BEIJING, Dec. 14 /Xinhua-PRNewswire/ -- CCID Consulting, China’s leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (Hong Kong Stock Exchange: HK08235), releases today its article on China’s traditional server manufacturers.
The server market saw more intensified competitions in 2007, and China’s traditional server manufacturers are now faced with more challenges compared with former years. They are under pressure from low-end products of foreign manufacturers, and their market is being encroached by China’s network communication equipment manufacturers (ZTE and Huawei). Therefore, they are in a difficult situation in a shrinking market share. Whether they can find a way out is the key to their survival.
Figure 1 Market share of home-made servers in the first three quarters
of 2006 and 2007
http://www.ccidconsulting.com/upload/12460.JPG
Source: CCID Consulting; Nov. 2007
Foreign manufacturers in low-end market and regionalization strategy
With the slow growth of the high-end market, foreign manufacturers are not expanding the low-end market, because of the profits from high-end products. Major profits still come from high-end product sales and services. To win the low-end market, foreign brands launched a price war, defusing the price advantage of China’s manufacturers. Meanwhile, opportunities are transferred to third- and fourth-level markets, and the competition among global and Chinese manufacturers over regional markets increases. Even Dell, who uses direct sales, has tried "direct sales + distribution" this year. The global manufacturers have started to construct and scramble for regional distribution channels and their reach has extended to fourth- and sixth-level cities, which weakens the marketing advantages of Chinese manufacturers. Considering the loss of advantages on price and marketing channels, it is more difficult for Chinese manufacturers to survive.
Arrival of network communication equipment manufacturers triggers round of reorganization
With the development of Internet technology and the change of the telecommunications service mode, the telecommunications and IT industries are developing towards amalgamation (especially the blade servers). More switching modules and network connection modules will be integrated to the blade cabinet. The high-speed growth of telecommunications and value-added telecommunication services will foster growth of the IDC server market. Blade servers will become the engines of data centers of the new generation and, almost all manufacturers regard it as a new profit growth point. Of course, network communication equipment manufacturers, such as Huawei and ZTE, will try to produce servers by themselves to reduce costs of project integration and boost sales of their network equipment. Server standardization lowers the threshold for communication equipment manufacturers, such as Huawei and ZTE, to access the server field. They enjoy unmatched advantages in this field because of their understanding of client services and the strong, long-term relationships with telecom operators. After entering the server market, ZTE and Huawei influence major server manufacturers, such as HP, SUN, IBM and Dell, and the Chinese server manufacturers who would like to advance toward the value-added telecommunication service field. If ZTE and Huawei enter the enterprise-level market in the future, the overall market pattern would be shattered, and a new round of reorganization will start.
Long-term development of China’s brands restricted by lack of sustainable innovation
The technical requirements for servers are complex because of critical applications, while Chinese manufacturers lack core technologies as well as independent innovation ability. This restricts their development. In some critical application fields, such as finance and telecommunications, the foreign brands have monopolized the market and heightened the market access threshold by setting technical barriers. Thus there are few Chinese manufacturers in such fields. In addition, due to insufficient input in technical R&D, some China mainland manufacturers have given up R&D and seek OEM from Taiwan manufacturers. It is difficult to form core technologies and products to compete with foreign manufacturers with unique products. Therefore, promoting sustainable innovation is the key to the development of Chinese manufacturers.
Acquisition and alliance is the strategy of manufacturers in the future
As China’s server industry matures, the manufacturers place stress on growth-oriented market behaviours, and the market competition increases. Along with the further standardization of servers, similar products are produced, and competition among manufacturers is aggravated. To survive, server manufacturers will surely enhance market power through growth and expansion. They may exchange technologies for market, or they may seek profits through scale expansion. Without external intervention, it is impossible to enhance the technical capability within a short period. Thus the upper and lower streams of the industry chain will cooperate and share the resources of upper-level manufacturers, increasing development of bottom applications through strategic application. Inter-enterprise acquisition is an important method for realizing scale expansion and promoting competition. Some competitive server or software manufacturers can be purchased through capital market operation in order to enhance overall strength. Therefore, in order to develop, Chinese server manufacturers may choose inter-enterprise acquisition and alliance.
About CCID Consulting
CCID Consulting Co., Ltd. (hereinafter known as "CCID Consulting"), the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM) of Hong Kong (stock code: HK08235), is directly affiliated to the China Center for Information Industry Development (hereinafter known as "CCID Group"). Headquartered in Beijing, CCID Consulting has set up branch offices in Shanghai, Guangzhou, Shenzhen, and Harbin, with over 300 professional consultants and industry experts. The company’s business covers over 200 large and medium-sized cities in China. Apart from home market development, CCID Consulting establishes international cooperation links across the United States, the Asia-Pacific region and Europe with agents in the U.S., Japan, South Korea, Australia, Singapore, Italy and Russia, with the aim of going global.
Based on four major competitive areas: powerful data channels, industrial resources, intense knowledge and a deep understanding of information technology, CCID Consulting provides customers with consulting, research and IT outsourcing services covering strategic planning, IT applications, marketing strategies, human resources and information technology outsourcing. Customers range from industrial IT users, telecommunications companies, energy companies, finance companies, and automobile companies, to government departments at all levels and diversified industrial parks. CCID Consulting commits itself to be the number 1 consultant in strategic consulting, the number 1 brand for strategic consultancy, the number 1 advisor for enterprise management and the number 1 consultant for government decision-making.
For more information, please contact:
Cynthia Liu
Coordinating Manager
CCID Consulting Co., Ltd.
Tel: +86-10-8855-9080
Email: liuyan@ccidconsulting.com
