UPDATE

BRIC: China Executive Market Watch 2Q 2006

Kitty Fok Lianfeng Wu
Grace Han Vicki Cui
Gary Lu

IN THIS UPDAT E
IDC's BRIC: Brazil, Russia, India, and China Executive Market Watch service is a
www.idc.com

qualitative complement to our quarterly research services and range of annual studies
published in these countries. In this document you will find an analysis of the
developments of the 2Q 2006 in China.
F.508.935.4015

Trends in the Economy

China's GDP growth is forecast at 9.6% for 2006, but the expansion rate is expected
to slow to 8.3% by 2007, as investment slows owing to problems with oversupply.
Consumer price inflation has fallen in the past 18 months, and the year-on-year rate
P.508.872.8200

fell to 1.4% in May. Despite high oil (and non-oil commodity) prices in 2006, domestic
overcapacity and low inflation in food prices will continue to put downward pressure
on prices. The pick-up of investments in the first five months of 2006 indicates that
the problem of oversupply is unlikely to go away, and thus inflation will average 1.2%
in 2006. However, the government has stepped up efforts to curb investments in
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2Q06. It raised lending rates, tightened controls on investment approvals and land
distribution for development, and also increased the reserve requirement for
commercial banks.

The Chinese economy is still rolling ahead, but it should also successfully come to a
soft landing, based on the government's willingness to raise interest rates. By and
large, the economic environment in China should remain fruitful for IT vendors. IT
infrastructure in the government, education, and large business segments have been
saturated in recent years, leaving vendors looking to the small and medium-sized
business (SMB) segment for continued growth. IDC expects the SMB market to be
the fastest growing segment over the next five years.

Filing Information: September 2006, IDC #LA3656

BRIC: Brazil, Russia, India, and China Executive Market Watch: Update
 T ABLE 1

BRIC and USA Comparative Indicators, August 2006

Indicators Source
Brazil Estimated 2005 Population (M) 181.4 1
Russia Estimated 2005 Population (M) 143.4 1
India Estimated 2005 Population (M) 1,095.4 1
China Estimated 2005 Population (M) 1,307.5 1
BRIC Estimated 2005 Population (M) 2,727.6 1
USA Estimated 2005 Population (M) 295.73 1

Brazil 2006 IT Spending (US$M) 16,774 2

Russia 2006 IT Spending (US$M) 14,259 2
India 2006 IT Spending (US$M) 12,357 2
China 2006 IT Spending (US$M) 35,697 2
BRIC 2006 IT Spending (US$M) 79,087 2
USA 2006 IT Spending (US$M) 445,021 2

Brazil IT Spending Growth CAGR, 2005-2010 12.7% 2

Russia IT Spending Growth CAGR, 2005-2010 18.3% 2
India IT Spending Growth CAGR, 2005-2010 19.1% 2
China IT Spending Growth CAGR, 2005-2010 11.3% 2
BRIC IT Spending Growth CAGR, 2005-2011 14.2% 2
USA IT Spending Growth CAGR, 2005-2010 5.3% 2
Source: 1. EIU Data, Jan - March, 2006 and 2. IDC Worldwide PC Tracker 4Q 2005

IT Environment

Overall
China's IT spending reached US$10 billion in 2Q06, with year-on-year growth
increasing by 18.8% and sequential growth by 31.1%. Services and software remain
the key drivers of growth. Communications/media, banking, and government are the
three key industries, contributing a combined 40% to total IT expenditures in 2006.

Drivers
China's stable economic growth is the foundation for the country's steady IT market
growth. It continues to rein in excessive investments and has gradually lessened its
reliance on exports and investments for economic growth. Instead, the country will
look increasingly to domestic demand as the primary GDP driver. In addition, the
incomes of urban and rural citizens have also increased by more than 10%.
Furthermore, the Consumer Confidence, Economic Satisfaction, and Outlook Indexes
all show strong consumer confidence in China's economy. These factors have all
helped to rouse enthusiastic demand in the consumer IT market.

In addition, as the period of transition set by WTO will soon end in 2006 (and in some
areas ended already in 2005), an increased number of foreign banks have set up
operations in China. As of September 2005, 325 foreign financial institutions had

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opened 238 operating offices, of which 138 are allowed to carry out RMB services, 15
are allowed to offer online banking, 41 are permitted to handle derivative services,
and five are allowed QFII operations. The number of cities in which RMB service
access for foreign banks is allowed has increased to 25.

