There can be no doubt that, the People's Republic of China has become one of the leading strategic opportunities for Intel, Nokia, Hewlett-Packard and virtually every other multinational.
"The PC penetration rate is below 5 percent. This is still very much a growth market," said WT Tan, president of Intel China. "China is still in love with technology."
Thanks to a rapidly expanding economy, combined with a huge population that views both employment in, and products from, the IT industry as one of the most direct routes to success, double-digit growth thrives and will likely continue for several years.
Nonetheless analysts at Gartner are urging caution when it comes to forays into the Chinese market. Having witnessed larger companies try and fail Bob Hayward, senior vice president of Gartner's Asia Pacific operations, believes smaller Australian IT companies should "avoid it like the plague".
"The reality is that doing business in China is still a lot harder than what some people expect," Hayward said. "Enterprise spending on IT is still only slightly larger than Australia's. There is such intense competition that margins are very very low, and a lot of companies are trying to capture a large user base as a market entry strategy."
Hayward warns many of these strategies are destined to fail, if past evidence is to be taken into account.
"Previous attempts to enter the Chinese market using price as a differentiator have failed," Hayward says. "Other industries discovered that as soon as they raised their prices by as much as 1 percent they lost customers."
Nonetheless tax breaks, a competitive educational system, and low labour costs that are transforming the nation into one of the key stops in the product development rather than the consumer chain. The average worker in China makes about 3,000 yuan a month, the equivalent of US$365, according to various sources.
"Today there is a lot of low-end assembly, but 10 years from now you will probably see a copy of today's Taiwan," said Jun Tang, president of Microsoft China. "First they will build up the manufacturing part, and eventually people will design products out of China."
For large companies, the process is well under way. A number of major tech companies manufacture products or maintain significant research and development centres here. Microsoft's Beijing lab, for instance, came up with some of the intellectual property behind the MPEG-4 video-streaming standard.
Local companies have also gained in strength and are expanding beyond the borders. Haier, a Chinese consumer electronics conglomerate, and network equipment manufacturer Huawei Technologies have begun to export branded products to Europe and the United States. Legend, the largest local PC manufacturer, commands 26 percent of the market and is inching into cell phones and the export market.
Semiconductors also appears destine to become a huge industry. Nearly 200 chip designers have sprung up in the past few years, said F.C. Tseng, deputy chief executive of Taiwan Semiconductor Manufacturing Co, the world's largest chip foundry.
Consequently, foundries-which make chips for companies that don't have factories--are proliferating on the mainland, and TSMC plans to open facilities there to compete with locals such as Grace Semiconductor and Semiconductor Manufacturing International.
"They are getting into communications and consumer products," Tseng said of the mainland Chinese, including their own standard for next-generation mobile phones.
