Amazon Could Be Launching A Kindle In China Next Month

by Trefis Team
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Amazon (NASDAQ:AMZN) will reportedly launch its Kindle e-readers and tablets in China in June 2013, thereby opening a big market for itself. [1] These devices will be sold via Amazon China’s Web site as well as Tesco stores chain. The tablet PC market in China is estimated to be about 12 million units a year currently and the e-reader sales are poised to touch 17 million by 2014. [2] The huge market size and Amazon’s competitive pricing could appease the growing Chinese middle class. But the road will not be easy. Not only may Amazon continue to face regulatory issues, it could also have hard time being profitable given the local competition.

See our full analysis for Amazon’s stock here

Competitive Concerns

China’s tablet PC market is dominated by market leader Apple‘s (NASDAQ:AAPL) iPad devices with almost 70% market share. The other notable players in the market include Asustek, Acer, Lenovo and Samsung (PINK:SSNLF). Also, the region is estimated to be the second largest market for e-readers in the world. [3]

e-Reader sales have been growing rapidly and are expected to top 17 million units annually by 2014. However, media conglomerates such as Hanvon, Dangdang and Shanda have strong presence in the region’s electronic publishing market. The wide availability of e-books and cheaper tablets based on Google’s (NASDAQ:GOOG) Android operating system could hamper Amazon’s growth. Nevertheless, many Chinese people buy Kindles from overseas. Brand loyalty built through the Kindle bookstore can help the devices weather the competition gain notable market share. Amazon will be looking to continually increase Chinese language titles.

China’s tablet PC market has been growing at a rapid pace, and the driving force behind the growing tablet sales in China has been the lower prices and view that the devices are a cheaper gadget to access the Internet. The Kindle Fire devices have conventionally been priced at almost zero margins and a similar strategy in China could prove successful in our view. However, the absence of Amazon as an online marketplace in the region and the dominant positions of local adversaries will mean that the company’s strategy of booking profits through sales directed to its websites through the devices may not work here in the near term.

Our price estimate for Amazon stands at $241, implying a discount of roughly 10% to the current market price.

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Notes:
  1. Amazon Reportedly Sets June 7 Launch For Kindle Devices In China, TechCrunch []
  2. E-Reader Market & Future Forecast Worldwide 2010 – 2014, Research and Markets, April 2011 []
  3. E-Reader Market & Future Forecast Worldwide 2010 – 2014, Research and Markets, April 2011 []
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