Cisco pledges $10b to sup­port lo­cal in­no­va­tion, with an eye on govt pro­cure­ment

China Daily (Canada) - - FRONT PAGE - By GAO YUAN gaoyuan@chi­nadaily.com.cn

Cisco Sys­tems Inc, the US multi­na­tional tech­nol­ogy com­pany, on Wed­nes­day pledged more than $10 bil­lion in in­vest­ment in China.

The cash in­jec­tion, which will last “sev­eral years”, will be used to “sup­port lo­cal in­no­va­tion, help with the coun­try’s on­go­ing trans­for­ma­tion and sup­port the growth of lo­cal economies and busi­nesses”, the San Fran­cisco-based tech gi­ant said in a state­ment.

Chair­man and CEO John Cham­bers, and in­com­ing CEO Chuck Rob­bins, re­vealed the am­bi­tious plan in Bei­jing af­ter meet­ing with top Chi­nese of­fi­cials in­clud­ing Vice- PremierWang Yang.

Cisco has also signed a mem­o­ran­dum of un­der­stand­ing with the Na­tional De­vel­op­ment and Re­form Com­mis­sion to ex­pand in China, fo­cused on in­no­va­tion, eq­uity in­vest­ment, re­search and de­vel­op­ment as well as job cre­ation, it said.

The rather sur­pris­ing an­nounce­ment came amid in­creas­ing in­for­ma­tion se­cu­rity con­cerns by the Chi­nese gov­ern­ment.

Over­seas in­for­ma­tion tech­nol­ogy firms, in­clud­ing Cisco, IBM Corp, Mi­crosoft Corp and Qual­comm Inc, are all feel­ing the pres­sure to gain or­ders in the gov­ern­ment pro­cure­ment seg­ment as reg­u­la­tors raise the bar on IT safety and se­cu­rity.

Cham­bers said in­May that or­ders fromChina fell by 20 per­cent dur­ing the quar­ter end­ing April 25 be­cause of se­cu­rity ten­sions be­tween the United States and China.

Cisco was the sixth-largest IT hard­ware ven­dor inChina at the end of last year, ac­cord­ing to re­search firm In­ter­na­tional Data Corp.

“We look for­ward to fur­ther­ing our dig­i­ti­za­tion ef­forts (through the new in­vest­ment), con­tribut­ing to tal­ent de­vel­op­ment and GDP growth op­por­tu­ni­ties in China,” said Cham­bers.

The com­pany also ex­pressed its in­ter­est in play­ing along with a num­ber of long-term na­tional strate­gies such as “Made in China 2025”, a plan to boost high-end man­u­fac­tur­ing, and “In­ter­net Plus”, a move to lift the use of IT in tra­di­tional in­dus­tries.

Kitty Fok, di­rec­tor of IDC China, said Cisco’s per­for­mance in the coun­try has been af­fected by the se­cu­rity is­sues, and the US gov­ern­ment’s de­ci­sion not to use prod­ucts from Chi­nese ven­dor Huawei Tech­nolo­gies Co Ltd.

“This planned in­vest­ment is im­por­tant for Cisco to show its com­mit­ment to China,” Fok said. “The next ques­tion is whether it can get the right lo­cal part­ner.”

As China in­creases its in­flu­ence on the global in­for­ma­tion tech­nol­ogy mar­ket, it will be im­por­tant for Cisco to not only stay in China but con­tinue to work with lo­cal com­pa­nies and gov­ern­ments, she said.

Cisco was one of the first over­seas com­pa­nies to set up a joint ven­ture and share tech­nolo­gies with lo­cal part­ners. But its plans hit reg­u­la­tory bar­ri­ers and it was forced to change strat­egy.

Over­seas ven­dors are start­ing to un­der­stand that team­ing up with lo­cal play­ers is the best way to con­tinue op­er­at­ing suc­cess­fully in the world’s most vi­brant IT mar­ket.

Last month, Hewlett-Packard Co sold 51 per­cent of its stake in the Hangzhou-based H3C Tech­nolo­gies Co Ltd to Chi­nese com­pany Unis­plen­dour Corp Ltd, so that the sub­sidiary could clinch more gov­ern­ment pro­cure­ment deals.

Bill Veghte, ex­ec­u­tive vice-pres­i­dent and gen­eral man­ager of HP’s En­ter­prise Group, told China Daily he was op­ti­mistic that the joint ven­ture will land more gov­ern­ment­backed deals as a re­sult.

Qual­comm, the world’s largest mo­bile chip maker, is also work­ing to jointly de­velop high-end chips with a num­ber of Chi­nese com­pa­nies, in­clud­ing Huawei and Semi­con­duc­tor Man­u­fac­tur­ing In­ter­na­tional Corp.

Be­ing a net­work­ing com­pany, how­ever, Cisco is deal­ing in a much more sen­si­tive mar­ket than HP and Qual­comm.

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