The gaming devices industries in mainland China, Hong Kong and Taiwan are foreseen to enjoy a robust growth in the medium term. Global worldwide production valued at US$24 billion in 2005 is projected to reach US$55 billion in 2009.
The growth of the industry is being driven by the development of hardware and software as well as the increasing numbers and expanding demographics of gamers all over the world. The approximate distribution of gamers according to types of games is as follows: 140 million gamers for consoles, 200 million for PC games and 100 million for handheld games. More than 60 percent of these gamers are more than 18 years of age.
This report covers 31 companies: 23 from mainland China, two from Hong Kong and six from Taiwan. The respondents from the mainland comprise 38.8 percent of the industry in the region.
Production Center
• Guangdong, mainland China is the main manufacturing center. Production facilities of 97 percent of the interviewed companies are located in this southern province, particularly in the cities of Shenzhen and Guangzhou
Manufacturing Capability
• Most gaming device makers in mainland China and Taiwan have about a decade's worth of manufacturing experience in the line.
• Factory space of respondents ranges from 500sqm to about 120,000sqm,with a production workforce varying from 20 workers to more than 1,000 workers
• The average monthly production of these companies is between 3,000 units and 900,000 units.
• Respondent companies perform cosmetic design, final assembly, QC and R&D in-house. Most front-end processes — mold-making, plastic injection molding, painting and silkscreening — are outsourced.
• Most components are sourced from suppliers in mainland China.
Exports
• Interviewed companies are all highly export-oriented. Gaming devices and accessories exports from the mainland reached US$200 million in 2004. This figure is expected to reach US$250 million in 2005 and 2006.
• Makers forecast modest growth in exports — between 8 percent and 52 percent — as the success of gaming devices is dependent on that of video game consoles and PC games.
• The main export markets of mainland China companies are North America, Western Europe and Asia. For Taiwan makers, output is mainly exported to Europe and North America.
• For interviewed makers, business is divided into 57 percent OEM sales, 23 percent own-brand sales and 20 percent ODM sales.
Product and Price Trends
• The range of gaming devices produced by respondent companies includes joysticks, gamepads, steering wheels, joy guns and jolt guns.
• These game controllers are compatible with various consoles like the Sony PS1/PS2, Microsoft Xbox/Xbox360, Nintendo GB/GC/DS, and Sega NeoGeo/Dreamcast. Other gaming devices are also suitable for PC use.
• Some high-end controllers with IR/RF capability and a range of 5mto 30m are also being produced. A limited number of Bluetooth capable units are on offer.
• In mainland China, joypads are priced from 80 cents to US$2.50. Wireless 2.4GHz joypads are priced from US$11 to US$12. Joysticks are priced from US$4.50 to US$5. The prices of steering wheels range from US$11 to US$30.
• In Taiwan the mainstream products are midrange joysticks, gamepads and steering wheels. These vary in price from US$3 to US$25.
Industry Overview
The game industry is projected to have a positive growth in the coming years. BusinessWeek valued the worldwide production of the game industry at about US$24 billion in 2005. Pricewaterhouse Coopers, meanwhile, projects spending on the global videogame market to reach nearly US$55 billion by 2009. The optimistic outlooks on the game industry are hinged on the continuous development of better consoles, better games, and better hardware. Looking forward to the future of gaming, another potential for the industry is wide-area network mobile gaming based on a multiplayer wireless network of economic communication. More importantly, it is the unprecedented growth in the number of people who are playing videogames that is fueling investments in the industry.
Growing Gaming Population
According to the NDP group, more than 60 percent of gamers are now over the age of 18. Those who grew up with games continue to play on as they grow older, according to Nielsen Entertainment's Interactive Group. The widening age distribution means that gaming is not, as some may perceive, for children only, but something that is very popular in the18-plus market. Adult gamers, on the average, have been playing 12 years according to the Entertainment Software Association. Close to 19 percent of gamers are over 50 years old, according to Peter D. Hart Research Associates. In addition, 53 percent of game players see themselves still playing beyond 2015. Gamers use a variety of gaming platforms. More than 200 million play PC games, while more than 140 million play console games, which include the Sony PlayStation, Microsoft Xbox, Nintendo GameCube, and Sega Dreamcast. Another 100 million play handheld games like Sega Game Gear, SNK Neo Geo Pocket Color, Bandai WonderSwan Color, Nokia N-Gage, Nintendo Game Boy Advance SP, Nintendo DS, Sony PSP, and GameBoy Micro.
