2. ITB Final Presentation Report- IT Industry of China and France
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Table of Content
Executive Summary ……………………………………………………………………... 4
1. The IT industry of china ……………………………………………………………….... 5
1.1.Some facts about China ………………………………………………………….. 5
1.2.Growth accelerators of Chinese industry ………………………………………... 5
1.2.1. Continuing Economic Reforms ……………………………………… 5
1.2.2. Growing internet Networks …………………………………………... 6
1.2.3. Advantage of JAVA language ……………………………………….. 6
1.2.4. Balanced and Developed Industry setup ……………………………... 6
1.2.5. Strong and effective state machinery ………………………………… 6
1.2.6. The Mega size of China ……………………………………………… 6
1.2.7. Venture Capital Investment ………………………………………….. 7
1.2.8. Patriotism ……………………………………………………….......... 7
1.3. Over-view of the High-Tech companies of China ……………………………… 7
1.3.1. Computer Hardware Industry of China ………………………………. 7
1.4. Growth Trend …………………………………………………………………… 8
1.5. Key players of PC and other Hardware industries ……………………………… 8
1.6. The Big players of PC in China are ……………………………………………. 9
1.6.1. Legend Group ……………………………………………………….. 9
1.6.2. IBM- China …………………………………………………………. 10
1.6.3. Star Groups …………………………………………………………. 10
1.7. The software Industry of China ……………………………………………….. 11
1.8. Semiconductor Industry ……………………………………………………….. 14
1.9.Challenges of the China’s IT industry …………………………………………. 15
1.9.1. Internet Restriction by Government ………………………………… 15
1.9.2. Lack of Fund ………………………………………………………... 15
1.10. The Role of Government in the development of the IT industry ……… 15
1.10.1. Defining direction …………………………………………………... 15
1.10.2. High-tech zones …………………………………………………….. 16
1.10.3. Start money …………………………………………………………. 16
1.10.4. Taxes, foreign investment and foreign sales policies ………………. 16
1.10.5. Standard-setting …………………………………………………….. 16
1.10.6. Market place growth ………………………………………………... 16
2. The IT industry of France ……………………………………………………………… 17
2.1.Some Facts about China ………………………………………………………... 17
2.2. France has no hardware industry of its own …………………………………… 17
2.2.1. The computer industry ……………………………………………… 17
2.3. Software industry ……………………………………………………………… 19
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2.4.Numbers of software vendors in top 200 European Market …………………… 19
2.4.1. Comparing top 3 US vendors Vs top 3 European ………………….. 20
2.4.2. Conclusion ………………………………………………………….. 20
2.5. An Overview of IT Industry of France ………………………………………… 20
2.5.1. Servers ……………………………………………………………… 20
2.5.2. Personal Computers ……………………………………………….... 21
2.5.3. Printers ……………………………………………………………… 21
2.5.4. Flat vs. CRT Monitors ……………………………………………… 21
2.5.5. Consumer electronics ……………………………………………….. 21
2.5.6. Best Prospects/Services …………………………………………….. 22
2.5.7. Opportunities ……………………………………………………….. 22
2.6. Concluding about IT industry of France ………………………………………. 22
2.6.1. key technologies and markets ………………………………………. 22
2.6.2. Consolidation will not slow down ………………………………….. 22
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Executive Summary
The purpose of this report is to provide a brief overview about the IT industry of china and
France. There is not a single country in the world where there are no Chinese goods available
whether it is food items or items for other uses like electronics products. US is the world’s
largest importer of the Chinese products.
Although the US GDP is currently more than China i.e. $14.60 trillion Vs $5.745 trillion but the
figure below forecasted shows that by 2016 the Chinese GDP will be almost double and by 2030
China will be the world’s super power with largest economy.
The reason for this economic growth is the industrial boom from past 3 decades. China is
pouring millions of dollars in every industrial sector to further boost its economy. The reasons
and Chinese Government efforts in this economical development is mentioned in detail.
Ref: Google Images “Figure 1 forecasted Chinese GDP in 2016”
The second part of the report deal with IT sector of France. Unlike China, France is quite behind this
giant emerging economy. Although the super power of Europe, but the economical growth is not much
entertaining as all the economy is shifted to China leaving least possibilities of investment in developed
countries due to high labor wages and resource prices. The report shows the IT industry of France, its
challenges, roles and revenue generated by the firms in the IT sector.
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1. The IT Industry of China
1.1. Some Facts about China:
China, ruled by a single communist group is situated in East Asia and is a home of more than 1.3
Billion people making it the world’s largest country by population. The total land area is 9.6
million km2 i.e. is 3rd largest country by area after Russia and Canada and roughly the same size
to the United States. There are about 56 ethnic groups living in China with Han 91.54% of the
total population. The Chinese Government implemented one child-policy in 1979 to control the
population growth. This policy have helped the government to prevent around 350-400 million
more births from 1979.
The Five Golden stars on the flag of China represent the five ethnic groups of China. There are
about 30 million Muslims in China. Chinese people are among the world’s genius people and
there are 4 great inventions associated to them. They are 1. Paper manufacturing 2.Compass
3.Printing and 4.Gunpowder.The country is producing 70% of the world’s toys. The Chinese
economy kept accelerating during past ten years. Once, a small emerging market is expected to
be the next super power in year 2020. A comparison between US and China GDP shows that
Chinese economy will surpass the US economy. Almost every industry in China is booming
among them IT industry is spurring at the fastest rate and is contributing billions of dollars
in Chinese GDP.
1.6. Growth Accelerators of Chinese industry:
1.6.1. Continuing Economic Reforms:
China’s shift from centrally planned economy to market in the end of 1978 was encountered by
many criticisms and was predicted to collapse. Some of the economist termed it as self suicide.