Inhibitors
Current information indicates a delay in the issuance of 3G licensing until next year.
As a result, 3G terminal makers and IT vendors, as well as market investments for the
entire telecom sector, will be affected.

Profitability is always the biggest challenge for IT vendors. This is owing to not only
intense competition, but also economic controls by the government.

IT infrastructure in the government, education, and large business segments have

been saturated in recent years, leaving vendors looking to SMBs for continued
growth.

PC Market Overview

PC Trends
The total PC market in 2Q06 was 5.5 million units, 7% higher than IDC's initial
forecast. This market grew 16% sequentially and 26% year on year in 2Q06, thanks
to growing demand for consumer desktops in tier 4 to 6 cities. Rapid growth in
notebooks also helped to drive overall growth. The market performed better than
expected as price drops during the quarter encouraged PC sales.

! In 2Q06, key PC vendors continued to open additional stores to reach more

consumers and SMBs. For example, Founder's "Thousand Stores" program was
launched in April. As the name suggests, Founder aimed to open 1,000 more
retail stores nationwide by the end of 2006. Tongfang, Haier, and HP also
opened more retail stores in 2Q06. As competition intensified in the more mature
tier 1 to 3 cities, vendors became more eager to further expand into tier 4 to 6
cities.

! PC vendors have also focused on building up their channel structures in 2Q06.

Most have already adopted multi-channel models, whereby a national distributor
is employed alongside a network of dealers and retailers, not to mention the
direct sales method. Haier added DongFangsihai as its new notebook distributor
(in addition to Hengchang). Fujitsu further developed its regional distributorship
to better penetrate the tier 3 and 4 cities. Meanwhile, Tongfang worked closely
with retail chain Suning to widen its sales reach.

! As 3C (Computers, Communications, and Consumer Electronics) retailers play

an increasingly important role in the market, PC vendors also strove to work
more closely with them. In 2Q06, Haier and Tongfang worked closely with Suning
during summer promotions, while Founder worked with Gome. This emerging
retail channel is expected to offer consumers better choices while giving PC
vendors an effective sales outlet.

©2006 IDC #LA3656 3

! To some degree, price drops for consumer notebooks have affected the sales of
consumer desktops in 2Q06. After Hasee launched its RMB 2,999 (US$370)
notebook, TCL also dropped its prices to between RMB 5,000 (US$620) and
RMB 8,000 (US$1,000). Founder, Lenovo, HP, and other key vendors have also
reduced their notebook prices on selected models.

PC Vendor Performance
The top 10 PC vendor rankings remain largely unchanged from the previous quarter.
Lenovo and Founder kept their first and second place positions respectively. Dell took
the third place position, as the vendor's PCs became more competitive after lowering
its prices and extending warranties for low-end PCs to one year. HP opened more
retail stores in 2Q06 and kept its fourth place position. Tongfang and Acer kept their
fifth and sixth place positions, respectively. Tongfang worked closely with VIA during
its World Cup promotions in 2Q06, while Acer's shipments were hampered by high
channel inventory from the previous quarter. TCL entered the top 10 in seventh place
and displaced ASUS, which dropped to the ninth spot. TCL's notebook sales saw a
tremendous increase in 2Q06 thanks to support from its traditional consumer
desktop–centric channels. Haier maintained its eighth place position, as its shipments
declined only slightly, following strong orders from the education sector in the
previous quarter. Finally, Sony rounded out the top 10 once more.

Server Market Overview

Revenue for the overall server market increased by 8.9% compared with 1Q06, and
year-on-year growth was at 15.5%.

! X86 server continued to produce strong revenue growth and accounted for
54.0% of total server revenue in 2Q06. Local vendors have already released dual
core–based models and these are expected to be taken up quickly. The take up
of dual core servers from MNCs is expected to take longer due to higher pricing.

! The unit shipments of non-x86 servers reached a historical high, thanks to the
competition between IBM and Sun over the volume server market; this
competition accelerated end users' decisions on server purchases. The
combined unit shipments of IBM's and Sun's year-on-year growth increased by
28.2% and 31.6%, respectively. However, the Linux-based non-x86 server
showed weakened performance as a result of IBM's discontinuation of the
OpenPower series and HP's recommendation to its distributor to sell the Integrity
server with HP-UX.

