Two-thirds of data centre IT infrastructure spending in China will be obtained by local vendors

"Over the last two decades, global data center infrastructure vendors have enjoyed high growth rates in China. However, the situation is changing," said Jimmie Chang, principal research analyst at Gartner. "Especially after the Prism affair, the Chinese government has been encouraging government institutions and state-owned enterprises to purchase from local vendors. At the same time, a media-hyped campaign, so-called 'IOE Out,' is targeting a reduction on the reliance of global IT vendors in Chinese enterprises."

Mr. Chang said that Chinese enterprises are also not satisfied with global vendors' premium prices for professional services, maintenance renewal and spare components. They also often require more localization and customization than global vendors can usually offer. These factors are reshaping the competitive landscape of the data center IT infrastructure market.

"Global data center infrastructure vendors are losing their dominant position because of these pronounced changes in market climate," said Mr. Chang. "This trend is particularly strong in the server market, where many local vendors are rapidly cannibalizing global vendors’ share. In the storage market, Huawei, the leading local storage vendor, will be competitively challenging EMC’s top storage vendor position in China in the near future. Cisco is also losing share to local vendors and the trend looks likely to continue.”

Gartner recommends that regional leaders at global vendor companies should develop a full set of local strategies in China, including product designs, marketing messaging, business models, selling tactics, culture and contract terms, together with a comprehensive understanding of the differences rather than similarities of the Chinese market.

Gartner made a series of further predictions, including:
By 2016, production of wearable devices by Chinese vendors will be more than 100 million units, with most priced at less than $50

The Nike+ FuelBand, Google Glass and Apple Watch have provided Chinese hardware vendors with inspiration to develop copycat wearable products that can be sold at a lower price for worldwide markets. Although the wearable-device market is still in the early stages, many Chinese companies have started to provide very low-priced products, such as the Xiaomi band for 79 yuan ($12), the inWatch Pi for 299 yuan ($47) and the Abardeen v.wo kids tracker watch for 188 yuan ($30). These products have features similar to those from global brands, but due to the pricing are attractive to a much wider consumer base.

In this way, the wearables market will likely repeat the history of mobile phone and tablet market growth iChina, according to Gartner. White-box manufacturers will leverage semiconductor vendors' reference designs to produce inexpensive copycat products in a short time. Besides traditional white-box electronics makers, many startups and venture companies in China are also interested in the wearable devices market and this will lead to the market becoming fiercely competitive.

"The aggressive product strategy of hardware providers will accelerate the evolution of the wearable device market and consumer adoption," said Roger Sheng, research director at Gartner. "Internet companies, software and service providers can leverage China's local supply capability and cost-effective hardware platforms to create user-friendly, value-added services and other business opportunities. As a part of the Internet of Things, inexpensive wearable devices will be the core focus area for technology and service providers in consumer-centric markets."

By 2015, half of 4G smartphones sold in China will be less than $100
Fueled by turnkey chipset solution providers, Chinese mobile handset makers are now able to provide good-enough Android smartphones at affordable price points, helping local brands to grow in the smartphone sector. The effort from the Chinese Technology Ecosystem (CTE), including Chinese white-box manufacturers and turnkey solution providers, has been seriously challenging global brands, such as Samsung, in both prices and sale units.

"We believe that in China, about 40 percent of 3G smartphones sold in 2Q14 were sold at below $100," said CK Lu, principal research analyst at Gartner. "Moreover, both technology evolution and the price decline are still speeding up. Chinese vendors, such as Xiaomi and Coolpad, are driving 4G replacements over 3G with aggressive pricing strategies and selling 4G smartphones at just $100."

Gartner believes that by the end of 2014, the three-mode 4G smartphones will replace the price segment of 3G smartphones, and the average selling price of five-mode (TD-LTE, FD-LTE, TD-SCDMA, GSM and wideband code division multiple access [WCDMA]) 4G smartphones will be close to $120. As a result, by 1Q15, 4G smartphones will account for more than 50 percent of Chinese OEMs' shipments.

"Such bold moves into the latest technologies with the latest specifications make it very difficult for global brands to differentiate themselves and justify their premium prices," said Mr. Lu. "Global manufacturers, especially those that are not able to maintain their products in the premium segment of the market, will find it increasingly challenging to compete in the low-cost segment and will cede their dominance in the mass-market sector to Chinese manufacturers. These factors will lead Chinese manufacturers of feature phones and 3G smartphones to repeat their success in the 4G sector with an even more aggressive pricing strategy. As a result, by 2015, half of 4G smartphones sold in China will be priced at under $100."