US firms now eye Chinese, Indian IT markets

Jennifer Tan

SINGAPORE: For US tech giants China and India could be the few bright spots

in a darkening economic climate. "China and India are very new markets so

there is still going to be IT (information technology) demand in these markets

even with the global economic slowdown," said Mike Scott, research manager

at consultancy International Data Corp Asia-Pacific.

"The US and Europe don't have the advantage of such large, fresh markets

unlike Asia." While recession stalks their neighbours, China and India have

huge infrastructure gaps and a thirst for the latest know-how is music to the

ears of tech firms trapped by mature markets at home and in Europe.

For Sun Microsystems Inc, China and India are the US network computer maker's

two biggest bets in the next few years. "What we are driving towards is a

billion-dollar business in China and India," Asia-Pacific sales director

James Whitemore told Reuters. "That's the goal that's set for us - 200-300

percent growth over the next two to three years."

Sun's customers in China and India come mainly from the finance,

telecommunications, energy and life sciences sectors. The Asia-Pacific region

now accounts for 23 percent of Sun's global revenues and is set to grow,

Whitemore said. The more demanding attitude of customers in these markets also

offers huge potential.

"Customers in China and India don't adopt previous methods of

problem-solving and adapt them they leap-frog them. With that kind of appetite

for technology, with that kind of attitude, you can see the opportunities in

these countries to build them into billion-dollar-plus revenue sources," he

said.

In praise of China



Paul Waide, analyst at consultancy Strategic Intelligence, said be believes
India is more of a "potential" at this stage. "India will be a

booming market, but in two to three years' time. Right now, they are just at the

beginning of the growth curve," he said.

But China is in a sweet spot. "China is the hot market for IT and

telecommunications infrastructure. But the rest of Asia, like the ex-Tiger

economies of Taiwan and South Korea, have been affected by the global economic

slowdown," he said.

Cisco Systems Inc is singing a similar tune about China, one of its top five

performing markets. Chinese corporations and enterprises have shown a voracious

appetite for the world's largest data networking equipment maker's routers and

switches, Cisco vice president Jia Bin Duh told Reuters.

"We're doing pretty well in China and business is on a healthy track.

China's economy is still very strong, with the government initiating many

infrastructure construction projects. We cover almost all the industries

including telecommunications, enterprise, banking and education."

China's gross domestic product expanded 7.95 per cent in the first six months

of 2001 and the world's most populous country is expected to maintain an average

growth rate of seven percent over the next three to five years.

Duh said China, where revenues hit $1 billion in the year to end-July,

accounted for half of Cisco's Asia-Pacific revenues and nearly five percent of

its global revenues of $22.29 billion. Cisco's customers in China include the

country's second-largest mobile carrier China Unicom, China Telecom and Bank of

China.

Bright spots to fade?



But the regional bright spots may fade, some analysts warned. According to
IDC estimates, the US market accounted for about 42 per cent of global hardware

spending in 2000, with Western Europe at about 25 per cent. This includes demand

for network servers, personal computers, and data communications equipment.

While the Asia-Pacific region excluding Japan has been a buffer for US

multinationals due to the region's comparatively slower rate of economic

contraction, this may only be temporary, said the IDC's Scott. "The worst

is yet to come and if the US economy doesn't turn around in the next three to

four months, Asia will not be able to provide a buffer anymore," he said.

"The size of the Asian market is just not big enough to counter a long-term

downturn in the US and Europe."

(C) Reuters Limited 2001.