But the government proper planning and nourishment gave this transition a new way of
development. The reason for this shift was international pressure and rising protests of the people
who were working for hours but still had very low wages. Like in any other communist country,
all the property and resources were under the control of the Chinese Government, constraining
the development. After the shift, all government distributed the capital among the people giving
rise to thousands of new small firms. More and more flexible reforms were introduced by the
government to encourage the new set up and entertain new foreign investments. Property right
was assured to new inventors for introducing any product/service of value to the market.
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1.6.2. Growing internet Networks:
By June 2011, the total number of internet users in China was reported to be 485 million and is
projected to reach 718 million in 2013 which will equivalent to 52.7% of the total population.
“The mobile phone adoption rate in China has been elevating for several years. In April 2010,
the country had about 787 million mobile phone users. The year before that, China had 679
million users and the new is 900 Million users”. This increased in demand of more software and
hardware in the Chinese market. Hence giving rise to more and more growth opportunities for
the IT industry.
1.6.3. Advantage of JAVA language:
This program helped the Chinese developers to develop software for the different use of the
domestic market. JAVA is easy to use and write computer languages. “Java is object-oriented:
Java is object-oriented because programming in Java is centered on creating objects,
manipulating objects, and making objects work together. This allows you to create modular
programs and reusable code”. This helped the programmers to develop new and more computing
language programmers that are nowadays widely used not only in China but in other countries as
well.
1.6.4. Balanced and Developed Industry setup:
Comparing the industry of China with other countries like India, China has a more stable
industry mechanism. They were better socialist during centrally planning era and a better
capitalist during the reform era. In 1980s when China and India were had almost same GDP per
capita, China had more advantage in manufacturing than India due to its low labor wages and
cheap prices of resources.
1.6.5. Strong and effective state machinery:
During the communist era, all the industries were governed by the state. Government used to
invest state money in developing new industries, EPZs (Export Processing Zones), great
infrastructure setup etcetera making it least possible for other countries to compete in the market.
The social control of the China was also under strict supervision of the state.When the setup was
transferred to the private ownership, businessmen took a great advantage of this as they got a
running setup in hands.
1.6.6. The Mega size of China:
“China - a huge country with a population of 1.3 billion - greatly magnifies the advantages of
effective state-led growth and sophisticated manufacturing. It produces the benefit of economy
of scale.”China divided its EPZ in to three clusters with each specified for specific purpose. One
of those clusters is, the Chinese Silicon Valley. Here the state directly intervenes to make
possible the collaboration of colleges, enterprises and state banks to develop the Chinese IT
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industry. Meanwhile state colleges are also turning out huge numbers of college graduates -
comparable to developed countries. Record show that In 2002 China had 590,000 college
graduates majoring in science and technology, whereas Japan had 690,000 one or two years
earlier, and Thailand only 10,000 far behind both China and Japan.
1.6.7. Venture Capital Investment:
Taking the advantage of Low wages, cheap resources prices and government welcome, many
companies from developed countries like America, Germany, France and Britain etcetera set up
their industries in china. This gave these companies a competitive advantage in the highly
competitive era. Producing the same quality and standard goods at a cheap price increased the
net profit of those countries. The income brought by these new ventures in the country helped it
to boost its economy and contributed in the development of China. The neighboring countries of
China like India lacks behind China because they can’t provide the same or equal advantages to
new business ventures. This is why more and more Multinational companies are heading towards
China. In the past, America was regarded as the land of innovation but they have lost this
attribute in the past few years. Big Multinational companies are leaving US and are setting up in
the emerging economies like Brazil, India and China mostly. Due to this US announced a trade
deficit of $162 Billion against China in 2004.
1.6.8. Patriotism:
As more than 90% of the Chinese population is from Han ethnic group, they are very patriotic
people of their land. All Chinese try and work hard to lessen their dependency on the other
countries. India focuses on business processing and IT outsourcing, while China is in fact
making its own business products and have developed many popular and successful companies
like TCL, Lenovo and Huawei etcetera.
1.7. Over-view of the High-Tech companies of China
The Industries that are included in the IT industry includes mobile making companies, telecom,
hardware, software, integrated circuits and telecom equipment manufacturers. But our discussion
is focused on the two main components of any IT industry i.e.Software and Hardware. The IT
industry produces tangible and intangible products that includes IT services, games and online
gaming products. For the manufacturing of PC circuit assembly is involved. This industry is
quite mature and there are great chances of profits. American companies are the world leader in
this sector followed by Chinese companies.
1.7.1. Computer Hardware Industry of China:
There are four major product categories that are produced in this sector. Those products are:
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a) Systems (servers and PCs)
b) Storage
c) Peripherals
d) Networking equipments
China hardware industry has a potential to grow due to high demand of PC locally and abroad.
The number of computer users in China has rose, exporting a large portion of its production to
other countries. According to estimation, currently there are about 52,990,000 users of personal
computers in China. An estimated 389 million people surf the net in china. Given the population
of the country which is 1.3 billion, this is number of users are not much. But things are set to
change andIt is being predicted that by 2015,China will have 500 million new PCs as a result of
growing levels of income enabling Chinese with more buying power.
As a result the demand for PCs in China will rise. To meet the market demand there are numbers
of hardware manufacturing companies which are local as well as foreign companies giving tough
time to eachother. According to a data of IDC (International Data Corporation), China computer
hardware industry earned 16.8 billion in 2002. The breakdown of which is as following: System
sale $11.0 billion (65.3%), storage for $707.4 million, peripherals for $2.7 billion and
networking equipment for $2.5 billion, altogether $16.8 billion. In 2010 it was $62.9 Billion and
in 2014 it is expected to be $101 billion.