! With the disappointing performance from HP's volume server and the delayed
launch of the Montecito processor from Intel, EPIC's server declined compared
with last quarter.

! In term of industries, healthcare, utilities, petroleum, and online gaming saw

exceptional growth in 2Q06.

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Server Vendor Performance
The 89% drop of IBM's non-server in the zSeries in 2Q06 could not be offset by the
growth of the pSeries, which recorded a 32.4% sequential growth and an 11.7% year-
on-year growth. IBM remained the top server vendor in 2Q06 with a 40% market
share.

HP saw mixed performance in 2Q06, with drops in units but increases in revenue.
Collaboration with its distribution channels was ineffective, and thus its volume server
market was impacted negatively. Meanwhile, a major order from China Mobile for a
high-end server helped its gain in revenue growth.

Sun's focus on the telecom equipment manufacturing (TEM) industry, which includes
vendors such as Huawei and ZTE, was successful in helping to push shipments of its
Ultra Enterprise series servers to reach 1,849 units, three times higher than in 1Q06.
Total unit shipments of Sun's non-x86 servers reached 3,389 units.

Dell and IBM were the top vendors in x86 server market in 2Q06. Meanwhile, internal
problems at HP have affected the company's performance since 1Q06 .

Local vendors are still strong within the government and education segments.

Storage Market Overview

Storage Trends
External disk capacity showed extremely strong growth of 88.4% year on year as a
result of demand for applications. However, revenue growth was only 27.5% and unit
shipment growth only 33.9%. Comprehensive product lineups and professional
service packages for discerning users emerged among fierce market competition.
Adequately utilizing of software systems, optimizing data configurations, and
minimizing human resource maintenance are worthy values of any investments,
meaning that not only replacing old version of systems and upgrading existing
facilities exists, but also that new technology is being applied widely in the China
market.

Data integrity and information security have been mostly prioritized as top storage
issues in storage solutions. As many successful examples exist for computing
hardware, the faith of extending the security barriers on the storage frontier has risen
on both sides — end users and product manufacturers. Along with continuity of
mega-data explosion, safe usage of networks requires attention to storage security, in
terms of preventing fraudulent data, data leaks, unauthorized data modification, data
loss, as well as maintaining information reliability, legality, continuity, and compliance.
In order to resolve potential risks from security issues, storage security has been
focused upon separately in data backups and false tolerance, antivirus, encryption,
recovery, and capability for terminal protection. Virtualization is another hotspot,
which largely depends on data transportation speed over LAN and socket security in
this transfer process. Despite cost reduction and TCO minimization, technology
upgrades turned to be the prime focus in 2006. 4GB disk products such as the EMC
CLARiiON CX 3- Series, IBM DS4700, and HDS AMS1000 have been strategically

©2006 IDC #LA3656 5

deployed in the China market toward the replacement of most existing popular
models.

Market expenditure on entry-level and midrange storage was over 76.2% in 2Q06.
About 66.3% of the storage network structure relying on FC SAN and iSCSI recorded
a quadruple increase in 2Q06. SATA has already taken place in the China market to
replace the share of existing SCSI products at the entry level.

In terms of industry, with the impact of 3G, all telecommunications-related industries,

such as equipment manufacturers, carriers, media, and electronic device
manufacturers, have substantial demands for storage.

Storage Vendor Performance

In 2Q06, IBM led the disk storage market with a 19.3% revenue share, followed by
HP and EMC with market shares of 16.8% and 15.1%, respectively. Dell and Sun
were the two fastest growing vendors in 2Q06.

IBM focused on pushing out its high-end products, alongside EMC and HDS to
dominate the high-end market. Meanwhile, all MNC vendors covered the low-end and
midrange segments. Most vendors are still debating whether to focus on only one
segment or to broaden their product offerings.

Software Market Overview

Software Trends
Three focal points shook out for the software market — SOA, SMB, and SaaS, while
the key strategies of software vendors in China were channel strategy, vertical focus,
and solution-based offerings.

