China, India drive Asia-Pacific IT growth

IT spending growth in Asia is back on the fast track as the region has largely recovered from the 1997 economic crisis.

          IT spending growth in Asia is back on the fast track as the region has largely recovered from the 1997 economic crisis.

          While Japan, the region's dominant market, is expected to continue to grow at a relatively tepid rate, regional growth over the next four years will mainly be driven by soaring spending in China and India, International Data Corporation (IDC) analysts said in a series of presentations in Las Vegas this week.

          By 2001 China is expected to surpass Australia and become the second-largest IT market in the Asia-Pacific region, after Japan, says Dane Anderson, Singapore-based vice president of internet and computing system research at IDC Asia-Pacific, speaking at IDC's International Business Summit at the Comdex trade show.

          "The biggest story in the region is China, and India is the second," Anderson says. IT spending in China in 2004 is estimated to reach more than $US30 billion, as compared to $US14 billion this year. India, meanwhile, will grow even faster, albeit from a smaller base, with spending set to triple to reach more than $US12 billion by 2004.

          "India is really surging ahead," Anderson says.

          South Korea has also rebounded strongly since the 1997 crisis, and has been the star performer in Asia in the past two years, he adds.

          For vendors, however, amid the immense opportunities, the diverse nature of the region's markets continues to pose challenges.

          "You have some of the most developed markets in the world with Australia and Singapore, but also some of the poorest such as India, Anderson says. "A lot of people are quite confused about the situation in Asia."

          Outside the more developed markets, hardware is still king. In the Asia-Pacific region outside Japan, IT spending is expected to grow from $US60 billion this year to more than $US100 billion in 2004.

          Currently, around 64% of total spending is devoted to hardware, according to IDC estimates. "The market is very heavily dependent on hardware spending," Anderson says.

          In China, hardware spending is even more dominant, making up some 87% of total spending this year. While spending on software and services is expected to increase from 13% of the total this year to 23% by 2004, it will be a challenge to change the widespread perception among Chinese end users that software and services should be free of cost, says Jocelyn Young, Beijing-based research director at IDC China.

          As in other parts of the world, the Asia-Pacific region is seeing rapid growth in both internet and wireless communications usage. By 2004, IDC expects that the number of web users in the Asia-Pacific region outside Japan will reach 140 million people, up from 40 million in 2000, 10% of which will access the internet via high-speed broadband connections, Anderson says.

          Wireless communications are also set to grow rapidly, with mobile commerce spending in the region projected to hit $US7.5 billion by 2004.

          Japan, however, will continue to be by far the largest IT market in the region. In 2000, IT spending in Japan will make up around two-thirds, or $US106 billion, of the approximately $US166 billion in total spending in the region, says Philippe de Marcillac, IDC's senior vice president of international business units.

          As a more advanced market, spending in Japan is tilted toward software and services, which make up about 54% of total IT sales in the country, de Marcillac says.

          Internet usage in Japan is set to more than double over the next four years. By 2004, IDC expects the number of fixed-line internet users in Japan to reach 78 million people, up from 34 million this year.

          Mobile phone usage, meanwhile, is set to continue to soar, with Japan expected to have as many as 86 million users by 2004, up from 61 million this year, de Marcillac says.

          NTT DoCoMo's I-mode service is leading the world in the mobile internet arena, with some 14 million subscribers, and has lead to a situation in which young users in particular often have their first interaction with the internet via their mobile phone handsets rather than PCs, de Marcillac says.

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