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Second-Tier China Market Powers Up IT Device Sales

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TAIPEI ( TheStreet) -- The Chinese dream for people with a real pile might be a flat on the 30th floor of a tower overlooking the colorfully lit riverfront in Shanghai. But hundreds of millions in the country's vast second-tier cities and provinces are sleeping comfortably with new electronic devices. That's where your portfolio comes in.

According to a Nov. 1 report from market research firm IDC, the middle third of China in terms of wealth will spend 13.6% more next year than this year on consumer electronics, more than the richest regions. The same segment would also lead the nation next year in buying smartphones, PCs and printers.

IDC is talking about places such as Tianjin, a 13 million-population city half an hour by train from Beijing, the province of Anhui just outside greater Shanghai and the western industrial boom megalopolis of Chongqing.

"We recommend that IT companies invest more in developing the markets in these provinces to strive for a competitive lead," IDC's Beijing research manager Xiao Hongliang says in a statement from the Massachusetts-based firm.

But a China cynic like me might be sitting in front of his Lenovo Tianyi Y300 laptop right now thinking, "hello, what's new?"

China is getting wealthier all the time, and the government has said consumer spending is top priority between now and 2015 per the current five-year plan for economic development.

It's actually simple. Second-tier China is growing. It's the teenager of Chinese consumption. Many people there haven't made their brand preferences clear yet, Xiao argues. The more mature markets of Beijing, Shanghai and Guangzhou, in contrast, are better penetrated and easier to predict.

But in five years the middle-tier market will mature because of growing incomes, the IDC analyst expects. Whichever IT brands march on Anhui, Chongqing and Tianjin, among other places, are in for a revenue boost if consumers like their stuff.

Smartphones should top the priority list, says Taipei-based principal analyst Tracy Tsai with the market research firm Gartner. She describes that tool as "a personal companion device for not only phone use but also for content consumption."

Next, in order of popularity, are mobile PCs, media tablets and desktop PCs, she says. Mobile PCs, presumably laptops, are selling because their multiple functions can be shared within a family, Tsai adds.

Their relatively large screens make them more attractive than tablets for hours of videos and Internet surfing. Ultrabooks, which are lightweight, thin PCs with strong processors and long battery life, are just beginning to make an impression in mid-tier Chinese markets, she says.

"The overall purpose is to improve the life quality, education and entertainment," Tsai says, suggesting that companies keen on the middle-China market boost their brand recognition and customer service.