! SOA is expected to be the key driver of software market over the next five years.
Middleware vendors such as IBM and BEA as well as applications vendors such
as SAP and Oracle have been heavily promoting SOA. The benefits of SOA
include faster integration and implementation of complicated systems, and
improved flexibility of IT systems to easily adapt to business changes. Although it
will still take time for SOA to be widely accepted by end users, some large
enterprises have already planned to deploy SOA in near future.

! SMB and SaaS are key areas of focus for both the traditional software vendors
and also for telecom carriers. Although results from the IDC survey showed that
only 10% of SMBs in China currently prefer the SaaS model, with the Olympics
coming in 2008, we expect an increase of transaction demand over SaaS. The
majority of SMBs still prefer to spend on packaged software, however. Within this
fragmented SMB market, channel strategies play an extremely important role in
software sales.

! Channels, especially solution providers or VARs that are able to add value to
vendors' software, have been courted by many vendors, with most of the vendors
launching attractive channel programs (e.g., SAP's PartnerEdge). A channel
strategy is key when doing software business in China, given its large geographic

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 area. Many vendors have realized this crucial factor and have begun to rely more
on their channels rather than direct sales. But finding qualified partners among
the 8,000 systems integrators (SIs)/ISVs in China and forming long-term win-win
strategies is not easy.

! In terms of vertical markets, users are have growing demand for industry-specific
solutions. Most vendors develop or package their software to more industry
characteristics to satisfy vertical clients. Besides, for application software, an
industry focus is essential, so some middleware vendors also provided industry-
specific solutions based on their middleware products. BEA, for example, set up
the China Telecom Technical Center (TTC) to broaden its WebLogic
Communications Platform to help China telecom vertical customers deploy new
applications. Some SMBs do not see themselves as SMBs at all; rather, they see
themselves as unique companies within an industry. As such, they look for
industry-specific solutions, instead of SMB software.

! Solution-based selling became more popular, accounting for more than 40% of
total software and services revenue. Clients gradually realized that purchasing
only good software products is not enough. What they need most are solutions (a
combination of software and services and, sometimes, hardware) to solve their
business needs. Among the large enterprise resource planning (ERP) projects
that IDC tracked, the software to services ratio changed from 1:1 in 2000 to 1:2.5
in 2005. The related consulting, implementation, support, and training services
are all very important, impacting highly the final result of the project. Improving
services and support will be the key differentiator between software vendors.

Software Vendor Performance

In 2005, the top 10 software vendors in China collectively accounted for a 40.9%
market share. The top 3 local vendors were UFIDA, Kingdee, and CS&S. Kingdee is
strong in enterprise applications while CS&S is strong in service industry applications.
Global vendors Microsoft, IBM, Oracle, SAP, HP, Symantec, and BEA made up the
other vendors in the top 10.

IT Services Market Overview

! Services Trends

! The convergence of IT and communications, utility computing, and transition

from higher- to lower-cost regions will be three important trends that will deeply
impact the overall services market. There will also be a thorough shift in current
service models.

! As an initial model of utility computing, the China application hosting (also known
as "hosted AM") market is growing quickly with high demand from medium-sized,
and even small, businesses. At present, applications — for instance, email, office
automation (OA), and distribution systems — used in the hosting model in China
remain simple while popular modules in western countries, such as customer
relationship management (CRM), are still not common in China.

©2006 IDC #LA3656 7

! Global consulting firms continue to expand aggressively. They are not only
recruiting more consultants, but have also built new offshore developments or
business process outsourcing (BPO) centers in China. Accenture, BearingPoint,
and IBM BCS each have more than 1,000 staff in these centers.

! Major local vendors are restructuring their services business to catch up with
foreign vendors. UFIDA and Kingdee are investing more HR and other resources
into their services business to benefit more from support and training. They are
providing hosting services to some local companies.

! In August 2005, China Telecom launched "Biz Navigator" by allying with

equipment providers, ISVs, SPs, and content providers (including Cisco China,
Digital China, Dianji, HP China, Lenovo, Microsoft, UFIDA, ZTE, Alcatel China,
and Trend Micro). This was targeted to provide one-stop services on a utility
model for SMBs, including asymmetric digital subscriber line (ADSL) access,
application hosting for OA, CRM, and enterprise resource management (ERM);
as well as email, Web hosting, and security services.

