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China's IT market: Ministry of Industry and Information Technology pledges US$743.73mn for SME IT program
(M2 PressWIRE Via Acquire Media NewsEdge) China Information Technology Report Q3 2009 : New Company and Market Analysis
China's IT market is expected to remain in positive territory throughout the 2009-2013 period, but growth will be markedly slower in 2009, due to the current economic headwinds. BMI has downwardly revised its five-year forecast, but IT spending is still expected to reach US$78.3bn in 2009, and increase to US$124.2bn by 2013.
There were signs in early 2009 of improved growth in several market sectors. Some PC vendors reported a pick-up in computer sales, particularly of notebooks, with more positive consumer demand compared with the last quarter of 2008. According to monthly figures from the Ministry of Industry and Information Technology, growth was down from 2008, but still very much in positive territory.
Ultimately, China has a number of strong growth fundamentals in its favour. Drivers including China's vast potential rural market, government spending and demand from key verticals such as telecoms will help to prevent market stagnation. Spending will receive a boost from investments related to government stimulus packages and the Shanghai World Expo in 2010.
Industry Developments
In 2009 the government launched a tender for a computer subsidy programme designed to increase usage of computers by residents of rural China. The programme guidelines state that the price of desktops should not exceed CNY3,500 (US$511), and that of notebooks should not exceed CNY4,500 (US$658).
The government's 'home electronics to the countryside' programme is intended in part as a stimulus package to benefit China's domestic electronics industry.
According to the Ministry of Industry and Information Technology (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 reached US$4.93bn in January-April 2009. Meanwhile, East China reported software business revenues of CNY219.82bn, government figures showed, accounting for 86.1% of the national total.
Informatisation among small and medium-sized enterprises (SMEs) is a government priority, given that smaller companies are the most vulnerable to the current decline in demand in many of China's export markets and tighter credit conditions. MIIT had already pledged US$743.73mn in 2008 for SMEs and proposed to allocate even more to inject capital into these smaller firms. MIIT also said that it would add credit loans and guarantee credit.
Competitive Landscape The launch of 3G mobile services in China promised to provide a fresh boost to sale of netbooks, one of China Information Technology Report Q3 2009 Business Monitor International Ltd Page 6 the PC segment growth areas in 2009. China Mobile, which launched its 3G service based on the domestic TD-SCDMA technology standard, was co-operating with a number of vendors including HP, Dell and Lenovo on marketing 20 models of TD Netbooks.
Meanwhile, Acer, Dell and Lenovo were among the 14 vendors selected by the Chinese government as designated suppliers for its subsidised computers programme that was launched in February. Eleven of the selected vendors were Chinese companies. The slowdown in the PC market towards the end of 2008 has enhanced vendor focus on rural areas and lower tier cities.
In 2009 Microsoft announced that it will make a series of investments in the eastern city of Hangzhou, as part of its efforts to combat software piracy. Microsoft will establish technology centres in the city and provide training. Last year the company signed an agreement with leading domestic PC vendor Founder to bundle MS Windows Live with its computers over the next two years.
Computer Sales China's computer hardware sales are projected at US$52.0bn in 2009 and are projected to reach around US$80.7bn in 2013. Close to 30mn computers are expected to be sold China in 2009, despite a slowdown that became marked in the fourth quarter of last year. Following a particularly bad quarter in Q408, 2009 is likely to be a challenging year because of the impact of the global financial crisis.
There were signs in H109 that market demand conditions had improved somewhat compared with the end of 2008. The government's CNY4trn stimulus package seemed to have created a more positive consumer sentiment, particularly with subsidies for PC buyers in rural areas. However, the market had not yet recovered to pre-crisis growth levels, and rising unemployment may dampen vendor hopes of a sharp upturn in the second half of the year.
Software BMI projects that the Chinese software market will grow at a CAGR of 14% over the 2009-2013 period.
The total value of the Chinese software market is projected to reach US$9.8bn in 2009, up from US$8.8bn the previous year. Despite the economic downturn, there are still expected to be opportunities for software vendors in many segments. The sheer scale of the market will mute the impact of cuts in IT budgets in industries such as financial services, construction and real estate.
In H109 software revenues growth was down on the same period of the previous year, but still robust, according to government figures. According to government figures, which include software industry export and software related services, revenues were up across a variety of sub-segments including 'Software Products', 'Business Software' and 'Software Technology Services'. The economic situation is likely to lead to further consideration of open source solutions in some areas, and to encourage vendors to promote software-on-demand solutions.
IT Services The IT services segment is projected to achieve expected sector CAGR of 13% 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 services, and the more competitive environment generated by WTO membership.
The economic situation, and credit tightening, has had an impact on projects in some key verticals.
However, indications were that overall IT services spending was continuing to grow in 2009, thanks to emerging opportunities such as outsourcing from South East Asia. In the telecoms sector, the launch of 3G services and associated network roll-outs will generate spending, while government spending is expected to increase as a percentage of GDP, thanks to stimulus packages. Other potential growth areas include healthcare, banks and retail.
To view this report, please use the following link: http://www.companiesandmarkets.com/r.ashx?id=914YXGBD9154352
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