INFORMATION TECHNOLOGY & TELECOMMUNICATIONS

Fast growing

Introduction

Worldwide IT spending is projected to be approximately USD4.0 trillion in 2016. Spending on devices (including PCs, ultramobiles, mobile phones and tablets) continues to grow. Convergence of the PC, ultramobiles (including tablets) and mobile phone segments, as well as an erosion of margins, will take place as differentiation will soon be based primarily on price, instead of devices’ orientation to specific tasks.

Enterprise software spending growth continues to be strong. Customer relationship management and supply chain management (SCM) continue to experience growth.

Investment is coming from exploiting analytics to make B2C processes more efficient and improve customer marketing efforts. Investment will also be aligned to B2B analytics, particularly in the SCM space, where annual spending is growing.

The information technology (IT) industry has become of the most robust industries in the world. IT, more than any other industry or economic facet, has an increased productivity, particularly in the developed world, and therefore is a key driver of global economic growth. Economies of scale and insatiable demand from both consumers and enterprises characterize this rapidly growing sector.

The term IT has been defined as “the study, design, development, application, implementation, support or management of computer-based information systems.” IT is a branch of engineering dealing with the use of computers and telecommunications equipment to store, retrieve, transmit and manipulate data.

The information technology (IT) market is both a huge industry in itself and the source of dramatic changes in business practices in all other sectors. The term IT covers a number of related disciplines and areas, from semiconductor design and production, through hardware manufacture (mainframes, servers, PCs, and mobile devices), to software, data storage, backup and retrieval, networking, and, of course, the internet.

China

The software industry in Mainland China is the business of developing and publishing software and related services in China. The size of the industry, including software and information services in 2013, was worth RMB3,060 billion (about USD493 billion) according to the Ministry of Industry and Information Technology.

China has already emerged as the largest global market for B2C e-commerce measured both by online buyers and by revenue. Most of the top e-commerce companies are from the United States and China.

In March 2012, there 284.3 million fixed-line telephone subscribers and 1.01 billion mobile phone subscribers in China.

China’s electronic information industry has grown three times faster than the national GDP growth rate and has grown faster than the machinery manufacturing and metallurgy industries.

The added-value base of the Chinese electronic information industry is about 900 billion Yuan (approximately USD112 billion). The value added ratio is (amount of value added / total sales x 100%) only 23.4%, compared to the whole national average of 27.1%.

This is evidence for China’s role as an assembly base that is dependent upon overseas components and parts, intermediary goods, and capital goods.

The growth in China’s R&D budgets will far outpace those of the US, which has resumed modest growth that is expected to be relatively stable through 2020. At the current rates of growth and investment, China’s total funding of R&D is expected to surpass that of the US by about 2022.

The telecommunications industry in China is dominated by three state-run businesses: China Telecom, China Unicom and China Mobile. The three companies were formed by are structuring launched in May 2008, directed by the Ministry of Information Industry (MII), Nationals Development and Reform Commissions (NDRC) and Minister of Finance. Since then, all the three companies have gained 3G licenses and engaged fixed-line and mobile business in China.

As a result of China’s entry to the World Trade Organization (WTO) on 11 December 2001, a new regulatory regime is being established and foreign operators are being allowed to access the market.

China’s second generation of mobile communications equipment market is dominated by European and North American companies. Because of the unique characteristics of mobile communications, most of China’s mobile communications equipment demands are filled by imports. The quickly rising Chinese manufacturers, however, led by Huawei Technologies and ZTE are turning to South American, Southeast Asian and African countries for business opportunities and are increasingly raising their market share in China.

As of 2009, Huawei Technologies surpassed Nokia-Siemens Networks and Alcatel-Lucent to become the second largest manufacturer of telecommunications equipment.

Japan

The information and communication technology (ICT) industry is the largest industry sector in Japan with a market size of USD1.2 trillion (as of 2011). Japan’s Ministry of Internal Affairs and Communications aims to double the market to USD2.4 trillion by 2020. The Japanese government has declared that it will “become the world’s most advanced IT nation to develop human resources who can drive the formation of an information resource nation, human resources who can support such a nation, and human resources who enjoy and lead prosperous lives.”