! Local application vendors are starting to penetrate the high-end market (e.g.,
UFIDA has secured deals with large enterprises, such as China Unicom, since
2005).

Services Vendor Performance

In 2005, China was still a fragmented market as the top 10 vendors collectively made
up only 17.5% of the market share, 1.2% less than in 2004. Market consolidation
continues — larger vendors grow by acquiring smaller ones while smaller companies
leave the market. IDC predicts that this fragmentation will remain over the next two to
three years, and that vendors will pay closer attention to the SMB market as a key
market.

Telecom Services Market Overview

China had 426.4 million mobile subscribers in 2Q06, with subscribers representing
32% of China's total population. Healthy growth continues in wireless data services,
which accounts for approximately 24% of total wireless revenue.

! China Unicom established a strategic partnership with SKT to develop its CDMA
business. Orange & French Telecom are developing further technology
partnerships with local operators and plan on establishing local offices. Five
foreign-invested value-added service providers, including MSN, won official
licenses to develop value-added services in China.

! 3G is expected to be launched soon. The Ministry of Information Industry (MII)

and operators are further boosting TD-SCDMA trials. Meanwhile, China Mobile is
also starting HSDPA trails. China Unicom won the CDMA20001X EVDO license
in Macau to build its 3G trial operations.

! Both China Mobile and China Unicom are taking more actions to boost wireless
value-added services as 3G come. Wireless music, wireless IM, and wireless
email will become next key wireless applications.

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! In 2Q06, the router and LAN switch markets demonstrated moderate growth
overall compared with 1Q06. After a quiet 1Q due to a seasonal downturn,
investment began to recover. Also, the router market performed well, as major
telecom carriers invested heavily into their backbone network upgrades as well
as in MANs.

Telecom Services Vendor Performance

The top 2 players in the market, Cisco and Huawei/Huawei-3Com, both offer more
product variety, greater vertical differentiation, and wider geographic coverage
compared with other smaller vendors. In 2Q06, both vendors managed to increase
revenue. Major wins in telecom, finance, power, government, and large enterprises
contributed to Cisco's business growth in 2Q06. Within the carrier market,
Huawei/Huawei-3Com showed competitiveness in both gigabit/terabit routers and
access switches in 2Q. It managed to secure projects with most major carriers on
backbone expansion, IP bearer networks, and Ethernet access. In the enterprise
market, government, electricity, resources, and education contributed to the growth of
its revenue.

Stronger performance is expected from the equipment market overall in 2H06,

especially in the enterprise sector. IDC does not expect a major change in the
competitive status in the China networking equipment market in 2H06.

Channel News & New Market Entrants

HP has cancelled Digital China's sole distributorship of the volume 9000/integrity

model, which resulted in a decrease of Digital China's unit shipments of HP's volume
model in 2Q06.

With a new CEO onboard at Sun, new channel strategies have been employed. Sun
has begun to seek out powerful partners in each of the vertical industries, and
especially in the telecom sector. Sun focuses on leading industries, such as the
telecom, education, and petroleum sectors.

HP announced its employment of Digital China as its sole agent for NAS storage in
2Q06 in order to increase opportunities for nationwide sales coverage.

In the x86 server market, Lenovo recently signed a solution provider contract with
IBM to resell the IBM xSeries in May. This is a great cooperative agreement to help
round out each vendor's product offerings. Lenovo will benefit from increasing its
product offering of high-end servers, while IBM can penetrate the government and
education industries in partnership with Lenovo.

Alliances, Mergers, and Acquisitions

The 2Q06 networking market witnessed Huawei's acquisition of Harbour Networks, a

former top 5 networking vendor in China. All related businesses, personnel, and
products have been shifted to the new operation. The road to integration of Huawei's
products with Harbour Networks' is still unclear, as a large number of products
overlap. The acquisition has greatly affected Harbour Networks' business, as have

©2006 IDC #LA3656 9

rumors before the acquisition, with some of its previous customers switching to other
vendors.

Big Contract Watch

Major contracts include the following:

! China Mobile centralized purchasing. The headquarters of China Mobile made

the fifth centralized purchase of non-x86 server and storage at the province level.
IBM and HP won this non-x86 server bid. IBM won in eight provinces, which
include Zhejiang, Guangdong, Sichuan, and Jiangsu. HP won in four provinces.
Most models ordered were high-end Unix servers.

