Google's Chrome PC may see muted demand in China

SHANGHAI Wed Dec 15, 2010 6:32am EST

SHANGHAI (Reuters) - Google Inc's new Chrome PC may meet with chilly demand from China as tensions between Beijing and the search giant curb the latter's offerings and as netbook sales slowly fall off the cliff in the world's second largest PC market.

Google's laptops, promote Web-centric computing where people use online applications instead of software loaded onto PCs, are expected to ship in the middle of next year.

But the focus on cloud computing and Google's tussle with Beijing earlier this year over censorship and hacking could make it difficult for the operating system to replicate the success of Google's mobile Android system in China.

Analysts expect Google's Android mobile operating system to become the dominant mobile OS in the future in China. Currently ZTE Corp, Lenovo and the Chinese telcos have released and sold thousands of Android smartphones in the Chinese market.

Yet analysts don't see a similar take off for the Chrome PC.

"Chrome may be as strong as Android from a technology perspective but from a user behavior standpoint, the adoption of netbooks is losing momentum," said Felix Liu, an IDC analyst based in Beijing.

Netbooks are smaller, cheaper laptops that are designed for portability and web-surfing. Although Google's laptops aren't sold as netbooks, they will be in competition given its focus on the Internet and portability.

Chrome adoption in China may be slow because of pricey 3G data plans in the country and the fact that many of Google's cloud products such as Google Docs and its photo editor are occasionally inaccessible in China.

"There is no guarantee that any of those services will be continually available in China. In the middle of 2010, some people were dumping their Gmail accounts because they were afraid they would lose those accounts due to the government's unexpected behavior," Liu said.

Google scaled down its China operations this year after a high profile spat with Beijing over censorship and after a serious hacking episode. Google Maps and YouTube are not available in the country and its Chinese search page is now redirected to a Google Hong Kong search page.

"In the past, Microsoft integrated a lot of products into its Windows OS. Is Google going to do the same -- incorporate its search bar, etc? If they do so, they will face problems," said Edward Yu, chief executive of Analysys International.

China is a fast-rising PC consumer. Chinese PC unit shipments rose 23 percent to 69.5 million units this year while U.S. PC unit shipments rose 5 percent to 71 million units, according to Gartner data.

PC majors are ramping up investments in the country and diversifying their product offerings to whet the appetite of the rising Chinese consumer.

Dell, the No. 2 PC brand in China, told Reuters on Tuesday it will focus on corporate customers in Beijing and Shanghai, while simultaneously expanding its presence in smaller cities.

Acer, the world's No.2 PC vendor, expects its China operations to make up more than 20 percent of its total sales in five years, helped by new tablet PCs and an alliance with China's Founder Technology.

While Chinese consumers are buying PCs, they aren't buying as many netbooks said IDC. Mini notebook shipments in China are expected to almost half in two years from 2.7 million units in 2010 to 1.5 million units in 2012.

Analysts said the introduction of tablet PCs makes it hard for Google's Chrome to compete in China because of the perspective that tablets and smartphones are the hottest devices right now not netbooks.

"Many of the Shanzai vendors choose to make copy tablets after iPad and Android tablets," Liu said.

Chinese consumers might also shy away from cloud services on privacy and security concerns, said Samsung Securities analyst Paul Wuh.

"The cloud issue is a difficult one, are people comfortable storing all that data on the system, especially in China?" Wuh said

STILL TALKING TO GOOGLE

Lenovo told Reuters on Monday it was talking to Google about a possible Chrome product.

"Our overall guiding principle is that if there is a market demand for it, yes we will definitely come up with a product with Chrome," Lenovo's Chief Financial Officer Wong Wai Ming said at the Reuters China Investment Summit in Beijing.

"I believe our R&D colleagues have been talking to all companies about operating systems, and I'm sure Google is one of them," Wong said.

Dell told Reuters earlier this year in was in talks with Google over a Chrome product. The firm is about to make a global announcement regarding Chrome in the near future, said Amit Midha, Dell's head of China operations.

Samsung Electronics and Acer Inc will make the first laptops. Intel Corp will make the processors in the first batch.

(Additional reporting by Kelvin Soh in HONG KONG)

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