Argentina & Uruguay Market Analysis: HIKSEMI Sales and Competitor Landscape

Let me briefly discuss the current situation in the Argentine and Uruguayan markets. This report is divided into three parts. First, let's look at the data. In July and August, Argentina and Uruguay shipped a total of approximately $800,000 worth of products, with about $500,000 in remaining orders. The Uruguay order can be shipped in September if the goods are produced on time. The data for Uruguay in July was 0 due to an order made by a former colleague for an 8W SSD, which arrived at the end of July. The overall market price dropped significantly during this period, leading to high inventory levels. However, through promotional activities, the excess SSD inventory has been consumed by the end of August. Gelirox has already placed orders worth around $100,000. In August, Argentina's data was 0 due to political risks, high foreign debt, and an unstable economy. The SELL OUT data in August was the lowest in the past two years, down 80% from July. The main products ordered in July and August were SSDs, RAM, TF cards, and USBs. SSDs accounted for 28%, while TF cards and USBs accounted for nearly 20%. The trend is shifting towards PCIE and large capacity SSDs, replacing small capacity ones. U10 and U100 GAMING series memory modules accounted for over 50% of the market, followed by U1 at 44% and S1 at a lower proportion.

The second part of the report focuses on the market analysis of Argentina and Uruguay. In Argentina, large IT distributors dominate the overall market, and agreements have been reached with AIR SRL, a PC installer, for the use of HIKSEMI/HIKVISION products. PC BOX, a local PC brand, is interested in collaborating with HIKSEMI, and discussions are ongoing with GRUPO NￚCLEO, the distributor of PC BOX. The shift to online shopping in Argentina and Uruguay has made online retail channels a priority. Negotiations for cooperation with MEXX/POLYTECH, the two largest local IT online retailers, have taken place, and discussions with GELIROX on promoting HIKSEMI in MERCADO LIBRE are ongoing. In terms of surveillance SSD and TF cards, SECURITY ONE, the largest security distributor in Argentina, has agreed to cooperate exclusively with HIKSEMI. Discussions with Hikvision's largest security distributor in Uruguay are also underway. The import situation of each product line in Argentina and Uruguay has been analyzed. SSDs have a market share of about 10% in Uruguay, while USBs and memory modules have lower market shares. The potential for USBs is still significant. The promotion focus for the second half of the year will be on the Uruguayan market, taking advantage of the price increase of Kingston to promote PCIE 3.0 and 4.0 products.

The third part of the report outlines the main areas of focus for product promotion in the second half of the year. Firstly, high-value gaming products will be promoted to tap into the promising gaming market in Argentina. Secondly, SSDs will be promoted as a replacement for HDDs, focusing on the advantages of HIKSEMI's V300x in terms of performance and price. Cooperation with SECURITY ONE has already been negotiated. Finally, the promotion of online retail channels, particularly for external SSDs, will be a priority. Packaging, design, price, and performance will be highlighted as key selling points.

The main competitors in the Argentinean market are Kingston, ADATA, PNY, and Patriot, with Kingston being the main competitor in Uruguay. PMs in charge of our brand also handle these competitors' brands, and incentive initiatives can be implemented for PMs to appreciate their role in brand promotion and sales. The overall competitive pressure is high, with Kingston and ADATA paying extra attention to our brand and taking measures to hinder our progress. The political and economic instability caused by the Argentinean elections will also impact import policies, and if the right-wing comes to power, it may negatively affect the import of Chinese brands. The repayment of the International Monetary Fund's U.S. dollar debt has caused overdue problems, resulting in no shipments until November and poor expectations for imports. The depreciation of the local peso has led distributors to focus on keeping existing inventory, resulting in a significant drop in SELL OUT data in August.

Brand switching will be a key focus in the second half of FY23 and FY24. Actions will be taken to increase brand exposure on local IT websites, build Argentina's INS social media presence, collaborate with local netroots for unboxing activities, and launch HIKSEMI's Spanish official website. The website will feature main distributors and clients will be encouraged to display the HIKSEMI logo on their websites.