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Enterprise ICT revenue in China to hit $179bn by 2026

960 640 Stuart O'Brien

The enterprise ICT revenue opportunity in China is expected to increase at a compound annual growth rate (CAGR) of 8.5% between 2021 and 2026.

The ongoing government initiatives prioritizing industrial digitalization and acceleration of digital transformation activities across large enterprises and SMEs provide a promising ground for the ICT market growth in the country, forecasts GlobalData, a leading data and analytics company.

GlobalData’s research on “China enterprise ICT market” reveals that the digitalization of national governance systems and government capabilities along with the expansion of 5G infrastructure and extensive use of digital applications such as e-commerce and digital payments will drive the demand for ICT services and products in the country over the forecast period.

Pragyan Tarasia, Technology Analyst at GlobalData, said: “While the country’s economy is largely concentrated around manufacturing, the government’s push to create a diverse digital economy as one of the key objectives under its 14th five-year plan (2021-2025) and Vision 2035 is significantly driving the demand for various ICT products and services in China.”

IT software segment to be the fastest growing enterprise ICT market

GlobalData forecasts IT software to be the fastest growing enterprise ICT segment at 10% CAGR and reach $171.9 billion in 2026.

Tarasia continued: “Increasing adoption of process automation and application-based service delivery model among enterprises in China to support digitalization as it transitions from manufacturing to service-based economy will drive the revenue prospects for the software segment.

“Furthermore, Chinese tech giants such as Huawei, ZTE, Xiaomi, and Haier that are specialized in hardware or telecommunication equipment also have a strong presence in the software segment. The presence of other key domestic IT players such as Alibaba, Tencent, and Baidu has also significantly increased the innovation capability of China’s IT software segment.”

Manufacturing the largest end-use vertical

GlobalData forecasts manufacturing sector to account for 14.2% share in the overall cumulative ICT market revenue in China over the forecast period. ICT revenue from the manufacturing sector is forecast to grow at a CAGR of 8.3% to reach $104.5 billion in 2026.

Tarasia added: “The use of Industry 4.0 concepts is a linchpin in making the manufacturing sector a key market for ICT. While China boasts companies like Xiaomi in smart hardware and Beijing Automotive Group in automotive, it also hosts factories and production units for several international industrial conglomerates. The five-year plan for smart manufacturing to support large manufacturers achieve digitalization by 2025 will boost intelligent manufacturing in the country.

“Recent sanctions from developed nations may stifle China’s future industry growth by some extent. For instance, the US Commerce Department has prohibited supplying high-tech equipment to chipmakers in China. This type of sanctions will have a negative impact on China’s growth rate in chip technology.”

ICT investment up as R&D drops during pandemic

960 640 Stuart O'Brien

45% of UK firms have decreased their research and development initiatives during the covid-19 pandemic, with even 18% of firms halting theirs altogether, according to new research from Durham University Business School.

However, 40% of firms have invested in their ICT, likely to be the result of firms having to facilitate working from home and remote engagement with customers, say the researchers.

Conducted by Richard Harris and John Moffat, Professors of Economics at Durham University Business School, the study seeks to understand the impact of the pandemic on UK firms’ research and development plans and whether or not companies had refocused their efforts in terms of investments.

The researchers interviewed over 4500 UK companies during the period between October and November 2020. Questions were centred around the firm size, industry, history of operations, before taking a more specific look at the companies’ previous research and development investment initiatives.

The results of the study suggest that the COVID-19 pandemic will have long-lasting negative effects on productivity and growth for firms, whilst increased ICT investment reflects the necessity for firms to become more digital.

Professor Richard Harris said: “The COVID-19 pandemic has had profound effects on the world economy, and in the UK specifically Bank of England figures suggest that it has led to the largest fall in GDP since 1709. While the short-run effects of the early stages of the pandemic are now well understood, less is known about its implications for growth in the medium to long-term.

“Our research findings clearly show that research and development spending dropped drastically during the covid-19 pandemic, which likely will have a negative impact on productivity and growth in the medium to longer term.”

The research reveals that the fall in intangibles investment is distributed unevenly across firms, with industry playing a major role in predicting the change in investment and internationally-oriented firms experiencing smaller declines in the early stages of the pandemic.

These research findings showcase the huge impact that covid-19 pandemic has had not only in the short-term, but in the long-term too for UK firms, with it likely that firms will have challenges related to productivity and growth in years to come due to the lack of R&D over the last year and a half.