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China Information Technology Report Q4 2009Published by: Business Monitor International Published: Oct. 15, 2009 - 58 Pages Table of Contents
AbstractChina's IT market is expected to remain a global outperformer during the 2009-2013 period, but growthwill slow to the single digits in 2009 due to the current economic headwinds. The government's stimuluspackage and rural electronics products subsidy programme helped to revive confidence in Q209 and ITspending is expected to reach US$78.3bn in 2009, increasing to US$124.2bn by 2013.Ultimately, China has a number of strong growth fundamentals in its favour. Drivers including China'svast potential rural market, government spending and demand from key verticals such as telecoms willhelp to prevent market stagnation. In H209, demand could receive a boost from factors such as 3G mobilesubscriber growth and the launch of the Windows 7 operating system. However, much will depend on thecontinued revival of consumer and business confidence. Industry Developments China's Ministry of Industry and Information Technology (MIIT) announced that it had delayed itspreviously announced July 1 deadline for launching the controversial Green Dam filtering software. Thesoftware, which would have been mandatory for any PC produced or sold in China, was ostensiblydesigned to block internet pornography, but concerns were expressed about privacy. As of September2009, the government had not announced a new deadline for PC manufacturers to include the software. However, domestic and multinational PC vendors proceeded to include the software in PCs sold in China.According to the MIIT, Chinese software exports were up 48.2% in the first four months of 2009,although this was slightly slower than last year's growth rate. The value of software exports reachedUS$4.93bn in January-April 2009. Meanwhile, eastern China reported software business revenues ofCNY219.82bn according to government figures, accounting for 86.1% of the national total. Informatisation among small and medium-sized enterprises (SMEs) is a government priority, given thatsmaller companies are the most vulnerable to the current decline in demand in many of China's exportmarkets and tighter credit conditions. The MIIT had already pledged US$743.73mn in 2008 for SMEsand proposed to allocate even more to inject capital into these smaller firms. The ministry also said that itwould add credit loans and guarantee credit. Competitive Landscape In H109, PC vendors took advantage of new channels amid the challenging trading conditions associatedwith the global economic slowdown. The launch of 3G mobile services in China was a key driver behindrising sales of netbooks; China Mobile announced co-operations with 17 vendors including HP, Dell andLenovo. Meanwhile, Acer, Dell and Lenovo were among 14 vendors selected by the Chinese governmentas designated suppliers for its subsidised computers programme launched in February. Software market leader Microsoft China has said that its annual revenues in the Chinese market aregrowing at a 'healthy double-digit rate'. In 2009, the company hopes that the launch of its Windows 7operating system, scheduled for October, will drive sales. In the summer, Microsoft continued to lay thegroundwork for the new operating system launch in China and announced that it had tested more than1,000 software applications for compatibility with Windows 7. Strong growth in manufacturing sector demand for enterprise resource planning (ERP) applications hasstimulated a wave of industry consolidation. Domestic software giant Ufida Software said that it wouldcontinue to expand through mergers and acquisitions in 2009, after spending around US$70mn in thisarea last year. Meanwhile, fellow leading domestic vendor Kingdee has also been among those makingacquisitions to strengthen its presence in the manufacturing vertical. Computer Sales China's computer hardware sales are projected at US$52.0bn in 2009 and are forecast to reach aroundUS$80.7bn in 2013. Close to 30mn computers are expected to be sold in China in 2009 despite theeconomic slowdown, which is expected to see PC market growth dip to mid-single digits this year. Following a particularly bad quarter in Q408, 2009 is likely to be a challenging year because of theimpact of the global financial crisis. However, the roll-out of 3G mobile services by China's mobiletelecoms network operators will stimulate sales of netbooks, while government subsidy programmes willboost demand from the vast, under-penetrated rural areas of China. There were signs in H109 that market demand conditions had improved somewhat compared with the endof 2008. BMI expects computer sales to remain in positive territory this year, with low single-digitgrowth projected. Early data suggested that laptop sales rebounded somewhat in the second quarter of2009. Sales picked up after the lunar new year, with the government subsidy programme providing aboost to consumer and business confidence. Software The total value of the Chinese software market is forecast to reach US$9.8bn in 2009, up from US$8.8bnthe previous year. In H109, software revenue growth was down on the same period of the previous year,but remained robust as enterprises looked for solutions that would help them improve performance andoperational efficiency. According to government figures, which include software industry export andsoftware-related services, revenues were up across a variety of sub-segments including 'SoftwareProducts', 'Business Software' and 'Software Technology Services'. Despite current economic uncertainties, there are still opportunities in many segments of the Chinesesoftware market. The release of Microsoft's new Windows 7 operating system, scheduled for October2009, has the potential to provide a boost to the IT market; however, much will depend on the extent ofconsumer and business confidence in the economic upturn. The sheer scale of the enterprise market willmute the impact of cuts in IT budgets in sectors such as construction and real estate, as demand fromother sectors such as telecoms, logistics and retail continues to grow. IT Services The IT services segment is projected to achieve expected sector compound annual growth rate (CAGR) of13% between 2009 and 2013. Spending is projected to reach around US$16.4bn in 2009 as banks,telecoms operators and manufacturers invest to meet the challenges by growing demand for their servicesand the more competitive environment generated by WTO membership. Shanghai will be a key locationof IT services opportunity over BMI's five-year forecast period as the city invests to implement its plan ofbecoming a world-class financial and shipping centre. The economic situation and credit tightening have had an impact on projects in some key verticals.However, indications were that overall IT services spending was continuing to grow in 2009, thanks toemerging opportunities such as outsourcing from South East Asia. In the telecoms sector, the launch of3G services and associated network roll-outs will generate spending, while government spending isexpected to increase as a percentage of GDP thanks to stimulus packages. Other potential growth areasinclude healthcare, banks and retail. Get Full Details About This Report >> |
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