A Gross Domestic Product of over $13 Trillion last year. A working age population of almost 800 million. The worlds fastest growing major economy. China may be to most people just where their TV gets made or a place that makes noodle-based foods, but in actual fact this socialist country holds the holy grail of new markets to enter for almost every technology firm in the world. No other country can boast such purchasing power and economic growth especially in this current day and age. However since 2000 the Chinese market has been devoid of foreign video games consoles due to a ban put in place to protect the young of this fast growing nation against mentally adverse effects.
Not that this ever stopped imported consoles being sold upon a grey market within the country, but that’s another matter all together. Now -for a limited time only – China has lifted this 14 year ban on foreign video games consoles.
Whether this will change attitudes amongst the gamers of China is another matter. Due in part to the ban on foreign consoles two thirds of gaming market in China is in PC gaming. A market which is worth around $8 billion. No console manufacturer is going to pass up on such an opportunity if they are worth their salt. But before Sony, Microsoft or Nintendo jump onto the market they will have to jump through a couple of resrictions to get their hardware onto the market.
The Chinese government stated that they would allow foreign console sales if the units are made inside the Free Trade Zone of Shanghai and only let them on sale after they pass inspection by China’s numerous cultural departments. The major concern here though is that the term of the ban’s suspension hasn’t been confirmed and likely never will be. To most this might not seem like much of a problem, just build a factory and make consoles there. It’s rarely that simple though. For starters new factories have to be planned and built as well as equiped with the necessary technology and plant machinery – most of which will be bespoke – then pass inspections then filled with staff who will have to be trained and then finally opened for production.
If we assume this process takes 6 months, that’s 6 months of expertise and resources spent in one area which could have been applied to others such as reducing production costs or marketting. We all know that 6 months in the technological industries is equal to a lifetime in others when it comes to development and processing. Without a confirmed amount of time the ban will be lifted too, this spending of resources could incur a substantial opportunity cost which will be wasted the moment it’s shut down. Can any of the big three who are all still embroiled in a marketting war with one another take the time out of their current operations to take up such an opportunity.
Sony commented on this, stating;
“We recognise that China is a promising market. We will continuously study the possibility, but there is no concrete plan at this stage.”
From that we can read between the lines and boil Sony’s thoughts on the matter down into one easily digestable cup of news tea. Maybe.
On the plus side though, China’s video gaming market is not only large – it’s growing at an incredible rate. In the space of just one year (2012/13) the market grew by an astounding 38% to reach it’s current $13 billion level and could grow again at the same rate as China continues to be a growing economic powerhouse.
People may look to Foxconn to help then decide whether the opportunity is worth the hassle. Foxconn already produces consoles and components inside China for export for each of the Big Three with Microsoft being probably it’s biggest and most famous (or infamous depending on the stories you read) customer. Nintendo and Sony may sub-contract components out to other companies but Microsoft goes the whole hog and produces entire consoles consistently through outsourced means.
In short, this suspension of a long time ban could open up a market worth tens of billions of dollars to console hardware manufacturers if they are quick to get into the market. All they have to hope is that the suspension stays and their investments can grow.