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China's largest PC firm expands

Chinese market leader Legend expects sales to top $2.2 billion in 1998, a 44 percent increase from its $1.5 billion last year.

Bolstered by the country's surging PC industry, Chinese market leader Legend expects sales to top $2.2 billion in 1998, a 44 percent increase from its $1.5 billion last year.

Legend president Liu Chanzhi also stated that he intends to raise annual sales to $2 billion and enter the ranks of the world's top 50 computer firms by the year 2000, according to the Xinhua News Agency. Legend was established with state funding and is still a quasi-governmental concern.

These estimations are not surprising, as Legend's success in China's PC market has put the local manufacturer ahead in market share over foreign competitors IBM, Compaq Computer, and Hewlett-Packard, according to recent data from market researcher International Data Corporation.

Besides being China's most successful domestic PC manufacturer, Legend would also like to become one of the world's top information technology companies by introducing a wide range of products to be sold internationally, the company told Xinhua, itself a state-run concern.

Already, the company has become the world's fifth-largest PC motherboard manufacturer and, by some estimates, is expected to quickly rise in ranks. A motherboard is the main circuit board used in a PC and houses most of the main components.

Mark Mechem, head of the U.S. Information Technology Office in Beijing, believes that Legend could pave the way for China to overtake Taiwan's motherboard industry within five to ten years, but other analysts remain skeptical.

"Other motherboard manufacturers have already got operations in mainland China and elsewhere like the Philippines," said C.B. Lee of Sutro & Company. "So cost advantage is not unique for Legend. Other people are getting into the act as well. [Legend] doesn't have a lock on low production cost in China."

Nonetheless, Legend's strength in PC sales does come from effectively marketing to local tastes.

"They provide high quality [at] a low price point," IDC analyst Lisa Cosmas previously told CNET's NEWS.COM. "This is a very successful model. As we see it they do have a price advantage and they're able to keep dropping their prices."

Legend is also favored heavily since it is a national brand. Additionally, foreign PC manufacturers are faced with a 17 percent value-added tax, which has given local companies a pricing advantage.

"Legend is an important customer for Intel," added Lee. "Mainland China is a big market. They can do very well selling just to the mainland Chinese market. They don't have to go overseas at all."