1.8. Growth Trend:
In 2002, the revenue from storage devices grew the fastest at 26.3%, in the second place was
peripherals at 12.4% while the system and networking equipment both were badly affected by
the market downturn in the country and saw a decline of -5.3% and 7.6% respectively.
Between2002-2007, peripherals were expected to grow the fastest at an annually rate of 14.8%,
followed by the systems that includes servers and personal computers at 11%.
1.5. Key players of PC and other Hardware industries:
S. No Company Name
1. Huawei- the largest vendor of telecom equipment to more than 40 countries and
have about 32 branch offices worldwide. It has international collaboration with
Microsoft, 3com, Siemens, QUALCOMM, Motorola and Infineon. In 2004, it
gained 42% revenue thorough its international sales.
2. Lenovo-headquarter is in Purchase, NY. This company is the global leader in the
PC market. This company develops, manufactures and market PC products and
value-added professional services. “Lenovo Group today reported results for its
third fiscal quarter ended December 31, 2011, highlighted by record highs in
quarterly sales, pre-tax income and market share, and the 11th quarter in a row that
Lenovo has grown faster than the industry as a whole. For the ninth quarter in a
row, the Company grew faster than any of the top four PC manufacturers, a result
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of Lenovo’s continued focus on balanced growth across all geographies, customer
segments and product lines. During the third sector Lenovo recorded its highest-
ever worldwide market share of 14.0 percent, and it’s highest-ever market share in
China of 35.3 percent, an increase of 3.7 and 3.1 share points year-over-year in that
order”.
3. ZTE- it is the largest listed telecom equipment provider of China. The company
has 15,000 employees and it sells product in more than 40 of the world.
4. UTStarcom-This company manufactures broadband, wireless, 3G mobile
communications, optical networking and soft switches.
.6. The Big players of PC in China are:
1.6.1. Legend Group:
The Legend's beginning is typical of many of the first generation of high-tech startups that began
in Beijing in the 1980s. The company was created in 1984 as a spin-off of the Chinese Academy
of Sciences' Computer Institute. In November of that year, a handful of institute researchers set
out, with a RMB 200 thousand loan and a ramshackle shed, to turn the institute's Chinese
character input technology into a saleable product for the customers.
Alongside the company's "Chinese card," Legend also made handsome profits reselling foreign-
made computers. Profits went into R&D and capacity. When the first domestically produced
486s and Pentiums came out, they sailed out under the Legend flag. Legend by 1995 was the
hottest selling domestic brand of PC. By 1997, it claimed the largest share of any company in the
Chinese market. It has held onto that lead, with the Legend brand winning nearly 22% of the
domestic market by 1999. By 1998 the company was ranked as the number one electronics firm
in China.
In getting to that point, it went through several metamorphoses. In 1988-89, the company set up
the joint venture Hong Kong Legend (HKL), and then reconstituted itself as Legend Computer
Group Company (in Beijing) to control Beijing Legend Company and the Legend share of HKL.
The Group Company then expanded operations under several sub-companies, specialized in
producing own-brand computers, reselling imported computers and peripherals, designing and
producing motherboards (mostly for export) and printed circuit boards, and doing systems
integration.
In 1994 some Hong Kong Legend shares started selling on the Hong Kong stock market. Three
years later, the Group Company transferred titular ownership of most of the manufacturing
operations to Hong Kong Legend, with the Beijing-based Legend Group Holding Company still
controlling the majority of shares. In 1998, a further reorganization in Beijing dissolved the old
Computer Institute, putting part of its personnel into R&D within Legend and the rest into a new
research institute with some top Legend managers on its board of directors.
Those reorganizations made it possible to raise capital on the Hong Kong stock market and
created a framework allowing Legend employees, especially key managers, to receive ownership
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shares in the Beijing holding company -- approximately 35% of the total share value. The state,
however, in the form of the Chinese Academy of Sciences, maintained the majority ownership.
1.6.2. IBM- China:
To be the World largest PC maker, Lenovo China has acquired IBM for a deal of $1.78 after
which it has penetrated deep in the local market. Lenovo was founded in 1984 by academics at
the government-backed Chinese Academy of Sciences and first worked out of a small cottage.
Initially set up to distribute equipment made by IBM and other companies, by 1990 it was selling
PCs under its own brand name. “This acquisition will allow Chinese industry to make significant
inroads on its path to globalization,” Lenovo chairman Liu Chuanzhi said at a news conference.
“It has changed the structure of the global PC manufacturing business.”
1.6.3. Star Groups:
One of the 5 domestic computer producers of China and is “based in Fujian province, arrived
later at the central action in the computer industry. Although founded in 1988, the company
specialized in peripherals until 1997. When a new management team formed in 1994, they
deliberated over strategic direction: should the company stay in the safe, steady, low-risk
peripherals business, or should it risk a move into some new business areas? They finally
decided to take the riskier route in order to grow the company faster. Start brand PCs and VCD
players first hit the market in 1997, and in 1998 the Group Company launched a software and
systems integration subsidiary (SSI Company) in Beijing province of China.
Lanchao, Great wall and Hisense are among the emerging companies of PC maker in china and
the time is not far when companies will become a brand name and will be widely used by
customers domestically and internationally.
It will not be exaggeration if we say Chinese PC maker are threatening the West. In the past for
years, the equation was clear: Large PC brands were American, the big makers were Taiwanese,
and China was, at best, a low-cost production site.Today several of the former Taiwanese makers
have become international brands, and mainland China has risen to become a full player as both
customer and supplier. The Chinese leader, Lenovo Group, is the fourth-largest PC vendor in the
world. No. 2 is Taiwan's Acer.
