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IBM Eyes 50% Market Share
International Business Machines Corp (IBM) is reaping the rewards of a
decade-long push into China's business computer market, and is eyeing upwards of
a 50-per-cent share, China General Manager Henry Chow said.
Citing industry figures, the world's largest computer company boasts a
43.6-per-cent share of China's market for business computers large and small.
The computers used to operate everything from State-run banks to e-commmerce
websites.
Its global business computer share is 32 per cent.
"I would not say we do well enough," Chow said in a deliberate understatement of
the company's recent momentum in business computers.
"We are not yet over 50 percent," Chow said in an interview late last Monday.
But while hardware remains its mainstay in China, IBM is focusing on new hiring
and investment on software and services, where it sees even stronger growth.
"While the rest of the world has moved to a software and services market,
China's industry remains hardware-centric," said Chow, chairman and chief
executive of IBM China.
"We have seen in the past five years, and will see that in the foreseeable
future," he said.
In its most recent quarterly results statement, Armonk, New York-based IBM
singled out China, for the first time since it opened offices in the country 20
years ago, as a key driver of its overall corporate results.
Big emerging markets such as China, Russia, India and Brazil grew a combined 35
percent in the first half of this year, or five times faster than overall
revenue growth of 7 percent.
Currently, the bulk of IBM's China revenues -- 70 percent -- come from hardware,
while only 30 percent on software and services.
That's roughly the reverse of its global revenue mix, where services lead with
57 percent of sales.
But the percentage of its software and services business is increasing as the
economy matures, Chow said.
While the typical business technology buyer pays a premium for its foreign-built
computers, customers have traditionally expected hardware vendors to throw in
technical services for free.
Software has been developed and maintained in-house, a legacy of the
self-sufficiency forced on State-supported firms.
IBM's closest competitor in the server market is Hewlett-Packard Co, with a
26-per-cent share.
Crucially, IBM leads across all four segments of China's server market made of
PC servers, Unix, minicomputer and mainframes.
Sun has 12.4 percent, Dell holds 7 percent and China's leading PC brand, Lenovo,
has 2.2 percent, indicate the latest data from market researcher IDC.
IBM is a lesser player in the highly competitive desktop PC market -- where its
five big rivals each have larger shares -- but leads in the more profitable
market for notebook computers used by business travelers, with nearly 24
percent.
IBM has been profitable in China for 11 years.
IBM is taking aim at software and services in China because the sector is
projected to climb in excess of 20 percent.
Industry sales of personal computers are expected to grow 15 percent this year,
and servers and data storage equipment should rise by 13 percent, indicate IDC's
estimates.
"Most people we hire now are in software and services, because customers are
telling us they want to change," said Chow, a 36-year veteran of IBM China.
He started as a programmer in Hong Kong, and has become a top business figure in
China.
Under government prodding, China is undergoing its own merger wave, as State-run
enterprises at the provincial level combine into nationwide organizations so
they can become more globally competitive.
IBM China counts 3,800 employees, just a little over 1 percent of the company's
global headcount of 320,000.
Most are in sales, consulting, software or research. Another 4,500 work in IBM's
Chinese manufacturing operations.
IBM's global strategy of hiring away the internal staff of major corporate
customers under long-term outsourcing contracts doesn't work in China, where
private companies and government organizations still see technical labour as
cheap, plentiful and best-controlled in-house.
"Right now, we have a minimum of outsourcing contracts in China," Denis Yip, IBM
Asia-Pacific director for one of IBM's business computer lines, said in a
separate interview.
"We are making a lot of investments in IBM consultants -- that will be our next
wave of growth."
Sources: China Business Weekly
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World Exhibition Organizer Shifts Market Focus to China
Koelnmesse Co Ltd, the world's fourth largest exhibition organizers in terms of
exhibition space, is taking a more active approach towards the Chinese market.
Wolfgang Kranz, executive vice president of Koelnmesse said, "The Chinese market
is becoming increasingly important as many of our major exhibitors, which are
world-renowned companies, had already suggested we come here to organize shows
before 2002" , China Daily reported Wednesday.
He added that at present, Koelnmesse holds 15 international exhibitions outside
Germany, and seven of them are in China's major cities such as Beijing,
Guangzhou and Shanghai.
The seven fairs are dedicated to fields such as woodwork and furniture,
children's clothing, photographic equipment, hardware, sewing machines and food
and candy.
David Feng, the general manager of Koelnmesse (China) Co Ltd, said, "Shanghai
has been holding three of the seven fairs in China, thanks to its significant
position in China's economy."
Kranz pointed out that before Koelnmesse came to China the company had asked
several internationally renowned consulting companies to take surveys of the
Chinese market.
The results suggested the consumption ability of Chinese consumers, especially
those in Shanghai, has been growing extremely rapidly in the past five years.
Sources: Xinhuanet
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MG Rover Plans to Export Cars from China
MG Rover Group is expecting to be the first foreign carmaker to be involved in
exporting cars from China. This will come as part of its proposed joint venture
with Shanghai Automotive Industry Corporation.
The revelation indicates that MG Rover's proposed tie-up with the state-owned
SAIC, which is awaiting official approval from the Chinese government, is much
more far-reaching than had previously been thought.
