarter to June) and similar troubling numbers from Europe are bad news. But that is only half the story. There is the familiar quagmire of the sovereign debt and solvency issue in the eurozone.

A script largely written by euro-grandees of French origin decades ago, the bill to be footed mostly by Germany: It seems like the last scene in a great tragedy. Either from it will rise a political union of Europe or a virtual dissolution of the monetary union. Considering that 600 years of war and millions of dead did not succeed in making a united nation of Europe it would be poetic if a financial crisis can.

To my mind, the other possibility is more likely. In the US, it is extremely unclear how the fiscal deficit will abate and the federal debt stabilise. It can happen under certain assumptions, as the Congressional Budget Office (CBO) in a brief released last week showed. Whether such assumptions can materialise is another matter.

Finally, there is the unpleasant and abundantly clear fact. Namely, the conventional tools of fiscal and monetary measures have not worked as expected. Worse, there is no ammunition left - the powder is blown. The combination of weak economic growth and fiscal stress is causing tremors.

In this bleak world of uncertainty people are not looking for profit, but ways not to make a loss. The driver of investment and growth is risk taking - the search for profit. Its beleaguered state in what is still the core of the global economy colours the outlook for the rest. Hoping that things will calm down in the West and the atmosphere of 2004-07 will return is futile.

Developing nations should understand this well. They do not yet have the capacity to stabilise the core of the global economy, but they can influence matters at the edge. If they seem to be turning into their own variant of basket cases, it will not happen. It will be a hard slog, but we have to live up to this challenge.
(Source: Economic Times)

Hollywood studios Fox Star, Viacom18, Walt Disney keen to produce films in regional languages in India

For Tamil film lovers, Engaeyum Eppothum (everywhere, all the time) is a much-awaited yarn on the love lives of four men and women travelling on two buses. But for Vijay Singh, the Mumbai-based chief executive officer of Hollywood's Fox Star Studios' India operations, there is much more riding on the flick being co-produced by the studio. This is among the early regional language productions by a Hollywood studio.

And Singh believes "the success of the film could redefine the strategy of foreign production houses in the Rs 5,000-crore regional language film industry (non-Hindi)".

In another part of Mumbai, Bhojpuri actor and film producer Ravi Kishan is deep in talks with an international production house. "Hollywood studios are trying to understand the Bhojpuri market and are looking at co-production opportunities," he says.

Around 75 Bhojpuri movies made every year generate more than Rs 200 crore in revenues. This is growing at 20% annually. Nearly 35 crore people watch Bhojpuri movies across northern India and overseas.

It's a similar story in other languages - 150 Tamil films and 120 Telugu flicks grossed over Rs 500 crore each. Nearly 60% of India's Rs 8,750-crore film revenues come from regional films, according to analyst estimates.

"One hit could open the floodgates for global production houses," says Jehil Thakkar, head (media & entertainment), KPMG India. "Fox, Viacom18 and Disney are waiting to produce films in Bangla, Malayalam and Bhojpuri."

Singh says Fox is discussing more coproduction deals in Tamil, Bangla and Malayalam. Walt Disney India released the Telugu fantasy adventure Anaganaga-O-Dheerudu in January. It was a co-production with K Raghavendra Rao.

"Once Disney completes the acquisition of UTV (its partner), it is expected to expand its presence in regional languages," says a senior executive with an Indian production house.

UTV is already focusing big on Tamil and Telugu," the executive says. Walt Disney India declined comment. Viacom18 is scouting for opportunities in Tamil, Telugu, Marathi and Punjabi.

"We are negotiating various business models with regional partners to enter the regional language movie space in the next 4-5 quarters," says Vikram Malhotra, chief operating officer at Viacom18 Motion Pictures. Warner Bros Pictures India signed a pact with Soundarya Rajnikanth's Ocher Studios for making 'live action' south Indian language films in 2008, but nothing has come of it yet. A Warner Bros India spokesperson did not comment on future plans.

Fox Star Studio's Engaeyum Eppothum, which releases on September 16, has been co-produced with AR Murugadoss, who directed Ghajini. It has worked out a backward integration model with Star's regional channel Vijay to promote the film. Singh says the first two songs of the movie have already made it to the Top 10 charts in Tamil.

