Deal sees Apple enter China’s $4bn gaming market

The FT Beyond Brics blog – dedicated to develop markets – has an insightful account of Apple’s move into the Chinese gaming market through the acquisition of Handseeing. 

Key excerpts from the post:

China’s online gaming business is booming. Last year revenues hit $3.97bn, and growth was 30 per cent. The industry’s revenue is expected to more than double in the next three years.

Chinese state media reports that Apple is in talks with Handseeing, a little-known software and gaming company from Sichuan.

The rumour mill says the deal may be part of Apple’s soon-to-be-launched Apple Game Centre, which will be an online social gaming network. But it’s hard not to see it also as a case of low-hanging fruit. In 2009, the total number of online gamers in China was between 60-70m – only about a fifth of the country’s total internet community, according to iResearch.

That might sound rather large for a small software unknown. However, according to Reuters, Apple has $46bn in cash, which works out to be close to a fifth of its total market capitalisation.

Apple has refused to comment. But Handseeing’s deputy general manager, Tian Bo, has confirmed that the two companies are negotiating an acquisition price – potentially around $150m.

Apple’s move into the gaming market is a natural progression for its existing content strategy. The Apple store has been selling music, videos and apps for its devices a long while, tapping into the prevalence of Apple devices among hardcore and casual gamers alike.

China’s huge, fast-growing mobile market, with more than 230 million mobile internet users and the government committed to improving 3G access and usage (with $18bn pumped into 3G this year), is a major source of future growth which explains why analysts estimate the China gaming market will grow to more than $8 billion by 2013. It also explains Apple’s move, while the timing coincides with other China-based ventures from the firm.

As blogged this weekend Apple is getting its hardware together in China with the impending launch of the first Wi-Fi enabled iPhone in the country, while Chinese operator Unicom claims to be in talks to carry the iPad with the iPhone 4 likely “later this year”.

As the FT post mentions, this is likely to be the first of many steps to position the company in China’s lucrative online and telecom markets.