Japan’s telecommunications industry size is on the order of USD200 billion for the operators alone, and annually about USD20 billion are invested in networks. Japan’s has one of the world’s most advanced cellular networks.

It is forecast that there will be continued growth in Japan in the application of ICT in cross disciplinary industry sectors.

In the almost 30 years since the telecommunications liberalization, sales by telecommunications carriers have increased about 4 times and the ICT industry’s market has expanded by about 2.4 times. The ICT industry has also been a consistent contributor to our economic growth. Competition among telecommunications carriers has slashed communication charges. The structure of the ICT industry had shifted from vertical integration to in-layer horizontal integration, but more recently, corporations have actively expanded into higher and lower layers and formed collaborations across layers. The profitability of layers is changing significantly as the modularization and commoditization of ICT devices continues.

Moving towards 2016 Japan possesses one of the most advanced and largest broadband markets in the world. Much of the success of broadband in Japan is owed to the stunning growth surge that occurred on the back of DSL broadband technology. Since then Japan has focused investment on FttH and on cable to a lesser extent. The faster speeds afforded by these technology platforms have seen both increase in popularity at the expense of DSL, with FttH representing almost two thirds of total fixed broadband subscriptions. Japan has also been an early adopter of triple-play models which provide TV, broadband internet and voice telephony as packaged services from a single provider.

Due to recent economic conditions and measures against various risks, many Japanese companies are looking for international business partners. Japan IT Week gathers such companies with specific needs and budgets.

Some of the opportunities in Japan in the IT&T sector include:

  • Cloud computing and big data management
  • Diversification and management of mobile device
  • Information security
  • Smartphone and mobile service solutions
  • Sustainable ICT (ITS, green IT, smart grid/city)
  • Agri ICT/Food security and network system
  • e-health/e-medical
  • Image/speech recognition/embedded technology.

South Korea

In Asia, South Korea is one of the countries at the forefront of key development in the IT industry in terms of its growth potential, trade, and added value.

As the third largest economy in Asia Pacific and 11th largest in the world, South Korea also ranks among the top three in terms of the production and trade of IT equipment, and accounts for almost 6% of the world production and export volume in the industry. Not only is South Korea a favorite investment destination for new and upcoming technologies, but it also houses some of the top major corporations in IT sector such as LG Electronics and Samsung.

According to an industry report, IT spending in South Korea is set to reach KWD21, 930 bn in 2013, up by 6.6% from 2013. South Koreans have large per capita incomes in terms of regional comparison.

It is believed that South Koreans will consistently choose to spend on IT products as “several PC households” become more common. Demand for tablet PCs and other mobile devices will become more popular as price competition continues. Also growth trends in the current market, including cloud computing, IT outsourcing and industry related software applications, will assist market growth.

Computer hardware consumption in South Korea is expected to reach KWD5, 423 bn in 2013, which is 5.4% increase than in the previous year. Tablets experienced strong growth in 2013, as well as other form of mobile devices and system software.

Sales on Software will top to KWD7, 490 bn in 2013, up by 5.2% year on year. Trend in the South Korean software market now can be seen as specialized application packages.

IT Services revenue is set up to KWD9, 016 bn in 2013, grow by 8.6% year on year. Cloud computing is going to gain more traction in 2013, within large enterprises and SMEs.

In terms of foreign trade in IT industry, South Korea’s exports in the information technology (IT) sector topped USD13.11 billion in January 2013, increased by 16.4% compared with a year earlier, which is also the highest expansion in 27 months, and keeping the growth trend in tact for five straight months, according to the Ministry of Knowledge Economy.

Australia

Australia has also proved a particularly fertile domain for creative digital industries which generate in excess of AUD23 billion per year. A significant research infrastructure, highly skilled and experienced workforce, and technology-hungry, solutions-driven customer base makes Australia a strategic location for a range of ICT activities with a global and regional focus.

