Boston, MA -- (SBWIRE) -- 01/02/2014 -- IT spending growth in China is expected to outperform on a regional and global basis, with a CAGR of 9.2% forecast over the 2013-2017 period. A supportive economic and policy environment, low penetration of key products and services, and the meta-trend of urbanisation and infrastructure investments by the government will continue to drive demand. However, China's IT market is not without its challenges as the pool of first-time buyers diminishes and vendors struggle in the face of high levels of piracy, cyber security issues and price-sensitive consumers. The outlook is still positive, but as China develops, its IT market evolves and vendors offering mobile PCs and services firms with strong cloud computing product portfolios are expected to perform better.

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Headline Expenditure Projections

Computer Hardware Sales: CNY500.0bn in 2012 to CNY533.1bn in 2013, +6.7% in local currency terms. The shift from desktops and notebooks to cheaper tablets is limiting increases in market value, though unit volume growth is sustained.

Software Sales: CNY99.4bn in 2012 to CNY114.0bn in 2013, +14.7% in local currency terms. Enterprise investment in software as they modernise will be the key driver of growth, particularly implementation of enterprise software among SMEs.

IT Services Sales: CNY165.3bn in 2012 to CNY185.5bn in 2013, +12.2% in local currency terms. China is a large outsourcing market and we expect outsourcing activities to increasingly be geared to high value activities over the medium term.

Key Trends And Developments

- The tablet market is booming in China, with volumes driven higher due to the average price of devices declining through 2012 and 2013. We expect Android-based tablets from local manufacturers such as Lenovo and Huawei to make inroads with price-sensitive consumers and ultimately eclipse Apple's iPad installed base. Apple is trying to fight back in an important market for the vendor, implanting measures such as the provision of consumer credit and direct delivery from manufacturing partners, but its volumes will nonetheless remain under pressure from lower-priced competition. Meanwhile, the growth of tablet sales will continue to squeeze vendors operating in the desktop and notebook market. As notebook sales are cannibalised by tablets, unit growth of traditional forms will be constrained. There will also be a squeeze on margins, as notebook vendors are forced to lower prices to compete with tablets.

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