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.
Just a short post this week because it has quite frankly been a quiet week apart from one massive story that has dominated the headlines worldwide, except quite notably mainland China: PRISM and the IT whistle-blower Edward Snowden.
By far and away the most balanced most informative and least hyperventerlatingly hyperbolic piece was over at El Reg, where Duncan Campbell picked through the actual facts about PRISM so far to conclude that, actually, most of it is legal and definitely not tyrannical.
My key observations from his piece are as follows:
- Prism is nothing compared to the powers the UK government was asking for in its draft Communications Bill – now shelved for the time being. It is also pretty similar to what goes on in police offices and other agencies all over the country where officers act on RIPA requests to collect comms data.
- The NSA has numerous other similar schemes including direct Deep Packet Inspection, which have been going on in the background and arguably are more intrusive on personal freedoms.
- The scheme costs around $20m year and as such is definitely small fry in terms of the extent and type of surveillance involved. NSA’s overall budget is an estimated $10 BILLION.
- The number of requests disclosed by Microsoft, Google et al via PRISM are even far lower than the government requests they’ve disclosed not associated with the scheme
- Where Microsoft is concerned, at least, most requests (2%) were for non-content data – ie just account details but not the content of messages. I imagine the same is true of other web service providers.
- These providers may have said they didn’t known about PRISM because it is just an internal codename used by NSA.
What people should REALLY be worried about here is not PRISM per se but the other Guardian scoop – that Verizon was issued with a secret warrant “requiring wholesale delivery of all call data records from their entire system”. That and the doubtless other similar requests which other comms providers have been issued with are more insidious and certainly warrantless compared with PRISM.
It’ll be interesting to see whether the future “scoops” which The Guardian promises will focus on these. I for one would be interested to see whether UK operators have been subject to similar orders from GCHQ.