! IBM won the national taxation order once again. Since IBM beat HP on the
national taxation non-x86 server order in 4Q05, it has become the leading vendor
for taxation of the central government. This quarter, IBM secured a major
taxation order of non-x86 server, including 12 units of p5 595.

! HDS won a bid for the Agricultural Bank of China. The biggest single storage
deal came from the Agricultural Bank of China, with revenue totaling over US$6.5
million. The construction of an information datacenter will help the Agricultural
Bank of China to handle further mega-data manipulation and real-time data
transformation within an internal network. With this contract, HDS has not only
maintained an excellent performance record in the financial industry, but also
established a sufficiently strong relationship with the headquarters of the
Agricultural Bank of China for future cooperation.

! Fujitsu secured the ZTE IPTV program. Media storage purchases have been
increasing quickly in East China due to rapid IPTV growth in this region. As a
professional storage product supplier, Fujitsu has advantages in terms of its
high-performance large-scale products, the Eternus 3000 and Eternus 6000,
installing enough functions to meet IP network demands.

Demand from fast-growing industries include the following:

! Postal services: The China government announced the release of restrictions

from China Post. This action generated great server demand in both China Post's
headquarters and local Post branches. This quarter, postal savings bank in some
provinces made some non-x86 server bid.

! Tobacco: The Bureau of Tobacco Management in some provinces in Central

China, such as Hubei, Anhui, and Jiangxi, has made non-x86 purchases. (Note
that this is not the tobacco industry directly.)

! Petroleum: IBM secured a large order for x86 servers from the petroleum
industry for HPC applications.

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Future Outlook

Updated IT Spending Forecasts

The Chinese economy is still rolling ahead, but it should also successfully come to a
soft landing, based on the government's willingness to raise interest rates. By and
large, the economic environment in China should still provide a fruitful environment
for IT vendors.

One of the government's main priorities in 2006 will be to resolve imbalanced

development across various regions and to close the economic gap between urban
and rural areas. The government will also attempt to make the economy less
dependent on exports and investment by stimulating domestic consumption. In order
to control the overheating economy, especially the overgrowth of investments and
real estate prices, tighter monetary and fiscal policies will be imposed. The total GDP
growth will be 9.6% in 2006, but should cool down to 8.3% in 2007 as a result of the
effects of these policies. China will focus more on quality rather than quantity in
regard to economic growth. Aside from the appreciation of the RMB currency, trade
tensions will also slow down the trend toward the rapid growth of exports. At the same
time, expectations for the revaluation of the RMB currency and the increased demand
for oil and other raw materials will boost imports. As a result, the trade surplus will fall
gradually. Although the price of real estate and of natural resources will continue
rising, inflation will be sit 1.2% in 2006 due to price pressures from oversupply.
Whether inflation will remain low will depend on whether the control of utilities prices
is loosened by the state. China faces the threat of both an overheating economy and
competition from exports, so exchange rate expectations are uncertain because of
uncertainty concerning policies. However, IDC believes that the government is more
concerned about an overheating economy at this stage. We expect continuous, but
moderate appreciation of the RMB in 2H06. The exchange rate will reach RMB
7.85:US$1 by the end of the year, and will average RMB 7.97:US$1 for the whole
year.

IDC forecasts that China's IT market will reach US$35.6 billion by 2006, up 14.0%
over 2005, and that the telecom services market will also maintain steady growth and
amount to US$71.98 billion, up 9.5% over 2005.

©2006 IDC #LA3656 11

 T ABLE 2

IT Spending in China, 2005 - 2010 (US$M)

2005 2006 2007 2008 2009 2010

Services activities
Planning 774.6 934.0 1,132.7 1,354.5 1,596.4 1,903.4
Implementation 2,572.8 3,086.7 3,694.5 4,396.0 5,123.5 5,975.2
Support services 1,153.5 1,339.1 1,559.9 1,844.1 2,097.8 2,417.7
Operations 176.7 226.6 297.2 393.2 485.7 611.1
Training and education 440.4 502.7 581.3 661.2 744.9 840.5
Services total 5,118.0 6,089.1 7,265.6 8,649.1 10,048.3 11,748.0