So who's winning? My call is that the Asian brands have a long-term advantage. Top-ranked
Hewlett-Packard and No. 3 Dell share characteristics absent in the Asian vendors: Both face
various legal troubles and leadership turmoil. Both have seen a string of executive and board
departures.Dell has been able to settle most, but not all, of its lawsuits. HP faces yet another
regulatory probe over its split with former chief Mark Hurd. Both continuously bleed high-level
talent. Meanwhile, Acer, Lenovo, and Asus, another Taiwanese firm, now in the sixth spot,
slowly and steadily build their international presence.The US and China represent big
battlegrounds for all these vendors, must-wins in the market share wars.
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1.7. The software Industry of China:
The software industry of the China includes software products, system integration and services.
Compared to the past, the industry has grown rapidly in the last few years. The industry got
$19.67 billion in year 2003 which is 48.5% higher than year 2002. The growth of the industry in
2004 was expected to grow at a rate of 29% and will hit $25.3 Billion out of which $13.2 billion
would come from system integration and software services provided by the Chinese enterprises.
With the entry of about 2000 new software companies in the Chinese market in year 2003, the
total Number of the registered software developers raised to 8700 till the end of year 2003. The
majority of the software developing companies are situated in the province of Beijing,
Guangdong, Shanghai and Zhejiang area. The industry is comprised of domestic and
international vendors like Microsoft.Out of 8700 the following are renowned software companies
of China.
1. Asia Info
2. Xiamen Xindeco Ltd
3. Beijing Topsec Ltd
4. China Electronics Corporation (CEC)
5. Linkage Technology Co Ltd China
6. National Software & Service Co Ltd (CS&S)
7. New grand Software Co
8. iSoftstone Technologies Ltd
9. Dextrys
10. King soft
11. Sun Wah Linux Ltd
12. New grand Software Co
13. Nine towns
14. Infosec Technologies Co Ltd
15. TongTech
16. Ipedo
17. ZCOM
18. Shanghai Kayang Information System Co Ltd
19. Tencent
20. VeriSilicon
21. Beijing Rising International Software Co, Ltd
22. PANSKY
23. China soft International Ltd (ICSS)
24. Qianlong Technology International Holdings Ltd
25. Digital China
26. Red Flag Software Co Ltd
27. Infosec Technologies Co Ltd
28. Saybot
29. Petro-Cyber Works Information Technology Company
30. Rainbow
31. Neusoft
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32. SAP
33. TencentShinetech Software Development
34. Great Wall Technology Company Ltd
35. Sun Wah Linux Ltd
36. Infosec Technologies Co Ltd
37. Yucheng Technologies Ltd (YTEC)
38. Kingdee International Software Group Company Ltd
39. Beijing Lingtu Software Co
40. PANSKY
41. Platinum China
42. Transpac Technology Inc
43. CDC Corporation
44. Vanda Group
45. Automated Systems Holdings Ltd (ASL)
46. Cyberspace Ltd
47. Hisoft
48. iAsia Online Systems Ltd
49. Jardine One Solution (2001) Pvt Ltd
50. JardineOneSolution (JOS)
51. Sun Wah Linux Ltd
52. EG Group
53. Inspur (formerly Lang Chao Group)
54. New grand Software Co
55. Sys Solutions
The Import and Export in year 2007, China’s overall software industry experienced an export
worth of US$1.9 billion, showing a growth of 167.4% from the last year. Within this figure,
exports of software products reached US$928.0 million, accounting for 49.5%, while IT
outsourcing (ITO) services totaled to US$948.0 million, responsible for the remaining 50.5%.
Japan, the U.S. and Hong Kong were China’s major software export destinations, with an export
value amounting to US$818.0 million, US$365.0 million and US$264.0 million respectively.
Export value to these major markets experienced a year-on-year growth of 62.8%, 90.3% and
53.3% respectively. Amongst the provinces and municipalities, the value of software exports
from Beijing, Shanghai, Guangdong, Liaoning and Jiangsu exceeded US$100.0 million. Inside
the industry, a group of enterprises focus their operations on export and outsourcing services.
These include China soft International, Neusoft Group, Sino Com Software, iSoftStone and
CompuPacific International. As the industry continues to expand, these companies are also
growing rapidly. Meanwhile, the export of software products and the establishment of
independent intellectual property rights have driven profit margins within the industry.Top
Foreign Players in China, foreign vendors have a more dominant presence in the high-end
software market.
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Within the industry, the leading foreign software companies are Microsoft, IBM, Oracle and
Sybase. IBM, an international software conglomerate, has established a significant presence. In a
bid to further expand its operations in China, IBM liaised with its counterpart, Kingdee
International Software Group, in June 2007. Meanwhile Microsoft has also built cooperative ties
with 6 partners in China, including China soft International and Digital China Holdings.
Within the industry, Cisco, an international network equipment maker, is a key foreign player
within the country. It also boasts cooperative ties with many domestic companies. In 2005, Cisco
entered into an agreement with ZTE to develop overall solution services for third generation
(3G) mobile technology, as well as other platforms for telecommunications operators.
Subsequently, Cisco also signed a deal with Haier Group to develop home network markets in
China. In a bid for further expansion, Cisco plans to invest another US$16.0 billion in China in
the coming years, thereby doubling its total investment of US$8.5 million since 2002. Part of the
investment will be channeled into establishing network-based academies in colleges thanks to a
partnership with China’s Ministry of Education. In China, the employment of SOA is dominant
in the existing software market. By the end of 2007, 70.0% of software companies in China had
turned towards its applications.
In view of this growing trend, many foreign companies have diverted their focus towards the
Chinese market, including IBM, Oracle, SAP and BEA. In 2006, SAP launched SAP6.0 in the
Chinese market, thereby being the first SOA based product integrated into companies.
Subsequently, Oracle, BEA and IBM entered the burgeoning niche market as well.
