INTERVIEW - China's Hanwang sees e-book sales tripling

BEIJING (Reuters) - China’s biggest e-book maker Hanwang expects its reader shipments to triple this year on growing demand, but may see its market share and margins fall on intensifying competition, the company’s chairman said.

Hanwang now expects its gross profit margin to fall to about 30 percent from 50 percent previously, and its market share in China to fall to between 80 to 85 percent from 95 percent in 2009, Chairman Liu Yingjian told Reuters.

“The Internet, 3G connectivity and development in electronic book readers have all come together to change the e-book industry,” Liu said in an interview over the weekend. “The paperless age has arrived.”

The company sold about 200,000 e-book readers in the first quarter of this year, it said previously, compared to the 267,000 it sold in all of 2009. Each unit retails for about 1,200 to 3,300 yuan ($170-$485).

Globally, the e-book industry is dominated by Amazon’s Kindle and Sony’s Sony Reader. Apple’s iPad tablet PC also has e-book capabilities that allow consumers to download from an online book store and Barnes & Noble competes with its own offering, the Nook.

In 2009, the number of e-book readers sold globally rose to 3.5 million from 700,000 in 2008, according to industry tracker Digitimes.

Hanwang’s gross margins and share of the overall e-book market in China could fall as an increasing number of companies jostle for a piece of the fast-growing pie, but the company remains confident of its prospects in the sector.

“Our market share will fall, that’s without question, because the number of players will rise,” he said. “But right now, there still isn’t a single company in China that can threaten our place in the sector.”

China Mobile, the world’s largest operator by users, is also working with Hanwang and other manufacturers to sell e-book readers using its 3G platform that runs on the homegrown TD-SCDMA standard.

Liu declined to reveal the exact number of units China Mobile was procuring from Hanwang, but said that the company took up a large percentage of China Mobile’s overall order.

Hanwang was listed on a new Nasdaq-style enterprise board in Shenzhen in March, following the board’s official launch last fall. Its shares have tripled from its IPO price since then, beating the 2 percent decline on the Shenzhen main board.

Writing by Kelvin Soh; Editing by Jacqueline Wong