China Information Technology Report Q1 2012
Business Monitor International, February 2012, Pages: 68
Business Monitor International's 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.
IT spending is forecast to reach US$124.4bn in 2012, increasing to US$192.3bn by 2016. Despite an expected moderation in investment and retail spending over the next year, an expansion in consumer credit and modernisation drive in sectors such as education, healthcare, and manufacturing will sustain market growth.
Spending growth is forecast at around 14% in 2012, which is a slight slowdown compared with 2011. Owing to government stimulus packages and a recovering economy, PC shipments recorded robust growth of 16% in 2010, and equally robust growth in 2011. However, growth has decreased slightly, owing to government economic cooling measures. Rural areas and lower-tier cities and towns will be among the fastest growing segment of the PC market.
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 and will be further stimulated by the launch of government pilot programmes.
Industry Developments The China government is driving the integration of internet, broadcasting and communications networks. The campaign has the potential to boost sales of PCs and other connectivity devices, including in smaller city markets. The government has selected a number of cities for trials, including second-tier cities such as Mianyang in Sichuan and Zhuzhou in Hunan, each with populations of around 5mn.
In January 2011, the government introduced a 50% cut in import tariffs on some electronics products, such as laptops. The Ministry of Finance announced that the import tariff on computers, as well as other electronics devices such as digital cameras, would fall from 20% to 10% by January 27 2011. The tax move was presented as helping China fulfil its promise to the WTO.
E-government services in China are continuing to develop at a provincial level, with online services being delivered by more local government departments and organisations. In Fujian province in 2011, the local government was implementing a new portal for services including healthcare, social security and education, which are provided for up to 300mn citizens. Those in rural areas can access the services through kiosks in community centres and other public places.
Competitive Landscape By H211, several analysts reported that Chinese PC market giant Lenovo had overtaken Dell in global PC sales to rank second behind US giant HP. However, Lenovo's dominance faces a challenge from the growing popularity of tablets and smartphones. This was reflected by estimates from various analysts that in Q211 US consumer electronics leader Apple's greater China market revenue, including Hong Kong and Taiwan, exceeded those of Lenovo for the first time.
In Q411, European software giant SAP announced that it would spend US$2bn in China through 2015 to grow its business. SAP plans to hire around 2,000 people and open five or six new China offices over the next four years. The company will also establish more research and development facilities. In May 2011, SAP signed a deal with leading Chinese telecoms company China Telecom.
The cloud computing opportunity is also a growing focus for hardware vendors. In May 2011, enterprise software leader SAP signed a deal with leading telecoms company China Telecom. According to the terms of the agreement, China Telecom will sell SAP's on-demand BusinessByDesign cloud solution for mid-size companies. SAP hopes that the deal will provide it access to a Chinese market opportunity of more than 1mn mid-size companies.
Computer Sales China's computer hardware sales are projected at US$81bn in 2012 and are forecast to reach around US$121bn in 2016. PC shipments are expected to be more than 90mn in 2012, with double-digit year-onyear growth. The roll-out of 3G mobile services by China's mobile telecoms network operators will stimulate netbook sales, while government subsidy programmes will boost demand in the underpenetrated rural areas.
BMI forecasts a computer hardware CAGR for the 2012-2016 period of around 10%, 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 11% over the 2012-2016 period. The total value of the Chinese software market is forecast to reach US$16.2bn in 2012, up from US$13.6bn the previous year.
As a rule, Chinese enterprises tend not to pay enough attention to software. However, there is a growing trend for companies to seek greater efficiency by using IT to improve productivity and lower costs, including labour costs. The hosted application model may already account for 20-25% of China's software revenue.
IT Services The IT services segment is projected to achieve expected sector CAGR of 15% between 2012 and 2016. Spending is projected to grow as banks, telecoms operators, and manufacturers invest to meet the challenges posed by growing demand for their services.
One potential demand driver will be organisations looking for help in using efficiencies from cloud computing. In the telecoms sector, the launch of 3G services and associated network roll-outs will generate spending.
Executive Summary
SWOT Analysis
Chinese IT Industry SWOT
Chinese Telecoms Sector SWOT
China Political SWOT
China Economic SWOT
China Business Environment SWOT
Business Environment Ratings
Table: Regional IT Business Environment Ratings
IT Markets Overview
Asia
Market Overview
Table: China Computer Production
Table: End-User Analysis, China's IT Sector, 2006
Industry Forecast
Table: China's IT Sector – Historical Data & Forecasts (US$mn Unless Otherwise Stated)
Industry Forecast Internet
Table: China Telecoms Sector – Internet – Historical Data & Forecasts
Macroeconomic Forecast
Competitive Landscape
Hardware
Software
Company Profiles
Kingdee
Dell
Lenovo
IBM China
Country Snapshot: China Demographic Data
Section 1: Population
Table: Demographic Indicators, 2005-2030
Table: Rural/Urban Breakdown, 2005-2030
Section 2: Education And Healthcare
Table: Education, 2002-2005
Table: Vital Statistics, 2005-2030
Section 3: Labour Market And Spending Power
Table: Employment Indicators, 2001-2006
Table: Consumer Expenditure, 2000-2012 (US$)
Table: Average Annual Manufacturing Wages, 2005-2012
BMI Methodology
How We Generate Our Industry Forecasts
Transport Industry
Sources
- Kingdee
- Dell
- Lenovo
- IBM China
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