As the Chinese economy continues to develop, the future of its software industry is deemed to be
bright. According to the Ministry of Information Industry (MII), sales for software and
information services are expected to reach RMB 1.1 trillion (US$143.0 billion) by 2010 while
Chinese software and informational services are likely to exceed 65.0% of the overall market
share within the country.
In the coming years, China’s management software market will continue to develop, with rising
demands for total solutions. Within the market, the importance of IT services will be on the rise,
leading to more domestic and foreign specialized IT service providers. Additionally, the IT
service market will become more integrated and IT services in finance will grow.
With security being an issue in China, the network security products market is expected to grow
in the coming years. Abiding by a slow growth, the overall network security market is estimated
to reach RMB 15.6 billion by the end of 2012. One of the most promising markets in China’s
software industry is the embedded software market, which is expected to scale RMB 387.2
billion in 2010.
Furthermore, the Chinese government plans to encourage foreign multinationals to direct
outsourcing services into China, with plans to develop 10 outsourcing bases in the nation by the
end of 2010. According to plans, the first base cities will include Dalian, Shanghai, Xi’an,
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Chengdu and Shenzhen. Support extended to the outsourcing bases include interest rebates,
protection of intellectual rights, as well as research and development funding, amongst other
forms of preferential aids.
According to China’s Eleventh Five-Year Plan (2006-2010), China’s software and information
service industry will continue to grow at an annual rate of 30.0% and is expected to reach
US$125.0 billion by 2010. As the industry develops, more resources will be gradually channeled
into research and development as Chinese software brands increase their global brand awareness.
Under the direction of the plan, exports of software products are targeted to grow at an annual
rate of 28.0% and are expected to reach US$12.5 billion by the end of 2010. Additionally, the
industry aims to produce approximately 15 major software enterprises with annual sales
exceeding RMB 10 billion.
1.8. Semiconductor Industry:
This industry has been recognized as leader of Strategic high growth industry. It includes design,
manufacturing, encapsulation and testing. Revenue from this sector is increasing and new and
more products are brought in market by these companies. But the Chinese domestic market is far
behind other markets in terms of domestic design capability.The growing IC markets, China
accounts for 13% world’s demand for semiconductor 2006.
According to Report of Chinese Information Technology- China will increase the integrated
circuit (IC) sector at a "state strategy" level over the next five years through 2015, Yang
Xueshan, vice minister of industry and information technology has said.China's IC sales will
likely top 330 billion yuan (50.54 billion U.S. dollars) in 2015 and meet 27.5 percent of domestic
demand, Yang told Xinhua Friday.Also, the sector will produce a series of chips with
independent intellectual property rights. Under the plan, development of about 30 percent of the
IC products used by China's major whole-set enterprises would occur domestically, Yang said.
Semiconductor IC production demands intensive capital and technology. For example, designing
a 45-nanometer IC requires 40 million U.S. dollars and building a 12-inch production line costs
2.5 billion U.S. dollars, said Xiao Hua, director of the information department of the Ministry of
Industry and Information Technology (MIIT).Yang said that a nation must support the
development of the IC sector, and China lags far behind the United States, Japan, the Republic of
Korea and other countries in providing state support to the sectors.
China's IC producers are mostly medium-sized or small enterprises with limited funds and
technology.Yang said that China's relevant departments would support and coordinate IC
production with linkages including research, manufacturing and marketing during the 12th Five-
Year Program (2011-2015) period.China's IC sales reached 144.02 billion yuan in 2010, making
up about 8.6 percent of the global market, according to the MIIT. As the world's largest IC
market, China can only meet 20 percent of its domestic demand with independently designed IC
products.
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China has faced challenge in boosting the IC sector because of outdated equipment, said
XuXiaotian, executive deputy director general of the China Semiconductor Industry Association
(CSIA).The MIIT expects China's IC market to top 1.2 trillion yuan in 2015.IC products add
significant value to products. A 3G mobile phone chip, for example, is responsible for about half
of the phone's total cost.China's chips rely heavily on imports. The country's imports of IC
products topped 156.99 billion U.S. dollars in 2010, according to the (MIIT).
An incorporated circuit or monolithic integrated circuit (also referred to as IC, chip, and
microchip) is an electronic circuit manufactured by diffusion of trace elements into the surface of
a thin substrate of semiconductor material.Computers, cellular phones and other digital
appliances are now inextricable parts of the structure of modern societies, made possible by the
low cost of production of integrated circuit.
1.9. Challenges of the China’s IT industry
1.9.1. Internet Restriction by Government:
The government's order to install censorship software represents a grave threat to freedom of
expression in China. The Green Dam technology highlights Beijing's ongoing efforts to intensify
its chokehold on Chinese citizens' internet access and the need for computer software and
hardware firms to resist complicity in those efforts made by the government.
1.9.2. Lack of Fund:
The federal government is expected to spend $96.6 billion funding R&D efforts, a modest
increase of 1.8% over the $94.9 billion spent in 2005 which is quite low.
Compared to India, the leader in software outsourcing, China has its own distinct challenges.
Chinese software companies have almost no U.S. customers for a number of reasons: language
barriers, different working styles, customers' concern for software piracy, and the lack of
experienced programmers and technical managers in China. Yet, China also has its advantages.
Not only does it have a rapidly expanding domestic software market, but it also has a large pool
of fresh engineering talent. "The key, therefore," asserted Dr. Liu, "lies in someone creating the
right environment to train and build a local team to be able to develop and deliver world-class
software products."
1.10. The Role of Government in the development of the IT industry:
The success of China's IT firms and their prospects for future growth are closely linked to measures taken
by government which was not possible if not supported by the government.
