04/26/2002
Business Weekly

Editor's Note: The CCID Consulting Co Ltd recently released its Annual Research Report on China's IT Market 2001-2002, which reviews China's information technology market in 2001 and makes predictions for 2002. Last week, Business Weekly presented the second part of the report. Following is the last part.
CCID forecasts that China's IT market in 2002 will demonstrate the following trends:

1. The interaction between advancement in technologies and shift in demands will continue as the major driving force for the continuous expansion of the IT market.

The ongoing advancement in IT product technologies, along with the development of communications and network technologies, has not only lowered the prices of products and services, but has also changed the way people live and work, thus creating new demand for IT products.

On the other hand, the shift in user demand has enriched the content of IT products and has become the original driving force in the promotion of technological advancement in products.

2. The rivalry of products will evolve from relative monotonous products to comprehensive application solutions.

As traditional trades lack effective support in professional technologies, the demand for comprehensive application solutions and professional consultation from these trades will accrue. Seen from the suppliers' aspect, the profit space for relatively monotonous products has shrunk to the extreme, whereas the provision of comprehensive solutions, including the provision of products and services, has large profit space.

In the face of this trend, more IT manufacturers will optimize their product structure and elevate product performance on the basis of producing and selling monotonous products in order to shift to the provision of comprehensive application solutions, which will increase competition between advanced products in the market.

3. The competition in distribution channels will shift from the expansion of scale to the elevation of effectiveness.

IT manufacturers have enhanced their power in channel integration one after another in recent years.

On the one hand, when the expansion scale of the manufacturers' own channels makes cost rise greatly, it also lowers the effectiveness of the channels. Thus, the implementation of networking and electronic channels in order to promote effectiveness has become a necessity for manufacturers.

On the other hand, the softening trend of China's IT market encourages closer partnerships between manufacturers and their partners, which requires greater effectiveness in the manufacturers' channels.

4. Regional competition will extend from L1 & L2 central cities to the regional L3 & L4 market.

China's L1 and L2 central cities are far more advanced in information construction than the L3 and L4 cities. At the same time, East, North and South China are far more advanced in this regard than China's other four great areas.

Therefore, in order to keep continuous development in the fiercely competitive market, some powerful IT manufacturers will take advantage of the country's relevant preferential policies supporting the development of some regions and extend the strategic focus of the divisional market from L1 and L2 central cities to L3 and L4 cities. Regional markets will become the focus of competition among IT manufacturers in the few years to come.

5. Competition in trades will shift from the extensive bulk market to the divisional trade application market.

At present, key trades such as communications, finance, transportation and government are generally more advanced than traditional trades such as manufacturing and architecture. With the step-by-step implementation of the country's "Industrialization Promoted by Information" strategy, the information construction of traditional trades will be enhanced.

Then manufacturers' focus will shift from the bulk market to the divisional trade application market, making the provision of specific products and application solutions to specific trades the focus of manufacturers' competition in the future.

6. The competition of service will shift from traditional services to professional and individualized value-added services.

With more investment for the information construction of domestic trades and enterprises, traditional service modes, such as hardware and system maintenance, cannot satisfy users' ever-growing demands.

Correspondingly, user demand for services such as consultation, integration and solution of various kinds continues to grow. Therefore, these services will undergo a substantial change from traditional content to comprehensive solutions combining software, hardware, network, consultation and training.

Accordingly, the various professional and individualized services provided by IT manufacturers and service suppliers will be favoured by more users.

7. The shifts in strategy and operation will become the most fundamental approach in taking the initiative in future market competition.

After China's WTO entry, Chinese IT enterprises will face more severe challenges and the focus of market competition will undergo substantial changes. The market's focus on customers makes integration a significant development trend and new industrial characteristic of the IT industry. Under these circumstances, to create brands and elevate enterprises' competitiveness through purchasing, restructuring or other capital operational approaches will become the strategic focus for some large-sized enterprises.

IV. Forecast for China's IT market in 2002

According to CCID's forecast, in 2002, China's IT market will achieve sales totalling 301.3 billion yuan (US$36 billion), an increase of 20.4 per cent from 2001. Computer hardware, software and information services will respectively achieve sales amounts of 215.2 billion yuan (US$25 billion), 35.7 billion yuan (US$4.3 billion) and 50.4 billion yuan (US$6 billion).