Haoting
100+ Head-Fier
- Joined
- Mar 4, 2009
- Posts
- 122
- Likes
- 10
http://www.businessworld.in/images/s...jehangir-p.gif
DIVINE OUTPUT: Speakers in the shape of incense burners help the ‘Temple of Heaven’ hi-fi system sell for $15,000.
HI-FI
The Sound Of Music
Chinese audio manufacturers are offering consumers a radical value proposition by the high fidelity industry’s standards — great sound at great prices.
JEHANGIR S. POCHA IN BEIJING
For years, established high fidelity (hi-fi) manufacturers in Europe, the US and Japan have alternately impressed and turned off music lovers with their tall claims, conflicting views and extravagant prices. After all, the world of hi-fi is one where a pair of speaker cables from the US-based Nordost Corp. that cost $6,000 (Rs 2.69 lakh) can receive the best value-for-money award from an audio magazine. That is despite the fact that sound engineers cannot even agree on whether fancy speaker wire is measurably better than the ordinary copper wire sold at a corner hardware store for $10.
Now, manufacturers of Chinese audio equipment are seizing the opportunity and offering consumers sweet- sounding and attractive-looking CD players, amplifiers and speakers for about a quarter of those from snooty western manufacturers such as Denmark’s Bang & Olufsen.
“Chinese hi-fi can’t compare with the best hi-fi in quality. But if you look at the sound you get from a good Chinese system for the price, it is unbeatable value,” says Billy Kim, who owns hi-fi stores Huafu Audio in Beijing and LA Audio & Video in Los Angeles. “A person who can spend $10,000 on a stereo should stick with known companies, but someone looking to spend $3,000 could look at Chinese products first,” says Kim.
Consumers seem to be listening, and exploring the market for themselves. Cattylink.com, one of the first to list the best Chinese hi-fi online, says it has had 250,000 visitors since it went live in 2002. Consumers who have bought little-known Chinese products say they have come up winners, and chat groups and blogs are full of happy tales of buying excellent stereos at affordable prices. One posting from a person ‘ACfan’, who had just bought a pair of speakers called Music Goddess from Aurum Cantus (a Chinese brand), summed up: “The high-end detail, transparent mid-range and deep strong bass make it a definite leader in every department within the price range ($3,000).”
http://www.businessworld.in/images/s...e/finding1.gif
China’s success in hi-fi is emblemic of the creativity bubbling here. Unlike the factories that came up in the aftermath of Deng Xiaoping’s 1978 reforms with government backing, the hi-fi industry’s success is a grassroots phenomenon. As Yu Jian Bing, who owns Chinese amplifier manufacturer Classic Audio, puts it, a bunch of local audio buffs used to tinker around, and as they got more sophisticated and China’s electronics capabilities improved, they came up with their own products. “Nothing was planned,” Yu says. “It just happened.”
With the Chinese government now pushing local companies to innovate and climb up the value chain, the local hi-fi industry has become a poster boy for how companies can make the transition from smokestacks to sensors. Over the past two years, a range of Chinese boutique hi-fi manufacturers have surprised the audio world by unveiling several fine sounding products. For example, the SCD-T200 valve CD player from Shenzhen-based Shanling Digital Technology Development has impressed audiophiles so much that it sells for about $2,000 in the US and Europe, in direct competition to coveted brands such as Meridian and Linn Sondek. Also fast gaining audiophiles’ respect are Chinese companies such as Zhuhai Spark Electronic Equipment, which makes the award-winning Cayin brand of valve amplifiers, Shandong-based Jinlang Audio, which makes the Aurum Cantus brand of ribbon tweeter speakers, and Zhongshan Shengya Audio, which makes the Vincent brand of amplifiers and CD players.
At a recent audio show in Beijing, locals and expats flocked to rooms where exhibitors were demonstrating their products. Foreign brands such as Dali, Martin Logan and Onkyo had the biggest spaces, and a range of products, each supported by glossy brochures. But it was hard to ignore the elegant musicality of some of the Chinese products showcased in smaller rooms, where visitors were handed photocopied technical specification sheets. It was impossible even for discerning listeners to tell whether any given system playing was Chinese or foreign. “The Chinese stuff is getting much better,” says Lars Kristensen, a sound engineer with Nordost, who was demonstrating the company’s $10,000 cable at the show. “But it can’t compare with western firms who have been refining their products for decades. In 10 years maybe, but not now.”