1.10.1. Defining direction :
If we see at certain key junctures, decisions made by the central government have opened the
road to rapid development for the whole sector. The first key point of departure came in 1984,
when the government chose to shift towards microcomputer development, and the PC
16. ITB Final Presentation Report- IT Industry of China and France
16
architecture beckoned new aspirants with its standardized components and low startup capital
requirements. Since the Ninth Five-Year Plan period began in 1995, the government has stressed
"informatizing" the whole country, with attendant commitments to massive investments in
infrastructure sector.
1.10.2. High-tech zones:
Promoted by the government in these designated areas, high-tech startups could enjoy five years
of significant tax breaks.
1.10.3. Start money:
Prominent start money has come, for example, from the "863 Project," funding a number of IT-
related projects like a Chinese operating system and a number of computer-integrated
manufacturing systems applications, an important step.
1.10.4. Taxes, foreign investment and foreign sales policies:
Primarily, foreign companies seeking to sell their products or to manufacture in China faced
requirements that they seek Chinese "channel partners" or create joint-venture partnerships.
Coupled with taxes, these requirements encouraged in-country production and transfer of
technology to Chinese firms. In recent years, China has reduced such barriers in hopes of joining
the World Trade Organization (WTO).
1.10.5. Standard-setting:
Chinese Ministry of Information Industry and other relevant agencies enjoy the power to set
technical standards. The standard-setting process can and has been used to ensure that Chinese
firms get a large piece of the action which as not under practices in the past.
1.10.6. Market place growth:
Although paradoxically, the government has greatly enhanced the market for IT purchases and
information services even as its own share in these has declined. Until the early 1990s, private
and household purchases were negligible, and most large customers were government agencies
and state-owned companies. In the 1990s, the state sponsored three "Golden Projects" aimed at
creating a networked infrastructure and applications in several sectors.[6] In 1999 a highly
publicized campaign got nearly all central government departments and many lower ones online.
The publicity and the availability of useful content have helped fuel the Internet boom which in
turn has fueled the growth of the domestic PC market as stated above.
Peering in the long run, the Chinese government has a string of projects aimed at further
developing its software industry including e-government, long-distance learning, introducing
software to the rural areas, and the digitization of many key industries and areas. In order to
achieve these goals, software companies must collaborate and establish modernization ties to
further spur the growth in this industry which is generating $ billion of revenue.
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2. The IT Industry of France
2.1. Some Facts aboutChina:
The French are the world’s chief consumers of psychotropic drugs. About one fourth of
the population admits having taken anti-depressants or tranquillizers over the previous
year.
Paris, the capital of France is renowned most for the Eiffel Tower, (La Tour Eiffel), built
in 1887/89, using 9441 tons of twisted iron.
France's population is 65,630,692 (July 2012 est.) with a population density of 111
people per km².
Islam is the second-most widely practiced religion in France behind Roman Catholicism
by number of worshippers, with an estimated total of 5 to 10 percent of the national
population.
2.2. FRANCE HAS NO HARDWARE INDUSTRYOF ITS OWN:
2.2.1. The computer industry: a long process ofdecline
Given the domination of American computer makers in the 1960s, all Europeancountries have at
some point perceived the necessity to exercise some form ofinterventionism in the computer
industry. French policy in this area, which wasintroduced in the mid-1960s, has been the most
systematic. Essentially a reaction tothe relationship of dependency with the Americans, it was
constructed upon clearlyinterventionist concepts, resulting in an explicit industrial policy known
as the ‘‘Plan-Calcul’’. This typical ‘‘mission-oriented’’ policy was triggered by the US
administration’sveto of France’s purchase of a large computer necessary to the development of
its nuclear program. In response, President de Gaulle’s government implemented aseries of
measures on industrial action plans, the organization of R&D and the promotion of applications.
Measures under the Plan-Calcul were implemented through contracts between thepublic and
private sectors during two periods (1966–71 and 1971–75). On an industriallevel, the Plan
initially staked its success on the concentration of previously disparateforces. To this end, the CII
(CompagnieInternationale pour l’Informatique) was formedin 1966 from the merger of the CE
and the SEA. However, in spite of state financialsupport, the CII did not entirely succeed in
achieving the objectives set out for it. Afteran unsuccessful attempt to create a European alliance
with Siemens and Philips underthe aegis of the UNIDATA project, the companywas eventually
merged with Honeywell-Bull, which was of French origin but controlled by American capital.
This episode marked the end of the Plan-Calcul; the failure of the European project, followed by
the transatlantic alliance, had reinforced France’s technological dependency. State support for
CII-HB continued, through a policy on public-sector purchasing and through a direct subsidy,
until its nationalization in 1981. Moreover, the French state attempted to re launch the production
of minicomputers through financial aid and subsidies to SEMS (a subsidiary of Thomson).
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These industrial policies were accompanied by scientist and administrative measures. In 1967,
the Plan-Calcul created a powerful research organization known as the IRIA (National Institute
of Computer Science), renamed INRIA in 1979. Additionally, a state agency, ‘‘General IT
Delegation’’, was given responsibility for the promotion ofIT applications. As of 1979, this role
of diffusion of IT within French society was assumed by a specific entity, the ‘‘Agency for the
Promotion of IT’’. The characteristicfeature of the French case, therefore, was the creation and
existence of powerfulinstitutional ‘‘levers’’ facilitating state intervention in all domains of IT;
the problemwas that the public powers failed to co-ordinate these levers.
The arrival of the Socialist government in 1981 further reinforced the state’s influence on the IT
sector, particularly through the nationalization of the main firms.Under the ‘‘Electronics Sector’’
Action Plan, finalized in 1982, the state undertook a vast program to restructure the electronics
sector around key centers of developmentwithin the public sector: Matra and Thomson in
components, CGE in officeapplications and telecommunications, Bull in computers, Thomson in
electronic consumer goods—including microcomputers—and Matra and CGE in industrial
automation(Dela pierre and Zimmermann 1991).
