This is the last Display Daily for 2006.  We will resume publication on January 2, 2007.  Until then all of us here at Insight Media wish you and your family a happy and healthy Christmas holiday and look forward to an “Insightful” New Year!!

Ken Tompkins
Insight Media Analyst

It is no secret that China has become a major player on the economic stage.  China’s GDP growth is expected to be over 10% this year, after blisteringgrowth throughout this decade and the last.  China’s hot economy will have ramifications on the path it forges in developing many industries, but the impact of Chinas unique worldview will become increasingly relevant as it moves from “beggar” of the world’s OEM business to a “chooser” of the direction of its electronics industry - especially in the arena of televisions and related industries.

The recent choices of “middle kingdom” in directing its television and television-related industries reflects China’s history as much as it does its best estimates concerning the future of television and content delivery.  China’s Qing dynasty was partly a pulling back of China’s elites into China’s own cultural identity. 

When the great powers led by England pried open China’s economic doors in the Opium Wars of the 19th century, China responded by using these xenophobic elites to take on characteristics of Western production, without changing the basic mindset of the producers.  With no eye on profit maximization, the experiment, called the “western material movement,” was doomed to fail.   China saw Western success merely as a function of gunboats and merchant ships.

In the 20th century, China’s “socialism with Chinese characteristics” was a way for the Chinese communist party to maintain power as a nominally communist entity while moving the economy strongly in the direction of free markets.  This move toward capitalism while maintaining communism in name is another peculiarly Chinese attempt to go its own way - akin to painting a pig chrome and calling it a car.

Today, China is going its own way again in television and related industries.  Leading Chinese manufacturers are attempting to eschew the world’s DVD standard by coming up with its own.  Enhanced Versatile Disk (EVD) was first introduced in 2003, but died when content providers and Chinese consumers didn’t follow the lead.

Since then, the proportion of all DVD players made in China has risen to as high as 90%.  With this kind of muscle, and as part of a larger group joined by heavy hitters such as Haier and TCL, China’s DVD industry is trying to resurrect the “standard.”  The ostensible reason for this move toward a homegrown Chinese standard is to reduce royalty payments to Japanese CE manufacturers.  The Chinese DVD industry expects to succeed by selling its EVD players to an increasing number of Chinese consumers who are financially able to buy new CE products.  Will Hollywood kowtow?  We think not.

Insight Media’s Aldo Cugnini recently wrote in these pages about another typically Chinese attempt to go its own way.  In the August 22 Display Daily, Cugnini reported that China would soon introduce its own DTV broadcast standard.  As with the EVD controversy, China’s stated aim is to avoid paying royalties to foreign firms. 

The China broadcast standard may also boost China’s chance of becoming its own supplier of television component and broadcast equipment.  Shanghai High Definition Digital Technology, a designer of IC equipment for China’s domestic terrestrial television market, recently finalized development of a chip for use in televisions for the Chinese market that complies with the newly announced broadcast standard, called China Digital Multimedia Broadcast - Terrestrial/Handheld (CDMB-T/H).

Without a rear view mirror, one could easily assume that China is merely using its increasing economic clout and growing consumer base to fill in the blanks between, and profit more from, what it manufactures and what it consumes in television hardware, content and content distribution. 

This simplistic explanation, however, would ignore China’s desire to see itself back in its “rightful” place as a leader among nations.  For China, economic growth is more than just a means to increase its citizens’ well-being.  China now sees economic growth and controlling its own economic destiny as a way of righting the wrongs committed against it during an era of Western imperialistic expansion.  It also does not damage the government’s hold on power to pursue the old agenda of “national humiliation,” which tugs on the heartstrings of the more nationalistic Chinese among the populace.