That is just sour grapes, said a salesperson. “If you can’t hear the difference, then how does it matter?” he asked.
But it does matter, and this is one lesson applicable to the entire Chinese economy, that the hi-fi industry is learning. Right now, it is the performance, or rather the performance-price ratio of Chinese hi-fi, that has got people talking. While that is pleasing and has certain integrity, it is marketing that determines a company’s success, says Junyan Ling, chief designer, Chengdu Xindak Electronics, which makes amplifiers and CD players. “Our products are strong but the marketing is still weak,” says Junyan. “Ultimately, we need to not just sell our image but build quality and learn what western listeners want.”
That won’t be easy. The Chinese audio industry is fragmented and characterised by embryonic, technically driven companies housed in tiny workshops. That is what the western hi-fi industry looked like from the 1930s, when Alan Dower Blumlein invented stereo sound, to the 1970s. During this period, the industry was led by innovators who focused on creating exotic new products such as the Vandersteen’s Model 1C Aligned Dynamic Design loudspeaker, which is still pulling customers into stores.
The hi-fi industry looks very different today. Only a few players such as Vandersteen, US-based amplifier maker McCormack Audio and Italy-based Sonus Faber continue to make great products in small quantities. But western standards of wages, overheads and margins mean a stereo system made up of components from such companies costs between $10,000 and $30,000, generally more than even upper-middle class music lovers want to pay.
At the other end of the market is mass-produced equipment from companies such as Sony and Bose that offer good sound systems for $1,000-1,500. Kim says Chinese companies lack the finesse to compete in the high end of the market and the scale and clout needed to succeed in the low end. But he says they could re-ignite interest in the currently uninspiring middle segment of the hi-fi market, where a system costs $3,000-$6,000, and which is occupied by brands such as Arcam, Rotel, Adcom, Rega and Creek.
This will require marketing capabilities that have become the cornerstone of hi-fi. Right now, Chinese companies rely mostly on local media, the Internet and word-of-mouth to spread awareness. That is not enough to become global players. Most consumers don’t really understand sound, and rely on reviews to guide them. These are often ‘bought’ by hi-fi companies who spend large amounts on advertising, says Kim. As a result, image and reputation, not quality, drive purchases. This is best illustrated by the retail stores some hi-fi companies like Bang & Olufsen use to stroke their buyers’ egos. Another indication is the money they spend on the external look of their products, says Kristensen.
Chinese audio companies have caught on to this and, in the past year, models from companies such as Shanling have become very chic. But they still have to improve on build quality, reliability and design, and western manufacturers are using this to discredit
Chinese products. At the trade show, a salesman for Jamo, a Denmark-based audio firm, turned his nose up at the idea of a Chinese stereo. “Can China really make an original hi-fi system?” he asked.
Ironically, the people most susceptible to this argument are local Chinese buyers. Zhang Tong, 42, a businessman in Beijing looking to buy a new stereo said he would spend up to $6,000 on the right system. “But I will stay away from Chinese products,” he said. “The quality is not that good. We prefer overseas products.” That has shrunk the home market for brands like Classic, which sells more than half its products in Europe and the US. While this ‘country of origin’ problem vexes people like
Yu, what seems unfair is the way western hi-fi firms manipulate this concept.
For example, Jamo likes to market its Danish/European heritage, despite being owned by the Indianapolis-based Klipsch Audio Group, which also markets speaker brands such as Mirage, Energy and Athena.
More significantly, a number of foreign audio companies are having their products manufactured in China, though they don’t like to talk about it, says Zhao Dao, 54, a hi-fi expert in southern Guangdong province who has a hi-fi radio show and runs his own website.