After Bull absorbed the IT subsidiaries of Thomson and CGE within the frameworkof the Plan,
the French computer sector became organized around three main players:IBM-France, Hewlett-
Packard, which had been in Grenoble since the early 1970s, andthe Bull group, which became
the sole ‘‘national champion’’.1 Bull was able to consolidateits technological position through
alliances around the Unix norm and its commercialposition through its captive market in the
French public administration. In 1987, Bull even embarked on the path of multi nationalization
by buying the IT division ofHoneywell, its former American owner, which had supplied it with
technologicalknowledge before nationalization. However, this expansion was hit by the global
ITrecession at the beginning of the 1990s. Bull suffered disproportionately because itremained a
general producer centered on mainframe systems and neglected the rise ofmicrocomputers. The
1990 take-over of an American specialist in this area, ZenithData Systems, came too late to save
Bull from a ‘‘historical’’ demise. Moreover, all French attempts to launch microcomputers ended
in failure, in spite of high technological quality: Thomson Micro, Matra and Goupil all
disappeared in this period ofcrisis. After experiencing large financial deficits, a restructuring
through downsizing,and recapitalization by the state—which incurred the wrath of the European
Commission—Bull was partially privatized in 1995. The sole national actor, Bull now aims
atbeing an integrator of technologies, progressively abandoning its own production of computers
in favor of external supplies from its associates: Motorola or Intel formicroprocessors, NEC for
certain mainframes and IBM for UNIX servers.
Amongst them, IBM France, with two production sites (main servers and semiconductors), is
devoted to theproduction function and plays no active role at the strategic level. By contrast,
Hewlett-Packard France has 2,530employees, including both R&D engineers and the
manufacturing workers for PCs; it has succeeded in copingwith the computer paradigm shift, by
moving rapidly towards RISC technology, UNIX open systems and the PC.
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2.3. Software industry: competitive edge despite an uncertain future:
While hardware providers have been weakened, the French software sector still shows a degree
of competitiveness and can count on a certain degree of success. There are 771 foreign and local
registered firms but the main local players and their revenue generated in millions of Euros are:
S.
No
Company Name Revenue From France Worldwide Revenue
1. DassaultSystemes (Champ) 469 1259
2. Sopra (F) 151 1001
3. Cegid (F) 136 241
4. GFI Informatique FR 110 689
5. GL Trade 82 203
6. Cegedim 76 753
7. Atos origin 60 855
8. Murex FR 74 151
9. Bull FR 56 1117
10. Linedata Services FR 56 165
11. Avanquest (incl. Nova and
Emme) FR
47 112
12. ILOG (acquired by IBM in 08) 45 128
13. SWORD (incl. Apak) FR 44 179
14. Viveo Trade & Finance FR 35 55
15. Lectra FR 34 217
16. Berger Levrault FR 31 83
Indeed, the French IT industry displays a high supply capacity in the area of ITservices and
consultancy (Table 1). Although marginalized in the production ofcomputers and involved only
in certain areas of software packages, France keeps agood performance in software services
based around system integration and thedevelopment of applications.2 Its relative success, at
least at European level, stemsfrom the historical fact that the major players in this field took a
key position in theimplementation of IT systems within the firms.
2.4. Numbers of software vendors in top 200 EuropeanMarket:
Country Top 20 Top 100 Top 200 Total
US 15 33 22 70
UK 2 13 19 34
France 1 7 12 20
Denmark 1 4 14 19
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2.4.1. Comparing top 3 US vendors Vs top 3 European
• US Software vendors make up three quarters of the top20 and nearly half of the top 100
• Total deals of the US top 3 vendors represent nearly sixtimes the to of Europe top 3
2.4.2. Conclusion:
The European market is dominated by US firms mostly and not a single EU firm is among top 10
software vendors in their areas except each firm specialized in their distinctive offerings.
2.5. An Overview of IT Industry of France:
Estimated at $145 billion in 2008, the French market for information and
communicationtechnologies - which includes computer hardware/software, telecommunications
and electroniccomponents – is growing at a rate of 5% per year. One third of this market is
related totelecommunication services and two thirds to computer hardware as well as software
and relatedServices.
The computer & peripherals market has grown by 6% in 2008. The market is driven by the sale
of consumer electronics, including smart phones, I-mode, 3G and PDAs. The level of penetration
in individual homes exceeds 50%.
About 33 million French people - or about 62% of the total population - can access the Internet,
including 28 million through a high-speed connection. More than one household out of two – or
14 million households – can access the Internet from the home. More than 80% of the French
also own a subscription to a mobile phone. Thanks to HSDPA/3.5G technology, 2008 has seen
the advent of revolutionary tools that will enable phone users to surf the Internet faster and do
on-line transactions as well as watch TV from their telephone.
The French public sector has greatly contributed to the boost in IT sales, as it currently
represents6% of total IT investments. Launched in January 1998, the Government Action
Program for anInformation Society (PAGSI) is investing billions of dollars in the automation of
VAT declaration, customs declaration, the filing of social contributions by employees. As a
result, over 7 million French tax-payers – or 11% of the overall population – filled out their
income tax return on the Internet in 2007.
France is perhaps more than any other country in Western Europe on the threshold of the new
Internet and mobile revolution; it is accelerating rapidly as one of the top leaders in the new high
technology era.
The European Association for Competition in Telecommunications announced that France had
become the largest broadband market in Europe. Revenue from these high-speedsubscriptions
alone already exceeds $2 billion annually. In France the overwhelmingly dominantmode of
broadband connection is ADSL, representing 94% of broadband connections and 97% of growth.
