China to Surpass Japan in Market Size in Value Terms for
Cellular Terminals in 2005, PCs in 2006
— NRI announces benchmarking results in seven principal segments of
China's IT market —
Cellular Terminals in 2005, PCs in 2006
— NRI announces benchmarking results in seven principal segments of
China's IT market —
Revised: 18:00 June 14, 2005
Nomura Research Institute, Ltd.
Nomura Research Institute, Ltd.
Nomura Research Institute, Ltd.
(NRI: Tokyo; Akihisa Fujinuma, President, CEO & COO) conducted a study
on the trends in seven principal segments of China's information technology
market (cellular terminals, cellular services, mobile contents, personal
computers [PCs], servers, storage, and IT services), and compared them
with those in the Japanese market. Results showed that the Chinese market
would very likely surpass the Japanese market not only in volume, but
also in value in the cellular terminal sector in 2005, PC sector in 2006,
and server, storage, and mobile contents sectors by 2010.
Surpassing in value as well as sales volume
The study showed that the Chinese market has surpassed the Japanese market in volume of cellular terminals in 2001 and PCs in 2002. Since then, China has also been catching up with Japan in these segments in value terms (Figures 1, 2). China's mobile contents market has also been continuing its expansion, showing high likelihood of exceeding that of Japan by 2010 (Figure 3).
Also in the information system related hardware market, China is expected to overtake Japan in value terms in the areas of storage related hardware in 2006 and server related hardware in around 2008. While the growth of the storage market mainly supported by the spread of the Internet has slowed somewhat since 2004, given that the user base is expected to increase to a scale nearly four times that of Japan by 2010, there is significant potential demand.
Meanwhile, the standard price per unit and cost per user in Japan are approximately 1.5 to 10 times that of China, showing that disparity in price standards remain great between the two markets.
Size of IT services market is about 1/10 of Japan
In the field of IT services, which involves information system development (includes system integration) and solution, the explicit market size in China has remained at about 1/10 of Japan. It is thought that this reflects low labor cost standards for software engineers, etc. and the immaturity of the Chinese IT market, in which information systems are mainly built in-house by companies. Looking at the breakdown of spending related to information systems in China, nearly 60% is hardware-related. The distinctive difference from Japan is the lower ratio of spending on software and services (Figure 4). However, the scope of latent demand for IT services in China, including in-house production, is estimated to be about 1/3 to 1/4 of Japan, indicating that there is significant room for future growth.
Off-shore development sector worth over ¥300 billion to lead the IT services market
The market size of China's system development sector destined for overseas markets (the offshore sector) has already exceeded \300 billion, accounting for nearly 10% of the country's overall IT services market. Offshore development is now considered one of the growth engines for China's IT services market.
It is noteworthy that IT services is not merely one segment of Chinese market, but it also has close connections with the IT services market of Japan. Development and operation of products geared toward the Japanese market is worth an estimated total of nearly ¥150 billion, accounting for approximately 1.5% of the market for development and operation of software and application in Japan. This ratio is expected to increase to approximately 5% in 2008 (Figure 5). The number of system engineers and programmers aimed at the Japanese market in 2005 could also reach nearly 60,000, an equivalent of 10% of IT engineers* in the Japanese market.
The IT market trend in China is highly relevant and vital not only for the IT industry but for all industries in Japan. NRI will continue to observe and analyze the Chinese IT market in the future.
Surpassing in value as well as sales volume
The study showed that the Chinese market has surpassed the Japanese market in volume of cellular terminals in 2001 and PCs in 2002. Since then, China has also been catching up with Japan in these segments in value terms (Figures 1, 2). China's mobile contents market has also been continuing its expansion, showing high likelihood of exceeding that of Japan by 2010 (Figure 3).
Also in the information system related hardware market, China is expected to overtake Japan in value terms in the areas of storage related hardware in 2006 and server related hardware in around 2008. While the growth of the storage market mainly supported by the spread of the Internet has slowed somewhat since 2004, given that the user base is expected to increase to a scale nearly four times that of Japan by 2010, there is significant potential demand.
Meanwhile, the standard price per unit and cost per user in Japan are approximately 1.5 to 10 times that of China, showing that disparity in price standards remain great between the two markets.
Size of IT services market is about 1/10 of Japan
In the field of IT services, which involves information system development (includes system integration) and solution, the explicit market size in China has remained at about 1/10 of Japan. It is thought that this reflects low labor cost standards for software engineers, etc. and the immaturity of the Chinese IT market, in which information systems are mainly built in-house by companies. Looking at the breakdown of spending related to information systems in China, nearly 60% is hardware-related. The distinctive difference from Japan is the lower ratio of spending on software and services (Figure 4). However, the scope of latent demand for IT services in China, including in-house production, is estimated to be about 1/3 to 1/4 of Japan, indicating that there is significant room for future growth.
Off-shore development sector worth over ¥300 billion to lead the IT services market
The market size of China's system development sector destined for overseas markets (the offshore sector) has already exceeded \300 billion, accounting for nearly 10% of the country's overall IT services market. Offshore development is now considered one of the growth engines for China's IT services market.
It is noteworthy that IT services is not merely one segment of Chinese market, but it also has close connections with the IT services market of Japan. Development and operation of products geared toward the Japanese market is worth an estimated total of nearly ¥150 billion, accounting for approximately 1.5% of the market for development and operation of software and application in Japan. This ratio is expected to increase to approximately 5% in 2008 (Figure 5). The number of system engineers and programmers aimed at the Japanese market in 2005 could also reach nearly 60,000, an equivalent of 10% of IT engineers* in the Japanese market.
The IT market trend in China is highly relevant and vital not only for the IT industry but for all industries in Japan. NRI will continue to observe and analyze the Chinese IT market in the future.
| * | In addition to engineers involved in system integration and outsourcing in the business sector, includes engineers engaged in software development of electronics, such as home appliances, cellular phones, etc. |
[For inquiries, please contact:]
Yukako Seto / Takeshi Nomura
Corporate Communications Department
Nomura Research Institute, Ltd.
Phone: +81-3-6270-8100
E-mail: kouhou@nri.co.jp
Yukako Seto / Takeshi Nomura
Corporate Communications Department
Nomura Research Institute, Ltd.
Phone: +81-3-6270-8100
E-mail: kouhou@nri.co.jp
[Reference]
| Figure 1. | Trend and forecast of cellular terminal market in China and Japan (value and volume terms) |
| Source: | Chinese estimates are based on information provided by Center for Information Industry Development (CCID) and the Ministry of Information Industry in China. |
| Note: | Chinese market includes PHS (personal handyphone system). The Japanese market does not include PHS. |
| Figure 2. | Trend and forecast of PC market size in China and Japan (value and volume terms) |
| Source: | Chinese estimates are based on information provided by CCID. Japan estimates are based on information provided by Japan Electronics and Information Technology Industries Association (JEITA). |
| Figure 3. | Trend and forecast of cellular service and mobile contents markets in China and Japan (sales value) |
| Source: | NRI estimates based on information provided by Shanghai iResearch Co., and annual reports of China Mobile, China Unicom, and China Telecom. |
| Note: | Market size is calculated by adding the market sizes of cellular carriers and contents providers that offer mobile contents such as ringtones, ring songs, and games. Added-value services such as broadcasts, GPS (global positioning system), payments are not included. |
| Figure 4. | Comparison of IT-related spending in Japan and China (2004) |
| Figure 5. | Trends of China's offshore market aimed at Japan |
Copyright(c) 2005 Nomura Research Institute, Ltd. All
rights reserved.
No reproduction or republication without written permission.
No reproduction or republication without written permission.