In fact, original equipment manufacturing for foreign audio companies is what gave Chinese hi-fi companies their boost, he says. Some foreign marketers are even importing Chinese products and re-badging them with western brands. For example, Red Rose Music, a company owned by Mark Levinson, a hi-fi industry heavyweight, basically tweaks and re-brands Aurum Cantus’ Moon River speakers that retail in Beijing for $1,200 as its Classic Ribbon speakers, and sells it for $8,000. Red Rose’s $7,000 Affirmation amplifier is basically a modified V8i amplifier from Shanghai-based Dussun, which sells in Beijing for about $700.
The margin a well-marketed brand commands is prompting Chinese audio entrepreneurs to adopt a strategy employed by many industries here — buying established but faded western and Japanese brands, and breathing new life into them.
Though consumers may not know it, hi-fi brands such as Wharfedale, AudioLab, Mission and Quad that position themselves as European boutique offerings are actually owned by some Hong Kong entrepreneurs through the UK-based International Audio Group. Many of their products sold under these names are now manufactured in China. Other such brands are KEF, Vifa, Akai, Rogers and Sansui. “Chinese businessmen usually don’t want to make it public that they have bought these brands because Chinese consumers will suspect the quality and complain about the price if they knew the products are made in China,” says Zhao. “This can be a good strategy if the company wants instant profits. But it won’t be good for building their own brand names.”
This is not likely to happen soon. “Some large companies don’t have long-term vision of brand building, unlike manufacturers of other industries such as TCL for TV and Haier for ACs,” says Zhao. “Some manufacturers are just making good-looking furniture that produces sound. In such an environment it won’t be easy for Chinese companies to succeed internationally.”
In fact, Zhao says the low margins Chinese manufacturers are maintaining is what might kill them. “It is true that hi-fi products that cost $300 to make sell for $3,000, but companies need huge margins to develop,” says Zhao. “For Chinese companies the margins are already not too high, and if this remains the case, they won’t survive in the market.”
Junyan says dealing with naysayers is part of being Chinese. “People always tell us what we cannot do,” he says. “Then when we do it, they go on to the next thing we cannot do. But that is OK, it only makes us want to do that next thing.”
http://www.businessworld.in/images/s...ue/ignored.gif
DIVINE OUTPUT: Speakers in the shape of incense burners help the ‘Temple of Heaven’ hi-fi system sell for $15,000.
HI-FI
The Sound Of Music
Chinese audio manufacturers are offering consumers a radical value proposition by the high fidelity industry’s standards — great sound at great prices.
JEHANGIR S. POCHA IN BEIJING
For years, established high fidelity (hi-fi) manufacturers in Europe, the US and Japan have alternately impressed and turned off music lovers with their tall claims, conflicting views and extravagant prices. After all, the world of hi-fi is one where a pair of speaker cables from the US-based Nordost Corp. that cost $6,000 (Rs 2.69 lakh) can receive the best value-for-money award from an audio magazine. That is despite the fact that sound engineers cannot even agree on whether fancy speaker wire is measurably better than the ordinary copper wire sold at a corner hardware store for $10.
Now, manufacturers of Chinese audio equipment are seizing the opportunity and offering consumers sweet- sounding and attractive-looking CD players, amplifiers and speakers for about a quarter of those from snooty western manufacturers such as Denmark’s Bang & Olufsen.
“Chinese hi-fi can’t compare with the best hi-fi in quality. But if you look at the sound you get from a good Chinese system for the price, it is unbeatable value,” says Billy Kim, who owns hi-fi stores Huafu Audio in Beijing and LA Audio & Video in Los Angeles. “A person who can spend $10,000 on a stereo should stick with known companies, but someone looking to spend $3,000 could look at Chinese products first,” says Kim.
