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Home Industry Given Fresh Start
Rarely does an industry get a second chance to assert itself in a new, but already highly developed market.
However, China's domestic software industry has been given just such an opportunity because of rapid and unexpected changes in the Internet age.
Software experts and industry representatives attending the International Software Exhibition (Int'lsoft China 2000) last week in Beijing said the country cannot afford to lose this chance as it did 10 years' ago.
China's software industry is tiny compared to its hardware sector.
More than 70 per cent of the market is occupied by foreign-made products, according to Yang Tianxing, chairman of the China Software Industry Association (CSIA).
Song Jijun, a senior researcher with the Chinese Academy of Sciences, said the figure could be as high as 90 per cent.
Almost every computer in China uses the Microsoft Windows operating system, although Bill Gates, chairman of the board of Microsoft, said earlier that he does not earn much money from the Chinese market.
According to a report from the CSIA, total revenues generated by China's software market were valued at US$2.2 billion last year, which is 0.42 per cent of the world market.
World IT (information technologies) leaders such as the United States hold a 42 per cent share of the pie, with Japan controlling 10.2 per cent.
Yang said, "This is a very unbalanced figure. China's total software output does not even match the exports of India or Ireland.''
In China, any software company valued at 100 million yuan (US$12.7 million) could be described as a relatively "big software firm.'' This figure is less than the research and development (R&D) budgets of the world's large-scale applications software firms, said Yang.
The present situation has resulted from a lack of mergers and acquisitions among domestic software firms, he asserted.
Software companies are often small and usually produce specific software packages. They usually do not want to be acquired, nor do they want to acquire other firms.
Yang said these small firms are little more than simple workshops. They cannot benefit from co-operation and diversification.
He said the government should not ignore the new opportunity.
Last year, the government offered some preferential policies that were expected to nurture growth of software industry. The tax on software products was lowered from 8 per cent to 6 per cent. Research and development of the Linux system, a free operating system which has emerged as a strong rival of Windows, has been encouraged.
"Applications will become a major development field,'' Yang said.
Of the three main areas of software products, operating systems, support software and applications, applications products will play a major role in China, according to Yang.
China's software firms do not need to compete with Microsoft in operating system products and they actually have no ability to do that, Yang said. Chinese firms should produce applications software for their own uses based on the mature Windows or Linux platforms.
He expects applications software to grow faster this year than the previous year's 30.1 per cent.
Software industry output is expected to surpass 21 billion yuan (US$2.54 billion) this year, according to statistics from the CSIA.
With government encouragement, many IT companies have changed their development focus to software. Legend is one among them.
The hardware giant launched its own Linux operation system: Happy Linux 1.0 recently. The software has already been installed in Legend's low-priced consumer PCs.
China's biggest software company also opened recently. The four founders of this 1 billion yuan (US$120.7 million) software giant are trendsetters in China's IT industry, the Beijing Centergate Corp, well known as Zhongguancun Science in the domestic stock market, Huajian Group Corp of the Chinese Academy of Sciences, Stone Group Corp and Beijing University Founder Group Corp.
Duan Yongji, chairman of the new firm, the Zhongguancun Software Group, said the firm will exploit the advantages of the four founders and try to create a domestic software flagship.
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