Tech giants do battle in China

21 December 2010

BEIJING: Major technology firms like Dell, Lenovo and HP are adopting diversified strategies as they seek to gain an advantage in China.

Dell will invest $25bn (€18.9bn; £16.1bn) in China this year, and has a spending target of at least $100bn for the coming decade.

The company is prioritising big corporate deals in urban hubs such as Beijing and Shanghai, and will also establish 800 outlets in fourth, fifth and sixth tier areas.

"China, all of a sudden, is starting to become the centrepiece for us," said Amit Midha, Dell's head of Greater China and South Asia, at a conference held by Reuters.

"Be it design, manufacturing, procurement, sales, service support – there's more and more that can be done more effectively in China than in many other places."

Ecommerce, which taps in to Dell's heritage of selling directly to consumers, is to assume a key role in the future.

While the internet generated just 5% of Dell's sales growth two years ago, the US multinational predicts this figure may hit 15% in 2011.

"China is a bit more of everything now," said Midha. "You can't choose. It's all about multiplying everything right now."

Dell is also planning to roll out a new tablet globally in 2011, but anticipates competition could prove particularly intense.

"This is going to be battle royale," said Midha. "This is not for the faint-hearted, and it's only the first inning of a very long game."

Acer, based in Taiwan, hopes China will deliver 20% of sales in five years, compared with 7% at present.

It expects the emerging range of handheld devices to drive this process, following the success of Apple's iPad.

"Tablet is a huge market and it shows a new path for new growth," said JT Wang, Acer's chairman. "We want to become a significant player as soon as possible."

The firm‘s projections suggest it will secure $2.5bn in sales from China in 2011, measured against $1bn in 2010.

"In China, purchasing power will increase significantly in the next few years and PCs will become cheaper," said Wang.

Lenovo currently leads the Chinese PC sector with a 27% share, according to Gartner, but is attempting to expand its horizons.

"We're seeing that demand for PCs is starting to slow," said Wong Wai Ming, Lenovo's chief financial officer. "By that I mean the market is still growing, but not at such a high percentage year-to-year."

Among the Chinese enterprise's options going forward is developing a Chrome PC in partnership with Google.

"Our overall guiding principle is that if there is a market demand for it, yes we will definitely come up with a product with Chrome," said Wong.

"I believe our R&D colleagues have been talking to all companies about operating systems, and I'm sure Google is one of them."

Lenovo has outlined an intention of introducing the LePad tablet in China, and to push further into the smartphone category.

Hewlett-Packard is also taking a nuanced approach to cracking China, Isaiah Cheung, a vice president at HP, argued last month.

"We will launch our Palm handset and tablet PC products in China next year," he said.

Elsewhere, the US organisation is extending its network to embrace 10,000 villages throughout China as a means of broadening its reach.

"Our plan is to cover more than 30 provincial regions and provide computer skills training to 120 million customers in rural areas," Cheung added.

Data sourced from Reuters/China Daily; additional content by Warc staff