Stronger local competition for foreign firms

Sales of x86 servers in China will increase substantially this year after a slowdown in 2007, local analysts report.

The market value will rise 11.8 per cent to $1.68bn, while unit sales will increase 16.1 per cent to 690,000, according to forecasts from Beijing-based CCID Consulting.

"The driving forces for market growth came from the fast-growing telecom and value-added telecom services, accelerating IT applications in the transportation sector [and] the warm-up of the SMB market," said CCID analysts.

A number of new markets for servers opened up and began to account for significant sales in China last year.

These included online banking and securities trading, new "socialist countryside building" and city emergency system building, according to CCID.

China's market for x86 servers was worth $1.5bn in 2007, with 595,000 servers sold, according to estimates based on initial sales data.

These figures indicate that the market suffered a significant slowdown in the rate of increase in sales revenue to below 13 per cent last year, after growing almost 20 per cent in 2006.

The shape of the market is also changing as major local vendors such as Huawei and ZTE begin to use existing sales channels to sell servers.

Huawei and ZTE, China's largest telecoms equipment makers, began selling servers in significant numbers during 2007, challenging market leaders Dell, HP, Sun Microsystems and IBM in the telecoms sector.

"If ZTE and Huawei enter the enterprise-level market, competition in the server market will intensify. The whole market pattern will change and a new round of reshuffling will be imminent," said CCID analysts.