Consumers seem to be listening, and exploring the market for themselves. Cattylink.com, one of the first to list the best Chinese hi-fi online, says it has had 250,000 visitors since it went live in 2002. Consumers who have bought little-known Chinese products say they have come up winners, and chat groups and blogs are full of happy tales of buying excellent stereos at affordable prices. One posting from a person ‘ACfan’, who had just bought a pair of speakers called Music Goddess from Aurum Cantus (a Chinese brand), summed up: “The high-end detail, transparent mid-range and deep strong bass make it a definite leader in every department within the price range ($3,000).”
http://www.businessworld.in/images/s...e/finding1.gif
China’s success in hi-fi is emblemic of the creativity bubbling here. Unlike the factories that came up in the aftermath of Deng Xiaoping’s 1978 reforms with government backing, the hi-fi industry’s success is a grassroots phenomenon. As Yu Jian Bing, who owns Chinese amplifier manufacturer Classic Audio, puts it, a bunch of local audio buffs used to tinker around, and as they got more sophisticated and China’s electronics capabilities improved, they came up with their own products. “Nothing was planned,” Yu says. “It just happened.”
With the Chinese government now pushing local companies to innovate and climb up the value chain, the local hi-fi industry has become a poster boy for how companies can make the transition from smokestacks to sensors. Over the past two years, a range of Chinese boutique hi-fi manufacturers have surprised the audio world by unveiling several fine sounding products. For example, the SCD-T200 valve CD player from Shenzhen-based Shanling Digital Technology Development has impressed audiophiles so much that it sells for about $2,000 in the US and Europe, in direct competition to coveted brands such as Meridian and Linn Sondek. Also fast gaining audiophiles’ respect are Chinese companies such as Zhuhai Spark Electronic Equipment, which makes the award-winning Cayin brand of valve amplifiers, Shandong-based Jinlang Audio, which makes the Aurum Cantus brand of ribbon tweeter speakers, and Zhongshan Shengya Audio, which makes the Vincent brand of amplifiers and CD players.
At a recent audio show in Beijing, locals and expats flocked to rooms where exhibitors were demonstrating their products. Foreign brands such as Dali, Martin Logan and Onkyo had the biggest spaces, and a range of products, each supported by glossy brochures. But it was hard to ignore the elegant musicality of some of the Chinese products showcased in smaller rooms, where visitors were handed photocopied technical specification sheets. It was impossible even for discerning listeners to tell whether any given system playing was Chinese or foreign. “The Chinese stuff is getting much better,” says Lars Kristensen, a sound engineer with Nordost, who was demonstrating the company’s $10,000 cable at the show. “But it can’t compare with western firms who have been refining their products for decades. In 10 years maybe, but not now.”
That is just sour grapes, said a salesperson. “If you can’t hear the difference, then how does it matter?” he asked.
But it does matter, and this is one lesson applicable to the entire Chinese economy, that the hi-fi industry is learning. Right now, it is the performance, or rather the performance-price ratio of Chinese hi-fi, that has got people talking. While that is pleasing and has certain integrity, it is marketing that determines a company’s success, says Junyan Ling, chief designer, Chengdu Xindak Electronics, which makes amplifiers and CD players. “Our products are strong but the marketing is still weak,” says Junyan. “Ultimately, we need to not just sell our image but build quality and learn what western listeners want.”
That won’t be easy. The Chinese audio industry is fragmented and characterised by embryonic, technically driven companies housed in tiny workshops. That is what the western hi-fi industry looked like from the 1930s, when Alan Dower Blumlein invented stereo sound, to the 1970s. During this period, the industry was led by innovators who focused on creating exotic new products such as the Vandersteen’s Model 1C Aligned Dynamic Design loudspeaker, which is still pulling customers into stores.
The hi-fi industry looks very different today. Only a few players such as Vandersteen, US-based amplifier maker McCormack Audio and Italy-based Sonus Faber continue to make great products in small quantities. But western standards of wages, overheads and margins mean a stereo system made up of components from such companies costs between $10,000 and $30,000, generally more than even upper-middle class music lovers want to pay.
At the other end of the market is mass-produced equipment from companies such as Sony and Bose that offer good sound systems for $1,000-1,500. Kim says Chinese companies lack the finesse to compete in the high end of the market and the scale and clout needed to succeed in the low end. But he says they could re-ignite interest in the currently uninspiring middle segment of the hi-fi market, where a system costs $3,000-$6,000, and which is occupied by brands such as Arcam, Rotel, Adcom, Rega and Creek.
