Domestic Market

Market Size of Information Technology, China 2001

Source: USIT. http://www.siia.net/divisions/global/1-24-02/wto.ppt 3

US $1 = Yuan 8.2

General growth trend for IT market in China

Source:  http://www.siia.net/divisions/global 4

Overview

China has been the most promising markets for IT globally. In 2000, the overall IT market in China reached US$16.18 billion, a growth of 43.7% over 1999. It was forecasted that the 2000-2005 Compound Annual Growth Rate (CAGR) for China’s IT market will reach 24.6%. At current year, China has surpassed Japan and become the second largest PC market in the world.5

Hardware market currently count for nearly 90 percent of total sale.  The software market is still in its infancy and its growth is encumbered by government regulations and heavy spread software piracy.  The piracy rate is at 92 percent high in 20016, even the government offices and state owned enterprise often time use pirated versions.

 Hardware

Hardware counts more than 70% spending in China for 2002.  The sales growth rate starts to slow down but still remain on high.  China already has surpassed Japan, become the world second largest PC market in current year. Gartner predicted that China will remain the biggest hardware market in Asian Pacific and accounted for up to 40 percent of the total hardware market, and by 2006, China will represent 47 percent of revenue in the region. 7

 Software

Comparing to hardware, the software market is still small.  Software sales in 2000 was US$ 2.83 billion, 64% sale was on application software and 32% platform software referring to operating systems, software environments, and database environments, and 4% middleware including development tools, industry-specific software for telecommunications and stock trading, as well network security. It’s expected is 30 percent; by 2005, sales is expected to reach nearly US$20 billions. 8

Currently, China's domestic software industry includes more than 3000 software developers and around 2000 companies involved in software sales. Of the 3000 developers, only about 10 enterprises have over 1000 employees, and 55 percent of them employ less than 50 people. Chinese companies account for 32 percent of total software sales, with foreign enterprises covering the remainder. China now has about 160,000 people working in the software industry, with another 300,000 involved in research, applications, and education.9

 Internet

Comparing to the United States and Western Europe, the Internet is in its infancy in China. By 2002, the estimated number of internet users in China is 12 millions.  Internet use in China will grow rapidly over the next few years. By 2005, according to research firm Computer Economics, China will have 37.3 million Internet users — second only to the United States’ 126.6 million and just ahead of Japan’s 34.7 million.

Source: ABCNEWS.com 10

Optical Communication

The market in China for optical communications components and equipment grew by 70% in 2001, even as the rest of the world endured a major slump. By 2005, the Chinese market is expected to grow to $3.1 billion.  The demand for optical equipment includes: SDH, DWDM, and CATV. For components including: Sources, modulators, receivers, Multiplexer/demultiplexers, Optical switches, Pump lasers, Other passive components, Transceivers and transponder modules, Optical Amplifiers DCF and PMDC modules. 11

Research Information

2002 annual research report on China computer market: http://www.friedlnet.com/0076-001.html#highlights