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China Information Technology Report Q1 2011
Business Monitor International, Jan 2011, Pages: 64
The China Information Technology Report provides industry professionals and strategists, corporate analysts, information technology associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on China's information technology industry.
China’s IT market is expected to remain a global outperformer during 2011-2015. IT spending is forecast to reach US$103.6bn in 2010, increasing to US$167.4bn by 2015. An expansion in consumer credit and a commitment to modernisation in sectors such as education, healthcare and manufacturing will help sustain market growth.
Total IT spending in China is projected to grow at a CAGR of 12% over the five-year forecast period. Several factors, including a vast potential rural market, government spending and gradual modernisation in sectors such as education, healthcare and manufacturing will help sustain market growth. Growing interest in cloud computing will drive vendor investment and attract new players into the market.
The first half of 2010 saw strong year-on-year growth in PC shipments, up by around 30%.The government’s subsidy programme will continue to boost demand from the vast, under-penetrated rural areas of China, while at the same time this will continue to deflate average PC prices. The lower-tier city and towns are now the fastest growing segment of the PC market.
Competitive Landscape
In H110, Chinese PC vendor Lenovo remained the market leader in both the desktop and notebook segments of its domestic market. Lenovo claimed to have achieved 42.% year-on-year growth in Q210, consolidating its number-one position in the Chinese market with a share of around 28.7%. Other competitors such as Acer, Dell and local company Founder have less than 10% PC market shares. The cloud computing opportunity is a growing focus for hardware vendors. In May 2010 PC leader Lenovo rolled out a mobile-focused cloud computing strategy, targeted at the business segment. Meanwhile, Dell announced plans to build two data centres in China and hopes to leverage its 2009 purchase of IT services leader Perot Systems Corp.
Computer Sales
China’s computer hardware sales are projected at US$69.7bn in 2011 and are forecast to reach around US$110.0bn in 2015. PC shipments are expected to be around 65mn in 2011, recording double-digit year-on- year growth. The rollout of 3G mobile services by China’s mobile telecoms network operators will stimulate sales of netbooks, while government subsidy programmes will boost demand from the underpenetrated rural areas.
BMI forecasts computer hardware CAGR for the 2011-2015 period will be around 12%, with small and medium-sized enterprises (SMEs), smaller towns and rural areas driving growth, along with replacement of desktops with notebooks. Vendors face the challenges of geography and channel underdevelopment in China’s enormous rural hinterland, where villages are often widely dispersed and far from the nearest large town. Vendors such as Lenovo and HP have been aggressively expanding their sales networks outside China’s largest cities.
Software
BMI projects the Chinese software market will grow at a CAGR of 14% over the 2011-2015 period. The total value of the Chinese software market is forecast to reach US$12.9bn in 2011, up from US$11.1bn the previous year. As a rule, Chinese enterprises tend not to pay enough attention to software. However, there is a growing trend for companies to seek greater efficiency by using IT to improve productivity and lower costs, including labour costs. The hosted application model may already account for 20-25% of China’s software revenues.
IT Services
IT services has been the fastest growing segment of the IT market in recent years and is projected to achieve expected sector CAGR of 14% between 2011 and 2015. Spending is projected to grow as banks, telecoms operators and manufacturers invest to meet the challenges posed by growing demand for their services. One potential demand driver will be organisations looking for help in using efficiencies from cloud computing. Shanghai will be a key location of IT services opportunity over BMI’s five-year forecast period as the city invests to implement its plan of becoming a world-class financial and shipping centre. In the telecoms sector, the launch of 3G services and associated network rollouts will generate spending.
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