At present none of the carmakers operating in China with local partners, such as
BMW or Volkswagen, is licensed to export vehicles. The ventures are designed
purely to exploit China's rapidly growing domestic market.
Rod Ramsay, the sales operations director at MG Rover, said: "If we have a model
that is essentially European, we will produce it at our Longbridge plant but
there is nothing to stop us importing from China or exporting from the UK."
Rover is planning to manufacture its 75 model in China and sell it to domestic
customers. However, the company has revealed that its new medium-sized car, the
designs of which are being finalized, will be produced for export in both the UK
and China.
"Part of the deal is developing a product plan for the long term," Ramsay said.
"Everybody is so focused on the new medium car that it has talismanic status,
but there is no limit on the products we are looking at with SAIC. This isn't
just a one-way street, these guys are big operators and they have an ambition to
produce 1m cars a year."
SAIC produces 600,000 cars a year, while MG Rover is expected to sell 100,000
vehicles this year. The figure is just half the company's sales four years ago
when MG Rover was sold off by BMW.
Sources: Xinhua News Agency
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FedEx to Turn Shanghai into Cargo Center
US FedEx plans to turn the city into its intercontinental cargo center in the
Asia-Pacific region by adding more flights to its air routes from China to the
US, Europe and the Asia-Pacific hub in Subic Bay in the Philippines.
The plans are based on the awarding by the US Department of Transportation (DOT)
to FedEx of 12 new frequencies, resulting from successful negotiations on rights
of navigation between the Chinese and the US governments.
"We are looking forward to providing our customers with even more comprehensive
service to and from China," said Eddy Chan, head of FedEx Express China.
Today, FedEx operates 11 weekly flights to Shanghai, Beijing and Shenzhen.
When finalized, the award will provide FedEx with 23 weekly flights to China,
more than doubling its current number of weekly flights and preserving its
leadership position as the largest express carrier in China, FedEx said in a
statement.
"If finalized, six new flights will begin this year and another six in 2005,"
Chan said.
Based on the Sino-US negotiations, the US will add 111 weekly flights to its air
routes to China between 2004 and 2010. At present, there are only 54 weekly
flights on Sino-US air routes.
"Adding new flights to China should be attributed to the express carrier's
booming business, with its volume increasing by 52 percent in its first fiscal
quarter (June-August) of 2004, compared with the same period last year," Chan
said.
"With more flights, we have enough power to compete with our rivals," he said.
Reports on FedEx's global business in the first fiscal quarter this year showed
that its revenue grew by 23 percent over the same period last year to reach
US$6.98 billion.
Its net income came to US$330 million, an increase of 157 percent over the same
period last year.
Next year, it will operate four daily flights from Shanghai to the US, Europe
and its Asia-Pacific hub.
"But it's not enough and we need more flights to meet the growing demand," Chan
said.
The FedEx statement said the company has filed a request with the DOT for six
additional frequencies connecting Guangzhou to Anchorage.
"Our expanded service would expand our shipment capacity in Southern China," he
said.
Meanwhile, FedEx will further enlarge its delivery network in China, which now
covers 223 cities with Beijing, Shanghai and Shenzhen as their centers, by
adding 100 more cities in the next five years.
"As the Chinese economy further expands, FedEx will possibly consider setting up
bases in Southwest China and Northwest China," he said.
FedEx has also ordered eight A380s from Airbus. The first will fly on a Shanghai
route when it is delivered in 2008.
The A380 aircraft can carry 150 tons of cargo, 50 percent more than Boeing 747
planes and double the capacity of MD-11 carriers.
Chan said that FedEx will invest US$2.1 billion next year to expand its
business.
"A considerable amount of the investment will be spent in China, because it has
become our major market," he said.
In another development, FedEx has signed a memorandum of understanding with the
Guangzhou Baiyun International Airport Company on the possibility of
establishing a hub operation there.
"The project aims to relocate its Asia-Pacific hub in Subic Bay to Guangzhou if
it is finalized," Chan said.
He said FedEx is confident of the project and a decision would be made in the
next 12 months.
The Baiyun Airport is suitable because from there it is only four to five hours'
journey to any major city in Asia.
Sources: China Daily
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Cisco to Open Research Center in China
Network equipment maker Cisco Systems Inc. plans to spend $32 million to open
a research and development center in China, the company announced Thursday.
The facility, to be located in Shanghai, is expected to open by April 2005,
Cisco chief executive John Chambers said. The company expects to hire about 100
employees over the next 18 months to staff the center.
Cisco said its plan is a response to the "increased and sustained growth" of
network service providers in China, the world's biggest emerging market. The San
Jose company also faces competition from China's own network-gear maker, Huawei
Technologies Co.
Cisco is not alone in boosting its presence in the world's most populous
country. Several other high-tech companies have set up research facilities in
China, including Intel Corp., Oracle Corp., Microsoft Corp. Hewlett-Packard Co.
and International Business Machines Corp.
Shares of Cisco fell 6 cents to close at $18.90 Thursday on the Nasdaq Stock
Market.
Sources: Associated Press
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