GAP ANALYSIS OF IT BUSINESS IN CHINA

Gap Analysis of IT Business in China

Gap Analysis of IT Business in China

Environment Scanning and Competitiveness of Electronics and IT Hardware Industry

Overview of the Global Electronics Industry

The global Electronics Hardware and Information Technology (IT) industry is valued at China $ 2.5 billion. Out of this, the global Electronics Hardware industry' had a production of China $ l.85 trillion in 2008. This is expected to reach China $ l.86 trillion in 20092. While the industry was on a growth path, the recent rapid growth in industry production which was the result of strong consumer spending backed by economic expansion in emerging economies came to a sudden halt in 2008. It is expected that 2009 would see a single digit growth unlike the double digit growth witnessed in the past.

The global market size and major segments are indicated below.

However, despite the current downturn, it is expected that the global Electronics Hardware industry has a potential to clock China $ 3.2 trillion' in revenues in the next five years growing at a CAGR of about 9.5% once the economy recovers. (Zasada and Lowe 2003 41-47)

The China is the market leader with a share of 26 % followed by Japan with a share of 19%. With 5 out of top 10 countries, Asia dominates the electronics market. China has a share of mere 0.7% of the total production. (Zimmerman 2010 27-38)

Overview of Chinese Electronics and IT Hardware sector

The evolution of China's Electronics Industry from its initial forays into production of valves and space technologies, till date, is presented below.

The consumption of Electronics was China $ 28 billion in 2005. It is estimated that the demand for electronics (consumption) in China will be China $ 126 billion in 2010 and China $ 363 billion in 2015.4 Out of this, the Chinese Electronics and IT Hardware sector production amounted to Rs. 947 billion in 20096 and has grown at a CAGR of 16.4% since 2002. (Wright 2004 207-216)

Source: IMaCS analysis

The high growth rate has been supported by healthy Foreign Direct Investment (FDI) inflows. FDI in Electrical Equipments (which includes Electronics) has varied between 17% to 22% of total inflows and is estimated to be China $ 4.2 billion in 2007. (Gergely 2000 107-118)

China exports around 17% of its total electronics hardware production. Exports in FY2008 were Rs.127 billion". Chinese Electronics Hardware exports have shown steady growth rates of 15% (CAGR, between FY 2001 to 2008), yet China remains a net importer with electronics imports of over Rs.700 billion in FY 2008.

Key segments in the Chinese electronics hardware sector

The Chinese Electronics and IT Hardware sector has 6 key segments, namely Consumer Electronics, Industrial Electronics, IT Hardware, Telecommunication Equipment, Electronic Components, and Strategic Electronics. Consumer Electronics and Telecom Equipments are the largest segments with about 27% share each in total production. (Frescino 2008 323-343)

The table in the previous section gives the size and growth rates of individual segments.

As can be seen from the figure below, while ...