Chinese Offensives
Server vendors based in China are showing steep growth. They are using growth in the domestic market as a springboard to launch new offensives to dominate the global market. Thus, the local server industry, which is lagging behind US-based server giants like IBM and HP, is worried about Chinese companies' offensives.
According to market research firms and industry sources on July 13, server vendors based in China such as Huawei, Inspur, and Lenovo are logging strong growth. Thanks to full support of the Chinese government and local enterprises, sales of Chinese server sellers have been growing constantly, to the extent that they are among the top 5 in the worldwide market.
As of the first quarter of this year, Huawei occupied the runner-up spot with a 13 percent share of the Chinese x86 server market, while Inspur was in fourth place with a 12.1 percent share. They are trailing Dell, the top-ranked server maker. The two Chinese companies recorded a more than 20 percent increase in sales in the Chinese market that is growing more than 20 percent per year, nearly four times higher than the global market. In contrast, IBM and HP saw their sales drop more than 15 percent.
In the past, there was a common perception that Chinese servers were low-priced products with low quality. But Chinese server makers are now targeting the global market using the domestic market as a springboard. In fact, some of them are now among the five major companies that dominate the global x86 server market. Huawei and Inspur ranked fourth and fifth in the global server market in Q1 2014.
Against this backdrop, Chinese server sellers like Huawei, Inspur, and Lenovo are eyeing the Korean market as the outpost from which to target the Asian market.
Experts are saying that amid competitive pricing in the x86 server market, if Chinese companies are flooding the market with low-priced servers, both Korean server makers and U.S. server giants, which comprise more than 90 percent of the global market, will suffer heavily. In particular, the position of local servers in the market is likely to be further weakened, since they are sandwiched between US servers that dominate the market and low-priced servers made by Chinese firms.
An official in the local server industry said that Chinese server makers are proposing business partnership schemes in various areas, from ODM models to distribution contracts. However, local firms are facing a dilemma, because it is uncertain whether or not businesses with Chinese companies will be successful. Moreover, local companies cannot compete with Chinese firms, since the price difference between Chinese and Korean servers is too big.