This will require marketing capabilities that have become the cornerstone of hi-fi. Right now, Chinese companies rely mostly on local media, the Internet and word-of-mouth to spread awareness. That is not enough to become global players. Most consumers don’t really understand sound, and rely on reviews to guide them. These are often ‘bought’ by hi-fi companies who spend large amounts on advertising, says Kim. As a result, image and reputation, not quality, drive purchases. This is best illustrated by the retail stores some hi-fi companies like Bang & Olufsen use to stroke their buyers’ egos. Another indication is the money they spend on the external look of their products, says Kristensen.
Chinese audio companies have caught on to this and, in the past year, models from companies such as Shanling have become very chic. But they still have to improve on build quality, reliability and design, and western manufacturers are using this to discredit
Chinese products. At the trade show, a salesman for Jamo, a Denmark-based audio firm, turned his nose up at the idea of a Chinese stereo. “Can China really make an original hi-fi system?” he asked.
Ironically, the people most susceptible to this argument are local Chinese buyers. Zhang Tong, 42, a businessman in Beijing looking to buy a new stereo said he would spend up to $6,000 on the right system. “But I will stay away from Chinese products,” he said. “The quality is not that good. We prefer overseas products.” That has shrunk the home market for brands like Classic, which sells more than half its products in Europe and the US. While this ‘country of origin’ problem vexes people like
Yu, what seems unfair is the way western hi-fi firms manipulate this concept.
For example, Jamo likes to market its Danish/European heritage, despite being owned by the Indianapolis-based Klipsch Audio Group, which also markets speaker brands such as Mirage, Energy and Athena.
More significantly, a number of foreign audio companies are having their products manufactured in China, though they don’t like to talk about it, says Zhao Dao, 54, a hi-fi expert in southern Guangdong province who has a hi-fi radio show and runs his own website.
In fact, original equipment manufacturing for foreign audio companies is what gave Chinese hi-fi companies their boost, he says. Some foreign marketers are even importing Chinese products and re-badging them with western brands. For example, Red Rose Music, a company owned by Mark Levinson, a hi-fi industry heavyweight, basically tweaks and re-brands Aurum Cantus’ Moon River speakers that retail in Beijing for $1,200 as its Classic Ribbon speakers, and sells it for $8,000. Red Rose’s $7,000 Affirmation amplifier is basically a modified V8i amplifier from Shanghai-based Dussun, which sells in Beijing for about $700.
The margin a well-marketed brand commands is prompting Chinese audio entrepreneurs to adopt a strategy employed by many industries here — buying established but faded western and Japanese brands, and breathing new life into them.
Though consumers may not know it, hi-fi brands such as Wharfedale, AudioLab, Mission and Quad that position themselves as European boutique offerings are actually owned by some Hong Kong entrepreneurs through the UK-based International Audio Group. Many of their products sold under these names are now manufactured in China. Other such brands are KEF, Vifa, Akai, Rogers and Sansui. “Chinese businessmen usually don’t want to make it public that they have bought these brands because Chinese consumers will suspect the quality and complain about the price if they knew the products are made in China,” says Zhao. “This can be a good strategy if the company wants instant profits. But it won’t be good for building their own brand names.”
This is not likely to happen soon. “Some large companies don’t have long-term vision of brand building, unlike manufacturers of other industries such as TCL for TV and Haier for ACs,” says Zhao. “Some manufacturers are just making good-looking furniture that produces sound. In such an environment it won’t be easy for Chinese companies to succeed internationally.”
In fact, Zhao says the low margins Chinese manufacturers are maintaining is what might kill them. “It is true that hi-fi products that cost $300 to make sell for $3,000, but companies need huge margins to develop,” says Zhao. “For Chinese companies the margins are already not too high, and if this remains the case, they won’t survive in the market.”
Junyan says dealing with naysayers is part of being Chinese. “People always tell us what we cannot do,” he says. “Then when we do it, they go on to the next thing we cannot do. But that is OK, it only makes us want to do that next thing.”
http://www.businessworld.in/images/s...ue/ignored.gif