2.5.1. Servers
Estimated at $750 million, the server market has grown by 5% in 2008. French corporations
Continue decreasing expenditures related to maintenance and platform administration and
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Supervision while increasing expenditures related to information system’s availability, security
and quality of service.
The five top server manufacturers are IBM (31.1%); Hewlett-Packard (28.3%); Dell (11.6%);
Sun Microsystems (12.8%); and Fujitsu-Siemens (4.1%). While IBM and Dell have known a
significant growth in revenue (13.8% and 14.1%), the three others have stagnated or regressed.
2.5.2. Personal Computers
After five years of growth at a rate of 15%, the PC market has been hit by a sharp drop
thataffected both consumer and professional applications during the fourth quarter of 2008,
whichbrought its growth down to 10%. The only market segment that has continued growing
steadily is that of Netbooks, which represent 3% of the total PC market. About 53% of the PC’s
is being sold are now notebooks rather than desktops. The PC market is dominated by ACER
(16.1%); HP (19.4%); Dell (10.4%); Asus (3.4%); Toshiba (5%); others (45.7%).
2.5.3. Printers
The French printer market is dominated by HP, with 44.1% of this market, followed by Canon
(15.8%); Epson (12.7%), Lexmark (7.6%) and Brother (6.1%).This market is estimated at $2
billion. The average price for a printer is about $200. The market for Inkjet printers has dropped
by a third since 2002. This market is estimated at $250 million. The sale of laser printers grew in
volume by 10%. Multifunction printers represent a $750 million market.
2.5.4. Flat vs. CRT Monitors
While only 20 percent of panel displays – 576,000 out of total of 3.3 million - were LCDs four
years ago, this rate has gone up to 90 percent now, with over 5 million units being sold.
Meanwhile, average pricing for LCDs has decreased threefold to reach $200. This dramatic drop
in pricing has affected manufacturers’ revenue, which dropped in 2007 and 2008 while volumes
kept rising. Market value for LCDs went from $4.01 billion in 2004 down to $1.5 billion in
2008.
2.5.5. Consumer electronics
According to market consulting firm Gfk, the French Consumer Electronics market is estimated
at $25.3 billion, against $26.6 billion in 2007. Only electronic games which represent 8% of the
overall market continued growing by 19% in value. TV’s, DVD’s, Stereo sound systems and
Walkman’s, which represent 38% of the global market dropped by 6% in value and 7% in
volume. IT products (desktop, mobile PC’s and Netbooks) represent 34% of this market and
dropped by 5% in value while growing by 15% in volume. Cameras and mobile phones, which
represent respectively 9% and 12% of the market, dropped by 2%. Camera equipments grow by
3% in volume while mobile phones grow by 1% in volume.
Flat TV screens representing 75% of total TV sales. LCD screens represent 85% of these sales.
The vast majority of panels are now full-HD. Sale of stand-alone GPS devices dropped by 6%,
However, there will be a 6.4% increase in mobile and smart phones equipped with a GPS.
However, while the value of goods dropped by 10-15%, demand increased by 30-35 %. For
example the drop in prices for notebooks averaged $260.
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2.5.6. Best Prospects/Services
•GPS mobiles and Smartphones
•Net books
•Portable devise (laptops, palm tops, Smartphones, etc.)
•Wireless solutions
•I-mode related products
•Portable storage devices (USB keys, hard-drives, etc.)
2.5.7. Opportunities
The ATAWAD (i.e. “anytime, anywhere, any device”) era causes the French to increasingly seek
portable solutions that provide them with permanent access to data across the Internet, whether
personal or professional. The market for devices such as laptops, palmtops, and blackberries is
therefore growing very rapidly. Great opportunities are also available for wireless solutions both
for the home and the office, especially with the advent of 3G high-speed mobile Internet
bandwidth.
2.6. Concluding about IT industry of France:
2.6.1. American vendors will benefit from a leading positioning in certain key technologies
and markets:
Over the last few years, American software vendors have considerably strengthened their point
in the Europeanmarket, mainly through acquisitions. Indeed, more than50% of the revenue
generated in the European marketis attributable to American vendors and one third
ofEuroSoftware100 companies are headquartered in the US.Although it is commonly accredited
that Americanvendors are not likely to see their share in the Europeanmarket turn down in the
coming years, opinions vary as towhether or not they will further strengthen their marks.
One of the factors contributing to a relative status quo is the significant decrease in the number
of companiesof substantial size in Europe, which means that majoracquisitions may simply no
longer be possible on a largescale. However, American vendors are strongly showing inbooming
sectors such as virtualization and in the onlinedelivery, including infrastructure and applications.
Topinternet players are also expected to gain ground. Changesin these segments should logically
provide American companies with an opportunity to boost their alreadyleadingexistence.
2.6.2. Consolidationwill not slow down
The major players have already taken advantage of mostmarket consolidation opportunities,
leaving fewer potentialacquisitions in the short- to medium-term. This relativesaturation could
well curb the ambitions of Americanvendors. However, acquisitions of smaller
softwarecompanies are likely to gather pace, with European vendorsthemselves setting the trend
and leading the way. Once theyhave attained critical mass, these newly formed groups
willrepresent attractive targets for their American counterparts.
The focus on the acquisition of smaller software companiesis both an advantage and a drawback
for the Europeansector: an advantage because it will boost initiative byproviding favorable exit
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23
prospects for entrepreneurs andinvestors and a drawback because it will further impede
theemergence of larger European players, if once a critical size is reached, insufficient long term
capital makes Europeanvendors an easy target.In the near term, the most vulnerable companies
will behardest hit by the combined impact of the economic crisis, financial pressures and the
maturity of certain markets,which will threaten their survival and pave the way for
moreconsolidation.
