IDC 2015 Top 10 Predictions of China ICT Market: 3rd Platform Pursuit of New Growth During Economic Adjustment Period
07 Jan 2015
Beijing, January 7, 2015 – In 2014, China’s macro economy maintained growth even under enormous pressure. The year also witnessed continuous industrial restructuring, feeble growth of overall real economy, recession of real estate market, and single digit growth of exports. Meanwhile, anti-corruption measures have also affected government spending. China’s GDP growth rate in 2014 was 7.3%, the lowest level in 24 years.
Nonetheless, considering the sheer volume of China’s GDP which is the second largest in the world, the growth rate of 7.3% is still substantial compared with those developed economies. In 2015, China will implement its economic policy, to maintain stable economic growth, nurture new economic growth points, speed up the transformation of agricultural and infrastructure development, and improve people’s livelihood. According to IDC, under the guidance of the aforementioned policy, Chinese economy will sustain steady growth in spite of further slowdown with 7% growth in GDP in 2015. In step with development trend of Chinese economy, the Chinese ICT (information technology and communications) market will continue in a “new normal state”. IDC predicts that the China ICT market in 2015 will reach USD465.6 billion, up 11.4% over 2014. Hereinto, IT market will hit USD211.8 billion with a year-on-year increase of 5.7%, and telecom service market will bring in USD253.8 billion with a year-on-year increase of 16.6%.
In order to adapt to the changing economic environment and user demands, the ICT industry is transforming from 2nd to 3rd Platform technologies. “The technological evolution of the 3rd Platform – represented by Cloud, Big Data & Analytics, Mobility and Social technologies – is accelerating. At the same time, six major technologies based on the 3rd Platform have emerged to accelerate technological and more importantly, commercial innovation of enterprises in the future.” says Ms. Kitty Fok, Managing Director, IDC China.
IDC analysts make the following 10 predictions, which are believed to be the top 10 trends from the strategic perspective:
Prediction 1: The Chinese ICT market will enter a “new normal state”
China’s economy has entered a “new normal state” slowing from double-digit to high single-digit growth. Other aspects of the economy include: consumption replaces investment as a major driving force of GDP; the income gap keeps narrowing as household income and spending power gradually increases; environmental protection and living standards are strengthened; and technological innovation becomes the new growth point in terms of development momentum.
Driven by the overall economy, the China ICT market will also enter a “new normal state”, mainly from the following 5 aspects: the overall ICT market growth rate will slow down from high to medium-to-high; the ICT market will undergo restructuring; the 3rd Platform technologies will remain to be the engine for ICT market growth; differentiation and specialization of regional and industrial ICT market will become increasingly prominent; and domestic brands and Chinese standards will exert greater influence.
Prediction 2: The transformation of construction mode of Smart City will speed up the progress of China’s new-style urbanization
During the period of 2015 to the 13th Five-year Plan, the fast transformation of construction mode will greatly promote the development of Smart City. The Chinese government has issued a series of policies to attract funding, aiming to transform the construction mode of Smart City from the traditional “government-dominating, market-assisting” mode to “government-leading, market-operating” mode.
Presently, China prefers cooperation to competition for construction of Smart City. The construction of Smart City is a huge project, covering top-level design, comprehensive integration, platform construction, software development, network and hardware support, construction maintenance, service management and so on. Only through the cooperation of government and various manufacturers in the ecosystem, can Smart City be manifested. IDC believes that the construction mode of Smart City is bound to change at a fast speed in the coming years with the close cooperation of the government and the market, thus advancing the progress of China’s new-style urbanization.
Prediction 3: Hot technologies will accelerate the industrial scale deployment of the Internet of Things (IoT)
IDC predicts that as of 2020, China will have about 5.5 billion IoT terminals, accounting for 19% of the installed IoT terminals worldwide. The enormous market opportunity has lured many ICT manufacturers to put more investment into this field. Along with the scale development of IoT, the trend for IoT to combine with the 3rd Platform technologies has become increasingly clear. Especially Cloud technology and big data technology will further assist the rapid deployment of IoT applications. 3rd Platform Cloud in 2015, as more and more foreign-funded Cloud service suppliers work with domestic partners to promote public Cloud service business in China, the public Cloud service of IoT will become the focus of attention. Meanwhile, some first-class companies will consider how to effectively use IoT data to make new breakthroughs for business innovation, thus realizing significant returns in the application of IoT for commercial analysts and solutions providers.
Prediction 4: The value chain of Cloud services will continue to integrate with increased cooperation among Cloud service providers.
After years of development and evolution, Cloud services will see continued growth in 2015. Entrepreneurial companies specializing in Cloud computing will emerge as major service providers constantly expand the market and release new products. China’s Cloud service market will witness further integration with increased focus on the vertical industrial market, Cloud platform integration and Cloud purchasing mode. Cloud service providers will continue to expand cooperation in order to gain competitiveness by virtue of complementary advantages. In addition,, the government will implement incentive policies to further popularize Cloud services.
