Chinese Automakers to Benefit from Reorganization and Consolidation
Bryan CiambellaTuesday, March 30th, 2010
Government reorganization and consolidation of the Chinese auto market should dramatically increase production and margins in 2010-2011. Chinese auto makers BYD, Geely and DongFeng are well positioned for government funding because they supply the nation’s demand for inexpensive cars and work towards China’s goal to emerge as a leader in the electric vehicle (EV) market.
PGR Experts believe BYD’s branding, inexpensive products (F3) and leadership, as well as the Chinese government’s support, has positioned it to emerge as the global leader of the EV market in 2010. BYD is a safe long term investment.
Meanwhile Geely’s integration of Volvo, which has the potential to become a giant failure, is a unique risk-reward scenario. Geely is well positioned to achieve continued government support because of its strong brand and market share in China’s large affordable vehicles market.
Success for DongFeng will depend on its broad joint venture strategy with Nissan, Peugeot, Kia and Honda and its ability to develop a strong product line for commercial vehicles.
The tremendous growth of China’s auto market is fueled by the lower class’ increased demand for smaller inexpensive vehicles and government backed stimulus spending. Successful auto makers will use reverse engineering, discounted raw materials and other methods to keep costs down and position themselves for government funding.
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Tags: auto market increase production, BYD, China, DongFeng, Geely
Posted in Bryan Ciambella, Industrials | 1 Comment »
Femtocells
Rajan VaradarajanFriday, March 26th, 2010
Femtocells have seen renewed interest due to announcements from carriers as they try to increase their coverage within office buildings and homes where the cell strength is an issue. At CTIA this week, AT&T announced that it is offering a residential femtocell in collaboration with Cisco for $149.99. T-Mobile, Verizon and Sprint already include femtocells within their suite of offerings. In Europe, Vodafone is one the carriers offering femtocells.
Femtocells are indoor devices that operate in licensed spectrum and connect to the cellular backend infrastructure using the broadband connection in the home or office. They guarantee “5 bars” of coverage within your home and can be used to carry voice and data sessions over the broadband network. In addition, you can seamlessly move the voice call from the femtocell on to the “regular” cellular network when you move out of your home.
The femtocell (also know as the Femtocell Acess Point or FAP) is one of two components that enable the home user to connect to the cellular network. The second component is the femtocell gateway which is used to aggregate femtocell traffic from multiple FAPs. This node is part of the carrier network and can aggregate thousands of FAP connections. The FAP and the gateway are often from different vendors. For example, the Airvana UMTS FAP is certified to interoperate with the Nokia Siemens Network femtocell gateway.
FAPs can be simple or complex with high degree of functionality. FAPs can be lightweight or include a high degree of functionality. For example, the Alcatel Lucent 9365 Base Station Router Femto product line includes the 3G Node B (i.e. base station) and Radio Network Controller (RNC) functionality. In addition, the FAPs act in a collaborative manner across the enterprise when multiple FAP devices are deployed. This includes an auto configuration/plug and play feature. FAP vendors include Airvana, Alcatel-Lucent, Ericsson, Huawei, Samsung and Ubiquity, among others.
Some phones use the home or office WiFi network for connecting to the data network when the cell phone signal is weak. This is more common for data traffic though it is possible to use VoIP over WiFi for voice calls. FAPs, in contrast, are “micro cellular base stations” – so the phones continue to operate over the licensed cellular frequency when connecting to FAPs. Carriers claim that their spectrum licenses make them the only permitted providers of these femtocells, though YMax, the parent company of MagicJack has indicated that the carrier spectrum licenses do not extend into the home.
The disadvantage of femtocells is that they tie up the bandwidth on the home user’s broadband network. Add to this the original reason for femtocells – poor carrier’s coverage inside the home or enterprise – and you end up paying more for a carrier shortcoming. Third, it is not clear if this is a good financial proposition for the carriers, especially if they end up subsidizing the cost of the femtocell. Finally, truck rolls to help debug installation issues with femtocells might end up costing the carriers much more than they anticipated.
All that being said, femtocells are increasingly being seen by carriers as an area of revenue, while fixing the technical issue of cell coverage. For the femto equipment vendors, close supplier relationships with the carriers is the key to success.
