IDC’s Top 10 Predictions for China’s ICT Market in 2014 and Beyond: Battle for Survival and Growth on the “Third Platform” in a Complex and Fluctuating Environment
Beijing, February 10, 2014 – IDC predicts that China’s ICT (information technology and communications) market in 2014 will reach US$396.7 billion, showing an increase of 11.1% YoY, with the IT market reaching US$204.8 billion, up 14.2% YoY, and the telecommunication services market size reaching US$191.9 billion, up by 7.9%.
Throughout 2013, the Chinese economy witnessed a weak recovery and market fluctuations. The Chinese economic growth rate in 2014 is expected to face downtrend pressure. Latest estimates from EIU show that China's economic growth rate for 2014 will be about 7.3%. Given China's sustained economic growth, the country will see a steadily growing ICT market.
2014 marks the first year in which China will fully implement the spirit of the 18th Third Plenary Session and carry out structural reforms. It is also the year with the most complicated political, social and economic environment over the past two decades.
The ICT market is evolving from the second platform to the third platform represented by Cloud, Mobility, Big Data Analytics and Social. Kitty Fok, IDC China's Managing Director, says: "Along with the rapid growth of demand from the emerging markets for third platform products and solutions, third platform based new products and solutions will see an explosive growth, and the entire ICT ecosystem will also undergo corresponding shifts. Third platform technologies will become the main driver behind the ICT growth over the next 20-25 years."
For the Chinese ICT market in 2014, IDC analysts made 10 predictions based on the complicated market environment:
Prediction 1: The 18th Third Plenary Session will boost 2014 and the future ICT market in China
The 18th Third Plenary Session unveiled China’s second deepening reform, and at the meeting, it was pointed out that "the market plays a decisive role in the allocation of resources." It also started the reform of state-owned enterprises, and stressed the inviolability of private property. These measures will effectively stimulate the enthusiasm of private enterprises.
Expanding the Free Trade Agreement (FTA) pilots, opening more inland and bordering cities, and relaxing investment access, will play an effective role in China's foreign investment. In addition, easing the cap on permanent residential registrations, improving the healthy development mechanism of urbanization, and the policy of allowing both one-child parents to have a second child, will effectively support the healthy development of urbanization, and prolong the period of time for demographic dividend.
Based on latest economic indicators, IDC expects that in 2013-2020, China's average annual GDP growth will reach 7.2% and in 2020 China’s GDP will reach US$18 trillion, accounting for 17% of the world’s total.
Changes in the economic environment will benefit five vertical sectors, namely information related consumer goods industry, environmental protection industry, modern service industry, infrastructure and strategic new industry. ICT markets in four key regions will also benefit, including the reform pilot areas in eastern China, industrial transfer areas in central and western China, inland and bordering open areas and renovation areas of old industrial bases.
Prediction 2: Smart City top design will become a hot spot for future development
In the second half of 2013, with the approval of the State Council, the country's eight ministries jointly developed "Guiding Opinions on Promoting the Healthy Development of Smart City". Thus China has officially incorporated the construction of Smart Cities into its national industrial development strategy.
When local governments promote smart city construction, it is critical to organically integrate hardware, software and service standards with overall business and technical specifications, and employ the Internet of Things, cloud computing, big data, mobile Internet and social media and other emerging technologies. Therefore, smart city top design services will become a growth area of China’s smart city construction over the next few years.
Prediction 3: 2014 marks the rise of Chinese personal IT device manufacturers
2013 saw an explosive growth in global smartphone and media tablet sales , primarily through telecom operator and online channels, according to IDC. These trends were also observed in the Chinese market.
According to IDC, for the first three quarters of 2013, Lenovo, Huawei, ZTE and Coolpad jumped into the global top 10 in smart phones, although in comparison with Samsung and Apple, the Chinese personal IT device manufacturers still have a long way to go. IDC predicts that the gap between the Chinese brands and the world’s top two brands (Samsung and Apple) will be narrowed in 2014, marking the rise of the Chinese personal IT device manufacturers.
Prediction 4: Hybrid cloud and software-defined data centers (SDDC) will become a new hotspot in cloud computing
During the past year, the public cloud computing market has developed very fast, as indicated by the provision of cloud computing services by major multi-national IT companies in China and the development of cloud computing infrastructure by Chinese internet companies.
Traditional companies in financial, manufacturing and energy industries have also started building cloud computing applications. IDC predicts that the Chinese cloud computing service market will shift towards a hybrid model, while users will put more emphasis on compatibility and convergence of public cloud services purchased from cloud service providers with their internal infrastructure. And the new hotspot in the private cloud infrastructure is building a software-defined data center.