New Models Noll Out
In the United States, total game hardware and software sales is nearing US$10 billion in 2005. In 2004, console software, portable game software and portable game hardware recorded sales increases of 8 percent, 13 percent and 9 percent, respectively. In the 2005 Electronic Entertainment Expo (E3) in Los Angeles, California, more than 70,000 industry professionals from 79 countries attended. E3 showcased more than 5,000 computer and video game products. Of the latter, 1,000 models were new and are due to be on store shelves by year-end 2005.
Game Consoles Lead the Way
The growing demand for game consoles is also increasing the sales of gaming devices such as game controllers, game software and other game accessories. Popular main gaming accessories are those for Sony's PS1/PS2/PSP, Microsoft Xbox, and Nintendo GBA/NGC/NDS, and personal computers. The regular release of enhanced videogame consoles, handheld game consoles and PCs has resulted in a regularly increasing demand for gaming accessories. The total distribution of PS2 consoles has been estimated at 100 million units; likewise, PS1 console sales have also reached over 100 million units. New console models such as the Microsoft Xbox 360 and Sony PS3 are expected to further fuel the growth of the industry.
Mainland China and Taiwan, Major Players
Asia is a key sourcing center for most game hardware and game accessories. Mainland China industry sources said total export value of gaming devices and accessories from the mainland in 2004 reached US$200 million. Taiwan, meanwhile, accounts for 47.5 percent of global gaming console shipments. In this report, key representatives of 31 gaming product manufacturers with headquarters in mainland China, Taiwan and Hong Kong were interviewed. Sixteen of the said companies agreed to in-depth interviews either at their headquarters or at their factory. All the factories of the respondent makers are located in mainland China — 97 percent are in Guangdong province. Based on the industry knowledge of the respondents, there are around 80 companies involved in manufacturing gaming products on the mainland in 2005. This means that in this Global Sources study, the respondents represent 38.8 percent of the industry on the mainland.
Supplier Profile
Alfa Data Computer Corp.
Alfa Data Computer Corp. is a Taiwan based manufacturer of gaming peripherals and accessories. Founded in 1990, the company has positioned itself as a professional ODM supplier. In Q1 2005, Alfa Data became a subsidiary of Sysgration Ltd, a company that mainly produces computer peripherals. Sysgration has been listed in the Taiwan Stock Exchange since 1996.
Alfa Data entered the gaming field in 1997. Now the company is not only capable of providing all kinds of game controllers, but is also a legal developer of PS and Xbox controllers.
Headquartered in Taipei, Alfa Data has set up a manufacturing site in mainland China. The company employs a total of 200 staff, most of whom are based in mainland China. In 2004, Alfa Data's sales revenue from all its product lines reached US$12.5 million. Of this, steering wheels — the company's major product —contributed around US$10.9 million.
Alfa Data exports 100 percent of its products overseas. Its largest market is Europe, which accounts for 70 percent of total sales. The other 30 percent of revenue comes from North America.
Alfa Data is focusing on ODM services. Its major ODM clients include top game controller brands such as Thrustmaster of France, 4-Games of the United Kingdom and Trust of the Netherlands. Other ODM clients are Fanatec of Germany, Pelican and GameElement of the United States and Twilight Express of Japan.
Alfa Data has plans to broaden its product lines. It is starting to implement marketing efforts in Japan. The company stopped the production of gamepads in the last three years due to small profit margins. It plans to revive production in this line, scheduling a release of several models before end-2005.
Manufacturing Capability
Alfa Data has two production sites in mainland China. The first one is the company's own factory, located in PingHu, Shenzhen, Guangdong province.The other is a subcontracted factory in Qiaotou, Dongguan, also in Guangdong. The company manufactures licensed and high-end products in its Shenzhen plant, while the Dongguan plant mainly produces standard products.
The Shenzhen factory has a total area of 100,000sqm and five assembly lines. It has a monthly capacity of 90,000 steering wheels and 300,000 gamepads. The Dongguan factory also has a production capacity of 90,000 steering wheels per month. Alfa Data produced nearly a million units of steering wheels worth $10.9 million in 2004.
The company conducts SMT work, auto insertion, PCB sub-assembly, final assembly and testing in-house. Processes such as mold making and plastic injection are subcontracted.
The Shenzhen plant carries ISO9001/9002/14000 certificates and meets RoHS and WEEE standards.
Plastic is the primary material used in steering wheels. It takes approximately 50 percent of production cost. Alfa Data believes its supply and cost are more stable this year than in 2004.
Alfa Data claims it is capable of designing chipsets for its products in house. To achieve further vertical integration and save on production cost, the company plans to increase the number of plastic-injection machines in its factory in the future.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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