Posted in Author, Rajan Varadarajan | No Comments »
Clouds Forecast for German Solar Industry
Ishita ManjrekarThursday, March 18th, 2010
Dark clouds ahead for the German solar industry as the government’s July 1 cuts in the solar feed-in tariff (FiT) are expected to touch off a decline in pricing and internal rate of return (IRR). However, “gray skies are gonna clear up” four-to-six weeks after that, say PGR Experts, with prices readjusting and the solar industry back to business as usual.
Between 70-80% of Germany’s photovoltaic (PV) market is represented by small and medium sub-1 mW solar PV systems. Post cuts, we expect prices of components to fall by another 10-15%. This would cut current IRR of these systems from 10-12% down to 6-9%, which is still quite attractive for the rooftop market. Price cuts by wafer and polysilicon vendors also factor into pricing readjustments. Good quality, vertically integrated Chinese module brands should easily adjust to these changes.
PGR’s network expects demand will peak in Germany in Q4 of this year.
Tags: feed-in-tariff, FiT, Gernan Solar Industry
Posted in Energy, Ishita Manjrekar, Solar | No Comments »
Car Spots Make Ad Slots Cost Lots
Lloyd WalmsleyTuesday, March 16th, 2010
A rebound in TV advertising revenue that started in September of 2009 continues to gain steam in 1Q and is likely to carry forward into 2Q, according to media buyers in PGR’s Network. Much of the momentum stems from a reinvigorated automotive sector whose new-car ads are snapping up enough time to squeeze ad inventory, touching off substantial price spikes in scatter TV ad prices. Experts note across-the-board pricing gains in broadcast and cable at local and national levels. Those in the direct response space have seen lower clearance levels in spite of attempts by some DR advertisers to test clearance by pushing pricing higher. Low clearance levels suggest strong demand and in all likelihood, higher floor pricing. Our Network singles out Time Warner’s Turner network and NBC Universal’s USA and MSNBC networks as particularly strong, although most experts agree the rising tide will lift all boats and impact a variety of players in the TV ad market.
Tags: advertising rates, MSNBC, NBC Universal, Time-Warner, Turner, TV advertising, USA Network
Posted in Lloyd Walmsley, Media & Internet | No Comments »
Iron Ore Prices: Firm And Apt to Stay That Way
pgresearchThursday, March 4th, 2010
Under a fixed GDP growth plan, China is slated to produce over 600 million tons of steel this year. If China hits or nears that mark, demand for iron ore could reach record levels and spot prices could rise 40% over 2009 levels. Add the likelihood of higher export tariffs on iron ore from producing nations and the upward pressure on iron ore prices has momentum — enough to carry it through the first half of 2010 at least.
The single moderating factor is economic inflation. Such a rise in raw material costs (iron ore prices are increasing at their fastest rate since July 2008) would bring substantial inflationary pressure to bear on the world’s economies, particularly in developing nations. Widespread adoption of anti-inflationary measures by industrial and developing nations would tamp down demand for steel and iron ore as higher interest rates impede the capitalization of large construction and public infrastructure projects.
So far, the People’s Bank of China has kept its benchmark interest rate at 5.31% (since December 2008), but PGR’s network consistently points to growing pressure on the bank to adjust its rates upward. Exacerbating the raw material situation, China will be a major player in the spot market for ore if, like last year, major exporters (BHP, RIO, VALE) are unable to come to agreement on long- term contracts. Last year after negotiations with producers failed, China ended up buying over 60% of its iron ore on the spot market where prices are typically far higher than contract prices.
Rising ore prices are also a result of government tariffs where certain producing nations are levying export taxes in support of indigenous steel production.
India is a recent example having imposed a new export tax and raised its export duty to add approximately $5/metric ton to the cost of iron ore out of that country. PGR has several experts who believe this tax could go as high as $20/ton in 12 months time. Others think $8/ton or somewhere in between would be more likely as such cost increases would render India’s iron ore less competitive on the world market. A moderating factor is also in the fact that India produces low quality ore (sub-60 iron quality), which is used primarily in China.
Reports indicate that Brazil, the second largest exporter of iron ore, will tax iron-ore exports this year. Support for this outlook is in the Brazilian government’s effort to persuade VALE to create internal jobs and domestic spending by constructing its own steel plants.
Of course, steel makers who obtain ore without added tax penalties i.e., material out of the U.S. and Australia, will have better margins.
Tags: China, India, Iron ore, steel
Posted in Industrials | No Comments »