Prediction 5: The Chinese rural market will see penetrated deployment of smart connected devices in 2014
In 2013, the smart connected devices' penetration in the Chinese urban areas was high, with the PC and smartphone markets in the cities getting saturated, but rural areas largely unpenetrated.
IDC predicts that by the end of 2014, the Chinese smart connected devices' install base will exceed 1.1 billion with nearly 1 billion smart connected devices coming from the consumer market. The biggest share will be taken by the smartphones. By the end of 2014, the smartphones' install base will exceed 700 million. With improving broadband access, declining smart connected device prices, customers further segmented and diversified marketing and promotion, the market will further expand into the rural areas in 2014.
Prediction 6: Enterprise mobility deployments will shift from single-point trials to multi-system projects
IDC researchers found that many CIOs or IT managers are considering mobility application as the next-phase key task for IT deployment. In the future, enterprise mobility will be carried out in batches, shifting from single-point trial to multi-system deployment.
In addition to extending existing enterprise IT applications onto mobile, they will also develop numerous mobility applications purely tailored to mobile environment and business process. These applications will cover department levels, enterprise levels and group levels, indicating a growing user base.
With increasing complexity of systems, the post-deployment maintenance will also become more sophisticated. Therefore, a unified mobile application platform will be created to prop up the development of numerous mobility projects in the future.
Prediction 7: Big Data will be put into business practice and deep integration with vertical applications
2014 will be a year when Big Data moves from conceptual discussions to business practice. IDC predicts that Big Data technology will penetrate into more industries, with banking, telecom, insurance and government sectors all investing substantially to extract value from these technologies. In the meantime, healthcare, manufacturing and energy industries are already incorporating Big Data and analytic application into their IT agenda.
From the perspective of technological development, various technologies associated with Big Data will coexist, with relational database, Hadoop, NoSQL, in-memory computing and database appliances all having their advantages in different application scenarios. Meanwhile, IDC also believes that cloud-based Big Data and analytics services will see fast development in 2014.
Prediction 8: Social business will facilitate internal and external collaboration and the upgrading of communication platforms
The concept of social business covers the workflows driven by social networking inside and outside the businesses
For example, account managers want to use social tools to communicate and keep good relations with their customers, while employees working at the product design department expect to leverage social networks to interact with their partners and customers for new ideas.
The impact of social business is profound and will cover all the processes of one business, especially in the following areas: business social network, innovation management, socialytics, customer experience (supported by socialized customers and strengthened by socialized marketing), socialized sales and socialized talent management.
Prediction 9: Traditional businesses accelerate the pace of embracing eCommerce, at different speeds
The Big Internet industry represented by PC internet and mobile internet is affecting many traditional businesses, from retailers to manufacturers, from advertisers to media industries, from wholesaling to logistics, from restaurant to tourism, and from ICT to broader-sense telecom industry.
Traditional businesses will continue to move online with eCommerce and online payments, among other applications. In 2020, when the Chinese Big Internet users exceed 900 million, more than 30% of the top 500 Chinese companies applying artificial intelligence Q&A systems in call center and retail stores services, and 50% of the new vehicles being connected to the Big Internet or Internet of Things, many new types of communication tools and innovative technologies based on PC and mobile internet will emerge, including cloud computing, Big Data and social marketing.
Prediction 10: Creative industrial solutions will define ICT and vertical market competitive landscape
According to IDC, the current market is shifting from the Second Platform to the Third Platform of cloud, mobility, big data and social. The Third Platform technologies will become the main driving force for spurring the growth of ICT in the next 20-25 years.
Over the next ten years, IT spending growth will be primarily driven by "third platform"-based, new, high-value and innovative solutions. All the next generation transforming "killer” solutions will pull along a massive amount of cloud, mobility, social and big data. They will enable businesses in developing more competitive products, services and businesses. This is helpful for the transformation, expansion and innovation of the businesses.
In the long term, the Chinese economy will remain in the stage of adjustment or “the second wave of adjustment growth period”. The changes in economic environment have brought changes on user demand, making ICT industry likely to become a new technological platform for delivering growth and innovation.
Meanwhile, along with changes in economy, environment, technology, eco-system and user demand, the market is faced with many uncertainties. Thus ICT vendors, channel partner and end users need to keep up with the times by adjusting their strategies and improving competitiveness.
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