Hollywood studios started their discovery of India by dubbing their flicks in Hindi and local languages. Nearly 40-50% of their local revenues now come from global flicks dubbed in Indian languages. Next, they tried their hand at Hindi films. The Shah Rukh Khan-starrer My Name is Khan, which was distributed by Fox Star Studio, was a blockbuster.
Fox co-produced Dum Maro Dum and the to-be-released Force. Walt Disney India, which recently acquired UTV Software Services, has produced four movies, which includes Roadside Romeo and Do Duni Char. Now, the studios are walking the last mile - producing regional language films.

Hollywood studios understand that the dynamics of regional movies are different from Hindi - theatre earnings bring in a higher proportion of revenues as cable and satellite rights do not fetch high returns; investments are lower (Tamil and Telugu are exceptions), but the returns are higher.

"They run for longer periods in theatres as compared to Hindi movies and fetch more returns per reel," says Timmy Kandhari, executive director and leader (entertainment & media) at PwC India. "Regional language cinema also works best with issues and subjects close to the heart of the language speakers," Viacom18's Malhotra adds.

"Tamil and Telugu films contribute nearly a quarter of the overall movie production; nearly half of all screens in India are located in the south," says Sanjeev Lamba, chief executive officer of Reliance Big Pictures. "Any player looking to become a significant Indian movie production house will have to diversify into regional languages."

KPMG estimates that regional film industries such as Telugu, Kannada and Malayalam are growing at 10-15%, while others like Bangla, Oriya, Punjabi and Bhojpuri are growing at 17-20% on average. Of the average 1,000 films produced in India, 750 are in languages other than Hindi.
(Source: Economic Times)

Tata Global Beverages eyes nourishing food segment

 Tata Global Beverages (formerly known as Tata Tea) on Tueday said it will consider entering the nourishing food segment as part of its plan to become an overall health and wellness company.

"There will come a time when there will also be a possible entry into nourishing foods and nourishments of all sorts," Tata Global Beverages (TGBL) Chairman Ratan Tata said at the company's annual general meeting.

He said the company is going through a transformation to become a truly global beverages and food company rather be known to customers as "sugar and sweetness alone".

"This company is going through a transformation which is to become a truly a global beverages and food company; not to fall into the category of being not good for you, but in fact, everything based on health and nutrition and wellness," he said.

He, however, did not divulge the time line and the kind of products the company aims to launch in the food segment.

"What has happened over the period of time is that your company has moved majorly to branded tea products and exited plantations in favour of its employees," Tata said.

"It (the firm) has moved on, looking at the future to be the creator and marketer of beverages and foods: ready to drink teas, ready to drink beverages or focus on providing health and wellness rather than mere sweetness and in taste," he added.

Last year, the company formed a joint venture firm with Pepsico -- NourishCo Beverages -- to produce non- carbonated ready to drink beverages.

Besides, the Tata group has signed a Memorandum of Understanding (MoU) with Starbucks to supply tea and coffee to the US-based coffee chain. It is also looking for opportunities to open Starbucks retail outlets in India.

The company has recently acquired 31 per cent stake in US-based Rising Beverages, which is known for vitamin water based products. It had also signed a MoU with Kerala Ayurveda to form a joint venture for product development.

"The company has introduced several new products under a specific brand that is going to achieve a name. So basically, when one looks ahead, the company is focused on growing in different geographies, in new countries all over the world," Tata said.

TGBL has recently introduced 8 O' Clock Coffee in Europe. Tata Tea is also being launched in Germany.

(Source: Economic Times)

Godrej Consumer's Good Knight, Hit, Renew and Godrej Expert to foray into Asia, Africa and Latin America market

Godrej Consumer Products will take its brands Good Knight, Hit, Renew and Godrej Expert abroad and possibly enter beauty products, shampoos and food segments as it targets more than Rs 30,000-crore turnover by 2020, a top official said. "We are drawing the roadmap to take our own brands to overseas markets by end of the year," Godrej Group Chief Strategy Officer Vivek Gambhir said.

"We want to take our insecticide brands like Good Knight and Hit to the African and Latin American markets, and hair colour brands like Renew and Godrej Expert to Asian markets like Indonesia," he said. Godrej Consumer wants to accelerate its pace of growth to 25% a year from 18% to become a Rs 30,000-crore entity by 2020, Gambhir said.

He said the group plans to evaluate its 3X3 strategy-which is about expanding in three continents (Asia, Africa and Latin America) through three categories (home care, personal wash and hair care)-to accelerate growth. "We would look at ways to expand personal wash into personal care without diluting margins as profit margins are comparatively lower in this category and subject to commodity price swings," Gambhir said.

