China's IT market to be worth $US15 billion next year

China's IT market to be worth $US15 billion next year

China will overtake Australia next year to become the largest IT market in the Asia-Pacific, excluding Japan, with a market value of $US15 billion, an analyst at market research company International Data Corporation (IDC) said this week. China will increase its share of the total Asia-Pacific IT market, excluding Japan, from today's 18 per cent to roughly 30 per cent by 2003, he added.

Last year, China's total IT market was worth $US9.24 billion which put the country ahead of South Korea, making it the second largest IT market in Asia, excluding Japan, behind Australia, according to Jared Peterson, research director for IDC China. The country's IT market is also the fastest growing among its Asian peers, with IDC estimating China's CAGR (compound annual growth rate) between 1998 and 2003 to be 27.8 per cent.

Looking at IDC's figures for last year, Peterson said that hardware -- a category under which the market research company includes computers and data communications equipment -- made up the bulk of China's total IT market with an 85.9 per cent share. In second position was packaged software with an 8.2 per cent share of the total IT market, equivalent to $US1.17 billion, up by 40.9 per cent on 1997's findings, while IT services grew 50 per cent between 1997 and 1998 to account for a 5.9 per cent market share. For this year, IDC estimates that hardware will have an 84.8 per cent share of China's total IT market, followed by packaged software on 9.6 per cent and services at 5.6 per cent.

"With services, there's a slight drop in the percentage of the total market (predicted for this year), but actually the market is growing," Peterson said. " The CAGR for services for 1998 to 2003 is a respectable 20.7 per cent."

Turning to packaged software, he said that piracy and the year 2000 (Y2K) issue continue to impact sales. "Y2K is definitely a market inhibitor for software, but it's a market accelerator for hardware as users opt to buy new hardware and install new systems on top to avoid the problem," he said. "ERP (enterprise resource planning) vendors will definitely be happy to see Y2K go away." ERP vendors, in particular, are currently seeing their bottom line hit as end users opt to patch their existing systems to cope with the year 2000 issue rather than invest in new software.

IDC splits China's packaged software market up into three segments -- operating systems, application tools (equivalent to development tools) and application solutions, Peterson said. Last year, application solutions held pole position in terms of market share in China with 51 per cent of the software market, then application tools with 34 per cent and operating systems with 15 per cent.

"We expect to see a decline in application tools which will grow at a slower rate," Peterson said. "Although there's lots of piracy in application solutions, tools tend to be hard to find and so users have to pay for them."

Other IDC research found that China's largest vertical industry is finance which accounts for 32.2 per cent of the country's total IT spend, followed by telecom on 18.1 per cent and transport on 10.1 per cent.

IDC Asia-Pacific: [ital][ital].

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