Taking stock of China's IDC technology trends: Tencent purchases more servers than South Korea

Despite the recent recession, Brazil remains one of the most dynamic economies in the world. As a country, it installs fewer servers per year than Alibaba. China is building IT facilities on a large scale. To help technology executives understand this trend, IDC analyst Kitty Fok outlined some China-related trends at the IDC Directions conference earlier this month. Yes, China's economy is running into some obstacles right now, but nonetheless, China still represents the biggest opportunity for anyone.

Here are some highlights from Kitty Fuok's speech:

1. Everything is huge

In 2015, Alibaba purchased about the same number of X86 servers as Brazil. Tencent purchases more servers than South Korea. Not only that, Baidu’s procurement volume is equivalent to New Zealand’s shipment volume, and Qihoo 360’s procurement volume is equivalent to Turkey’s.

2. Decline in the share of international suppliers

In China, local brands are beginning to dominate. In 2011, international companies accounted for 77% of the X86 server market share (by value), which dropped to 36% in 2015; the share of international brand external disk storage dropped from 77% to 45%. In the field of smartphones, the share of international brands dropped from 81% to 49%.

China is interested in promoting the development of the ARM server market. It wants to design (at least partially design) and manufacture ARM servers. Qualcomm and Guizhou Province have partnered to develop ARM servers. China's three major operators have also committed to building three data centers in Guizhou Province, requiring a total of 2 million servers to be installed.

3. The United States purchases more goods than China, but China purchases more modern IT equipment than the United States

Even in 2020, Americans will still spend more on IT than China. From a total perspective, IT spending in the United States is estimated to reach US$1.169 billion, and that in China is US$844 billion. However, there are differences in spending between the two countries. US spending mainly goes to traditional IT and maintenance fees, totaling US$904 billion; China's spending is mainly used for the deployment of "third platform" related technologies, such as the Internet of Things and mobile, totaling Reaching US$602 billion.

4. If you want to enter the market, you’d better cooperate with state-owned enterprises

You may be familiar with Xiaomi and Lenovo, but do you know China Electronics Technology Group? Do you know the Chinese Academy of Sciences?

To expand in China, international companies must cooperate with many companies upstream and downstream of the value chain. The most important partners are Tsinghua University, China Electronics Technology Group, China Electronics Information Industry Group, and the Chinese Academy of Sciences. These state-owned organizations (Fuok calls these organizations companies, but they are more like state agencies) form and manage some of China's largest companies.

For example, Tsinghua University, China's equivalent of MIT, owns TusHoldings Co., Ltd., a company valued at US$8 billion that specializes in building data centers and IT parks. China Electronics Technology Group has invested in 50 companies with a total investment of approximately US$30 billion; it has also cooperated with Microsoft to promote the Chinese version of Windows 10.

The Chinese Academy of Sciences owns about 29% of Lenovo and 27% of Xinsong Robotics, China's leading robot manufacturer.

5. Mobile e-commerce has become a reality

Fuok said that during this year’s Spring Festival, 420 million WeChat netizens sent $2.6 billion in red envelopes. Why are consumers willing to entrust their hard-earned money to its management? Fuok believes that Chinese consumers trust the government’s assurances that the system is responsible.

6. The proportion of technology is still small

In the 13th Five-Year Plan, China is expected to invest US$455 billion in the Internet, US$303 billion in smart cities, and US$23 billion in big data. In addition, China will invest US$6 trillion in the “One Belt, One Road” initiative, which means investing in large-scale infrastructure construction in neighboring countries.

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