"We would evaluate a possible entry into foods which too can become a big driver." He said the company localises the formulation of its brands for international foray . For instance, it recently rolled out the Renew brand on trial in South Africa where the product has been customized for Caucasian hair. Godrej Consumer is already a market leader in hair care in South Africa, Kenya, Ghana, Argentina and Uruguay, thanks to an international acquisition spree over the last couple of years.

It has bought South African firms Darling Group Holdings , Rapidol and Kinky Group, African medicated brand Tura, Indonesia's Megasari Group and Argentina's hair colour companies Issue Group and Argencos. Gambhir said Godrej Consumer will look at possibilities of brand extension for popular brands like Cinthol, Godrej Expert, Good Knight, Hit and Protekt in its product expansion process. He said the company will be cautious in expansion. "We will not get seduced for growth and will take calibrated steps."
(Source: Economic Times)

Amazon tablet seen as worthy Apple's iPad competitor

With Amazon reportedly poised to launch a tablet computer , technology research firm Forrester is predicting the device could be the first legitimate challenger to Apple's iPad. Forrester Research analyst Sarah Rotman Epps, in a blog post accompanying a report released Monday, said Amazon taking on Apple is a "bit like David taking on Goliath." But Rotman Epps said Amazon's "willingness to sell hardware at a loss combined with the strength of its brand, content , cloud infrastructure, and commerce assets makes it the only credible iPad competitor in the market."

"If Amazon launches a tablet at a sub- $300 price point -- assuming it has enough supply to meet demand -- we see Amazon selling 3-5 million tablets in the fourth quarter alone," she said. The Seattle, Washingtonbased Amazon, maker of the Kindle electronic book reader, is capable of "disrupting not only Apple's product strategy but other tablet manufacturers' as well," the Forrester Research analyst said.

Apple sold 9.25 million iPads last quarter and dominates the market for the multimedia devices, which are also being produced by South Korea's Samsung, Blackberry maker Research In Motion and scores of other companies. But none of the iPad's rivals has managed to put a scare so far into the California-based gadget-maker whose legendary co-founder Steve Jobs stepped down as chief executive last week.

Citing disappointing sales, US computer giant Hewlett-Packard killed its iPad competitor , the TouchPad, last week after just seven weeks on the market. According to technology research firm Gartner, the iPad will account for 68.7 percent of the 69.7 million tablets to be sold this year and will remain the top-selling device over the next few years. Amazon has not publicly announced plans to produce a tablet but numerous press reports have said the online retail giant will come out with one this year.
(Source: Economic Times)

Multigenerational Homes Surge in U.S.

When advertising executive John Gallegos wanted to promote a new package of Spanish-language channels for client Comcast Corp. (CMCSA), he put together a spot featuring the fictional Gutierrez clan gathered around television sets in their home.
A smiling grandfather hands out popcorn in the ad. Gutierrez women weep along with a soap opera. A younger family member looks up words in a Spanish-English dictionary. And everyone shouts when a little girl tries to change the channel during a soccer match.
“It’s a snapshot of all the different extensions of what a Hispanic family could be,” Gallegos, chief executive of Grupo Gallegos in Huntington Beach, California, said in an interview.
The U.S. is experiencing a surge in the multigenerationalhouseholds that were once a common feature of American life, and Hispanic and Asian families are driving the trend, according to U.S. Census Bureau data released this month. The number of such households, defined as those with three or more generations living under one roof, grew to almost 5.1 million in 2010, a 30 percent increase from 3.9 million in 2000, the data show.
They hit 2.9 million in 1950 and didn’t top that again until four decades later, according to the Washington-based Pew Research Center. At the 1980 low, multiple-generation homes represented just 2.9 percent of all U.S. households, down from 7.8 percent in 1900.