Australia’s Information Technology industry includes computer sales, software, IT Services and e-readiness. The market should continue to provide opportunities in consumer, government and business sectors in 2010, following a relatively robust performance in 2009.

The ICT industry accounts for 4.6% of Australia’s GDP and contributes 4.9% to gross value add, boasting a larger contribution than mining, education, defense, agriculture and the individual manufacturing sectors.

The Australian ICT sector remains diverse and fragmented and can be characterized as follows:

  • Large players (mostly multi-national, excluding the carriers) who are generating the bulk of revenues.
  • Smaller companies (mostly domestic) who are generating innovation and exports.
  • A broad (and becoming broader) product spectrum from software and media content to electronics manufacturers.
  • Telecommunications generating > 40% of the ICT industry’s revenues.

There are many examples of world recognized brands taking advantage of what Australia has to offer in ICT. Global names such as Avaya, Canon and IBM have built product development (R&D) facilities in Australia; Google Maps and Warner Bros have used their bases in Australia to develop profitable international digital content for business and entertainment sectors; Alcatel-Lucent, Cisco Systems and CSC run advanced technical assistance centers for operations around the world from Australia, and Logica CMG, Reuters and Infosys have made Australia central to their global risk reduction strategies.

The size of the market, its innovative outlook and a varied and sophisticated customer base combine to make Australia an ideal location to develop and test new ICT products and services. Software and processes that are built and adapted here are often rolled back into the global product development environment and subsequently used by customers worldwide.

Australia’s ICT workforce offers extensive domain-level knowledge and quality technical expertise – particularly in architecture and integration. The result is targeted, clever and innovative ICT solutions for a range of companies across different industries.

The Australian software industry has benefited from comparatively low development costs and a highly skilled workforce, and has consequently become a target for strategic ICT investment. Companies such as IBM, Canon, Citrix, EDS, Fujitsu, Google and NEC have built major software development facilities in Australia.

The digital game development has become significant, and working with the film industry, Australian digital content expertise, has won global acclaim in productions such as the animated feature film Happy Feet.

There were approximately 12.8 million internet subscribers in Australia at the end of June 2015. This is an increase of 2% from the end of June 2014. As at 30 June 2015, almost all (99%) internet connections were broadband.

ASX – IT & Telecoms

IT & Telecoms stocks make up 6.6% of the ASX 200 index and 6.8% of the All Ordinaries index.

GCP capabilities

  1. GCP is uniquely positioned and committed, with experienced tertiary qualified bi-lingual staff, to provide investment banking, corporate finance and advisory services to companies involved with the Asian IT&T industry.
  2. We act for private companies and companies listed on the AIM (London), and ASX stock exchanges. Being located “on the ground” amongst the key Asian markets, GCP is attuned to local business conduct, processes & culture, news flow, corporate announcements, government policy and economic initiatives. Combined with regular contact and our long standing relationships with key industry participants, this equips us to best understand the demand and potential for corporate equity investment, sources of project equity, joint ventures, R&D collaboration, technology & knowhow transfer, and for market entry strategies and customer acquisition.
  3. With Australia’s proximity to the key Asian markets, and combined with GCP’s strong differentiation, we are able to assist a variety of IT&T companies with their financing requirements who have projects along the full value chain, from conceptualization and R&D, to full commercialization including development & production financing.
  4. With over 27 years of operations GCP has assisted promoters of projects globally. These included mobile cellular distributors and retailers, satellite and cable TV developers, software developers (including receiving the COMPAQ computer award for best software company in 1997 – GCP was a founding shareholder in the company), computer hardware and software distributors, web hosting and development companies, internet service companies, content developers, the largest e-payments system in SE Asia, database management software development, data centre operators, telecommunications companies (including being the advisors to the successful applicant for Australia’s 100 th telecoms license), Wi-Fi developers and operators, and a variety of others.