As a hack whose inbox has been deluged with this kind of dross for weeks now, I’m going to look ahead to 2014 with a more focused question, namely: “how will Western companies fare in China next year, and vice versa?”
Well, first up the signs aren’t looking good for US tech firms. Washington has turned up the anti-China rhetoric fiercely in 2013 and with high profile reports like Mandiant’s finally tying Beijing to cyber espionage, things were already looking tricky for US firms in China.
Then Edward Snowden happened – a gift from heaven for the Chinese government which can now portray itself as victim of spying, not a perp, with an even straighter face.
Expect the backlash to come from Beijing, partly because of this, but also because China has some world class companies of its own now, especially when it comes to networking equipment (Huawei and ZTE), PCs (Lenovo) and mobile devices (all of the above plus Xiaomi, Oppo, Meizu, Coolpad, etc etc), so it can afford to be more self-reliant.
IBM and HP have both announced they’re shedding jobs in the PRC, despite the strategic importance of the market.
IBM just announced a new cloud partnership which will see it team up with Azure partner 21 Vianet to provide managed private cloud capabilities to business customers there, however it admitted in October a 22 per cent sales slump in China. Ouch.
Cisco has seen a recent 6 per cent sales slump in China with John Chambers admitting on a November earnings call: “China continued to decline as we and our peers worked through the challenging political dynamic in that country.”
Then there’s Qualcomm, which counts China as a $1bn market, has worked with countless local OEMs to support their products and yet now finds itself at the centre of an anti-monopoly investigation which could see it fined in excess of $1bn.
The rule in Beijing seems to be; if you can’t beat ‘em (and China still has some way to go before its chip makers are world class), fine ‘em.
Expect more of the same next year.
So what of the great Chinese invasion? I spoke recently to Deloitte TMT partner William Chou about this.
In the hardware space historically only the likes of ZTE, Lenovo and Huawei had a chance to grow their offerings abroad, but with VC firms now splashing the cash, more innovative local firms will be able to invest in R&D and expand their footprint internationally, he argued.
Coolpad, Meizu and Xiaomi, to name but three, could be names to watch for 2014.
“There are a lot of these smartphone manufacturers but the ones which will be winners are not really the handset manufacturers but the ones which can combine hardware, software and internet services, like Xiaomi,” Chou told me.
Others he mentioned included a Shenzhen-based handset firm looking at JVs in France and South Africa and an unnamed private company “aggressively” looking to expand in the European market.
On the internet side there are fewer potential breakaway global brands which could make a real impact in 2014.
Tencent’s WeChat is definitely one of them, although Chou argued that Google-beater Baidu will struggle as it seeks to “re-engineer its business model from search to mobile internet”.
There are also a host of little-known software and online firms under-the-radar ready to pounce, including one of the China’s online travel giants which is looking to acquire in Germany, Chou revealed.
In fact, the recently announced Deloitte Fast 500 list of fastest growing APAC start-ups had more companies from the Middle Kingdom than any other represented, although none made the top ten.
Going into 2014 entrepreneurs who are able to “apply technology to other industries” will stand the best chance of success, Chou said.
“China has an ageing population and a one-child policy so healthcare is a serious problem, so how you apply e-health will be a trend,” he explained. “Another major challenge is pollution, so clean tech will be a major area for entrepreneurs to consider as well.”
Whatever happens, things are never quiet in this part of the world. Let’s see what you’ve got 2014.
The big news from the Orient this week, or at least this small part of it, has been Google’s decision to pull out of plans to build a $300 million datacentre in Hong Kong.
Now the web giant claimed this was due to high costs and the difficulty of getting enough land for its requirements, which at first glance seems fair enough. It ain’t cheap here and land is at a premium in the tiny SAR.
However, the more I think about it the stranger it seems, and here’s why.
- It’s not short of a bob or two – was cost really the reason for its decision?
- The project has been trailed way back since 2011 when Google announced it bought 2.7 hectares of land in the Tseung Kwan O Industrial Estate near Sai Kung, although interestingly a link to the Google page on it now results in a 404 error message.
- At the time, Google said: “We chose Hong Kong following a thorough and rigorous site selection process, taking many technical and other considerations into account, including location, infrastructure, workforce, reasonable business regulations and cost.”
So what’s changed?
Mainland China is admittedly a small market for Google and that probably won’t alter unless there’s an unimaginable change of heart from Beijing. But it knew that back in 2011 when it bought those 2.7 hectares of land that are suddenly deemed not enough.
It’s more likely that with projects underway in Singapore and Taiwan, Google is concentrating on those first to ramp up its datacentre presence in the region.
We must remember it’s still a baby in the IaaS space when compared with the AWS behemoth.
But I personally wouldn’t rule out a return to the HK project for Google in the future as it looks to grow its Google Compute Engine offering in the future. Rival Rackspace has been steadily building out its operations from Hong Kong, for example, recently launching its first public cloud service in Asia from the former colony.
It must be added that Google already has a healthy complement of servers in the SAR and recently announced a tie-up with the local Chinese University of Hong Kong, so rumours of dissatisfaction with and interference by the local government may be wide of the mark.
However, news of the pull-out will still be a big blow to the Government CIO’s Office as it tries to sell HK over its near neighbours as Asia’s premier datacentre destination.
If any more PR blows like the Google story start landing next year, it might be time for the HK government to rethink its strategy.