Transforming Suburbs

Although the term multigenerational invokes images of grandma churning butter on a pioneer farm or turn-of-the-century immigrants crammed into tenements, today’s extended families are more likely to live in suburbs. Among large cities, the one with the highest percentage of multigenerational households, at 16 percent, is Norwalk, California, a collection of largely single-family homes 15 miles (25 kilometers) south of Los Angeles.
“Many conservatives are locked into this 1950s paradigm of the nuclear family,” said Joel Kotkin, author of “The Next Hundred Million: America in 2050,” a book about demographics.“Boomers are aging in place. Immigrants move in with their cousins. The suburbs are changing.”
Job losses and the difficulty of purchasing a home make young people more likely to live with their parents, according to D’Vera Cohn, a senior writer with Pew who has studied the trend. Longer life spans and growth in the Hispanic and Asian populations keep older folks in the house.
The nation’s two fastest-growing ethnic groups are 50 percent more likely to live in multigenerational families than are whites, according to Pew research.
“Among immigrants, it’s the way their lives were lived in their home countries,” Cohn said in an interview.

Marketing Challenge

Corporate America is figuring out ways to create products for, and market to, these multi-income, multifaceted families, Gallegos said.
Home builder KB Home (KBH) is seeing increased demand for what it calls double master suites, two large bedrooms with attached bathrooms to accommodate parents living with their adult children, according to Cara Kane, a spokeswoman for the company, which is based in Los Angeles. All 10 of the largest communities in the U.S. ranked by their percentage of multigenerational households were within an hour’s drive of the nation’s second-largest city. All had populations over 100,000.
At the National Council of La Raza’s National Latino Family Expo held in Washington, D.C., last month, businesses tried to reach as broad an audience as possible, according to Georgina Salguero, director of sponsorship for the event. Johnson & Johnson (JNJ)’s booth featured everything from its namesake baby oil to Aveeno anti-aging creams. ConAgra Foods Inc. (CAG) demonstrated modern takes on classic ethnic recipes, Salguero said.

Asian Impact

Asians, as well as Hispanics, are increasingly gathering under one roof. The state with the largest percentage of multigenerational households was Hawaii at 8.8 percent, twice the national average of 4.4 percent. The 50th state owes its large percentage to high real estate prices and the 47 percent of its population that is of Asian or Pacific Island descent, according to Sarah Yuan, a sociologist at the University of Hawaii at Manoa.
Her research on the state’s Filipino residents found multigenerational households are most common among the poor, who live together so they can pool their resources, and the rich, who have the space.
“A lot of times it’s for economic reasons,” Yuan said in an interview. “Other times it’s just cultural preferences.”

Epicenter of Change

Few areas of the country have seen larger economic and cultural changes than Southern California. Norwalk, the Los Angeles suburb with the highest percentage of multigenerational households in the U.S., was mostly dairy farms in the 1930s. It was the hometown of former First Lady Patricia Nixon and the filming location for the 1946 noir classic “The Postman Always Rings Twice,” about a bored, small-town wife who plots her husband’s murder.
The city saw an explosion in residents after World War II as returning soldiers swelled the population to 35,000 in 1950 from 5,770 a decade earlier, according to a municipal history.
By the time Norwalk incorporated in 1957, the city’s developable land was largely built out, according to Kurt Anderson, director of community development. Population increases and additions put on existing structures have strained the municipality, which now counts 105,000 residents.
“Parking is a huge issue,” said Marcel Rodarte, a Norwalk native and city council member. The city requires more onsite parking when permits are requested for room additions, he said.

Subprime Fallout

Norwalk’s median home price leapt to $495,000 in April 2007 from $151,000 in January 2000, according to San Diego-based real estate research firm DataQuick. By July of this year the median price was back down to $255,000, a reflection of the fact that Hispanics were frequent targets of subprime lenders who are no longer in business, according to Felipe Korzenny, a professor of marketing at Florida State University in Tallahassee.
“It’s a working-class community and largely Hispanic,”said Veronica Garcia, who directs social services for the city.“In this economy people have to live together.”
On a recent Monday afternoon, the Norwalk Senior Center was bustling with people playing bingo and taking weaving classes. Francisca Bernard, a 75-year-old retired waitress, said she has lived in the same three-bedroom Norwalk house since 1968. It now accommodates four generations of her family, including three grandchildren and her father, who is 100 years old.
“The house is big and we like to be together,” she said. Finances also play a role, Bernard said. While her daughter does most of the grocery shopping, major purchases, such as a new car, are hashed out over the dinner table.
Her father, Jose Maria Bernard, was shooting pool in another part of the center. A native of Mexico, he said he has 12 children and rotates among their houses. He said he never considered living in a nursing home because he’s still healthy and, in any case, family values would preclude it.
“My children wouldn’t let me go anyplace else,” he said.
(Source: Bloomberg)