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E-book story could be a long, difficult tale

By Wang Xing (China Daily)
Updated: 2009-06-15 08:08

Amazon.com's popular e-book Kindle has had a great reception around the world. Now Chinese companies are striving to replicate that success in their home market.

Makers of electronics and telecom carriers hope the new gadget, which enables users to download and read books wirelessly, could ride the hoped-for boom in China's third generation (3G) telephony and help reawaken fading consumer fever for electronic products amid the economic slowdown.

Liu Yingjian, chairman of Hanwang Technology, said he expects sales of his firm's e-book products to reach 500,000 customers in China this year.

"Sales of Hanwang e-books have outpaced the combined revenue of all our other products since we launched it last year," said Liu, founder and chairman of Hanwang, China's largest handwriting-input recognition company. "Because of the e-book's robust performance, we expect to double our revenue and profit this year."

Liu said Hanwang's e-book uses the same electronic paper display as Amazon's Kindle and enables users to mark on the pages using Hangwang's handwriting recognition technology.

The product does not yet allow users to download books wirelessly, but Hanwang announced plans to release the latest version this month that has Wi-Fi capability, while the company is in talks with China Mobile, the country's largest wireless carrier, on working out products that support the telecom's 3G network.

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According to a research by China Book Business Report and the domestic e-paper technology firm Sursen, China had 79 million e-book readers at the end of last year who sustained a 226.3 million yuan market. Although some 85 percent of e-book users read books on their personal computers, revenue of the mobile e-book market surged 366 percent to 30.3 million yuan in 2008.

Domestic companies such as eRAED Technology Ltd and Tianjin Jinke Electronics released e-books in China many years ago, but the market did not rise until recently as readers' preference for printed books began to fade a bit.

"China's e-book market is going to take off as consumers get used to mobile reading," said Guan Dai, analyst from research firm Instat. She expects the market to have explosive growth in the next four to five years when Chinese telecom operators finish deployment of their 3G networks and start pushing the service.

Boosted by Kindle business, which delivers a vast online library of more than 270,000 books - including 104 of 112 New York Times Best Sellers - to end users wirelessly, Amazon registered a 24 percent increase in net income in the first quarter of this year.

Citigroup Analyst Mark Mahaney expects Amazon to generate between $400 million and $750 million in revenue from the Kindle by 2010, accounting for 1 to 3 percent of the online giant's total revenue.

The huge market opportunity has attracted most of the world's major IT companies to release e-book products, including Sony, Apple - which released Kindle applications for its iPod and iPhone users - and Samsung.

It was also reported that China's Huawei Technology and Lenovo are eyeing the market.

However, Guan from Instat said it is not easy to copy Amazon's success in China as few Chinese e-book makers have an online business equivalent to that of Amazon. And China's rampant piracy is a drag on consumer willingness to pay for e-books.

"If there is one sector that can duplicate Amazon's success here in China it will only be the telecoms," Guan said.

In fact, Chinese telecom operators have long been wary of an invasion by Internet companies striving to expand their influence from personal computers to mobile phones.

The distrust reached a climax in recent talks between Apple and China Mobile on introducing the popular iPhone to China, in which China Mobile reportedly refused to allow Apple users in China to purchase applications through Apple's online store and insisted it will sell the software through its own online channel.

On May 17, China Mobile debuted its 3G electronic reader that supports the TD-SCDMA standard and is expected to launch in August. China Unicom was also reported to be working on similar services.

Guan said only telecom operators have the capacity to deal with piracy in China as they have the ability to make e-books available to the masses at an affordable price. "As Chinese carriers decide to push e-books after they finish their 3G networks, the market will see a rapid boost," she said.

But she also noted that telecom operator domination of the e-book market may create a "walled garden" that could hurt freedom of choice.