Prediction 5: The “entertaining IT spirit” will infuse in product design and innovation
With the rising affluence of Chinese consumers, IDC believes that Chinese consumers will have a changing understanding of individual IT. Personal devices will not only be necessities for work and communication, but also regarded of the approaches to improving life quality. Just as fashionable dress trends differ year by year, IDC considers that IT product trends will gradually change toward the “entertaining IT spirit”. The entertaining IT spirit refers to increased consumer demand for more entertainment-oriented new products, like game notebook, remote unmanned aircraft, home consoles, self-photographing artifacts, etc., deriving from the original products. IDC forecasts that in 2015 more consumers will prefer products with more entertaining IT spirit and abandon the former rigid product formats.
Prediction 6: The consumer IT market ushers in integration and innovation
China and global consumer IT market underwent disruption and restruction during the past three years. Smart phones and tablets shook traditional PC off the dominating position, Android altered the ecosystem of operation system, online retailing developed rapidly in China, and the gap between local brands such as Lenovo, Xiaomi and Huawei and leading international brands such as Apple and Samsung was further narrowed. The landscape of China’s consumer IT industry witnessed disruptive changes. IDC predicts that the disruption will come to an end and 2015 will be a year of integration and innovation.
Prediction 7: The software platforms will facilitate enterprises for product innovation and rapid deployment to meet market demand
With the widespread use of Cloud computing, industrial customers are inclined toward lower purchase and operation costs. Meanwhile, due to the increasingly fierce competition,, companies have changed both their production and operation mode. Yet the market cycle of new products and services becomes shorter demands that internal IT systems of enterprises support quick innovation. This poses great challenges to the traditional IT construction mode. The original standardized universal software platforms do not cater to long-term development requirements of domestic industrial customers any more. IDC believes that certain vertical industries, such as banks, telecom operators and manufacturers, will strengthen internal IT teams and build software platforms to quickly develop and deploy IT business systems, in order to adapt to fast-changing market demand and satisfy the requirements of long-term development in the future.
Prediction 8: 2015 will witness a blow-out of Internet-based products in manufacturing industry
The speed boost of the internet will penetrate into the traditional industries, through which its connection property will be further highlighted. This trend is most compelling in manufacturing industry. According to IDC, the internet-based manufacturing industry will permeate such value chains as R&D, production, logistics, sales and after-sales service. In 2015, the manufacturing industry will further extend internet access as well as information collection and transmission in product development. New products will integrate the virtual world and the real world by virtue of IoT, Cloud computing, big data, mobilization and many other internet technologies.
Prediction 9: Communication tower lease opens the door to “more attention on operation than asset” for telecom carriers
The establishment of China Tower Co., Ltd. and the delivery of tower asset shall gradually normalize tower lease of operators, transforming the traditional self-construction and self-controlling mode to lease. Meanwhile, thanks to the construction peak of 4G base stations and communication towers in 2015, market size of communication tower lease of operators will see a sharp growth. The official operation of China Tower Co., Ltd. will help break the unbalanced locations of base stations, which will promote balanced industry competition.
The top three telecom operators entrust China Tower Co., Ltd. to manage their communication towers and related assets so now they will put more resources on improving service and management, focus on service provision and business innovation, and advance balanced and healthy development of telecom industry. After the establishment of China Tower Co., Ltd., construction of shared station will become the mainstream of base station construction. Nevertheless, its establishment will definitely bring about tremendous changes and unprecedented challenges to the operation of traditional internet, promoting intensive, preventive and proactive development of internet maintenance and operation.
Prediction 10: Domestic ICT suppliers grow rapidly through self-controlling measures and increased cooperation with foreign companies
For the past few years, nationalization trend has attracted growing attention in IT market. IDC believes that self-controlling will become a key word for IT market in 2015. And self-controlling will be a necessary requirement posed by most governmental and state-owned enterprises for IT projects. Emphasis on self-controlling does not mean absolute restriction on the entry of international manufacturers as self-controlling emphasizes the opening of international brands so as to enable Chinese customers to grasp core technologies and make products controllable. Thanks to its inherent nature to achieve self- development, the idea of self-control might be realized through open source projects.
IDC predicts that in 2015, domestic manufacturers will devote more effort toward open source products. And there will be increasing joint-venture and cooperation between international manufacturers and domestic companies. The cooperation will go beyond the simple modes like OEM and distribution over the past years, including technology output, capital investment, etc., so as to form a win-win situation involving in both domestic and foreign ICT suppliers.
In summary, looking ahead to 2015 and the 13th Five-year Plan Period, China’s economy will enter a “new normal state” including structural adjustment and slowed growth. The technological evolution of overall ICT market from the 2nd platform to the 3rd Platform will accelerate. At the same time, the emerging six technologies which are based on the 3rd Platform will speed up enterprise innovation in future, and become the main force driving ICT market in the coming 20-25 years. ICT manufacturers, channel suppliers and service providers must reevaluate their ecosystem in light of the market environment. Enterprise IT must clarify their strategies and chart their evolution to the 3rd Platform technologies of Cloud, Big Data & Analytics, Mobile and Social in order to maintain their competitive advantage.
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