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US tech firms bank on solid China, India demand

For many 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 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 -- 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 a billion-dollar business in India," Asia-Pacific sales director James Whitemore said.

"That's the goal that's set for us -- 200-300 per cent 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 per cent 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," said Whitemore.

"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."

Singing China's praises

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," he said. "Right now, they are just at the beginning of the growth curve."

But China is in a sweet spot, he said.

"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 said.

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

"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 per cent over the next three to five years.

Duh said China, where revenues hit US$1 billion in the year to end-July, accounted for half of Cisco's Asia-Pacific revenues and nearly 5 per cent 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 ex-Japan 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."

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