Packaged software
System infrastructure software 1,073.2 1,231.1 1,439.7 1,687.3 1,930.9 2,185.0
Appl. development and deployment 510.9 580.8 678.0 797.5 942.1 1,118.0
Applications 1,506.6 1,739.0 2,033.0 2,381.3 2,778.7 3,241.9
Packaged software total 3,090.6 3,550.9 4,150.7 4,866.1 5,651.7 6,544.9

Hardware
Systems
High-end servers 190.8 196.9 218.5 238.8 224.4 220.2
Midrange servers 900.1 876.6 943.9 1,025.9 1,118.6 1,182.6
Volume servers 1,438.9 1,578.2 1,779.3 2,010.3 2,245.9 2,521.4
Total servers 2,529.8 2,651.8 2,941.6 3,274.9 3,588.9 3,924.2
Personal computers 11,810.2 13,541.5 15,230.8 16,440.4 17,362.9 18,222.7
Traditional workstations 26.2 26.0 25.4 23.9 21.7 19.8
Total clients 11,836.4 13,567.6 15,256.1 16,464.3 17,384.6 18,242.5
Systems total 14,366.1 16,219.3 18,197.7 19,739.2 20,973.5 22,166.7

Storage
Disk Systems 769.7 823.5 909.4 998.7 1,094.6 1,193.1
Tape 91.6 88.9 98.4 107.6 117.1 126.4
Storage total 861.3 912.4 1,007.8 1,106.2 1,211.7 1,319.4

Peripherals
Printers and MFP's 1,844.8 1,984.4 2,088.3 2,184.0 2,179.5 2,148.3
Smart Handheld Devices 1,797.1 2,260.2 2,467.9 2,730.6 2,940.7 3,121.1
Other Add-ons 981.0 1,118.4 1,266.6 1,355.3 1,422.4 1,486.3
Peripherals total 4,623.0 5,363.0 5,822.8 6,269.9 6,542.5 6,755.7

Networking equipment 3,228.5 3,562.4 3,862.1 4,125.8 4,523.8 5,017.0

Hardware total 23,078.9 26,057.1 28,890.4 31,241.2 33,251.6 35,258.8

Packaged software total 3,090.6 3,550.9 4,150.7 4,866.1 5,651.7 6,544.9
Services total 5,118.0 6,089.1 7,265.6 8,649.1 10,048.3 11,748.0
Total IT 31,287.6 35,697.2 40,306.7 44,756.4 48,951.6 53,551.6
Source: Worldwide Black Book, July 2006

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 T ABLE 3

Growth in IT Spending in China, 2006 - 2010 (%)

2006 2007 2008 2009 2010 05-10

CAGR
Services activities
Planning 20.6% 21.3% 19.6% 17.9% 19.2% 19.7%
Implementation 20.0% 19.7% 19.0% 16.5% 16.6% 18.4%
Support services 16.1% 16.5% 18.2% 13.8% 15.2% 16.0%
Operations 28.3% 31.1% 32.3% 23.5% 25.8% 28.2%
Training and education 14.1% 15.6% 13.7% 12.7% 12.8% 13.8%
Services total 19.0% 19.3% 19.0% 16.2% 16.9% 18.1%

Packaged software
System infrastructure software 14.7% 16.9% 17.2% 14.4% 13.2% 15.3%
Appl. development and deployment 13.7% 16.7% 17.6% 18.1% 18.7% 17.0%
Applications 15.4% 16.9% 17.1% 16.7% 16.7% 16.6%
Packaged software total 14.9% 16.9% 17.2% 16.1% 15.8% 16.2%

Hardware
Systems
High-end servers 3.2% 10.9% 9.3% -6.0% -1.9% 2.9%
Midrange servers -2.6% 7.7% 8.7% 9.0% 5.7% 5.6%
Volume servers 9.7% 12.7% 13.0% 11.7% 12.3% 11.9%
Total servers 4.8% 10.9% 11.3% 9.6% 9.3% 9.2%
Personal computers 14.7% 12.5% 7.9% 5.6% 5.0% 9.1%
Traditional workstations -0.7% -2.6% -5.7% -9.1% -8.8% -5.4%
Total clients 14.6% 12.4% 7.9% 5.6% 4.9% 9.0%
Systems total 12.9% 12.2% 8.5% 6.3% 5.7% 9.1%

Storage
Disk Systems 7.0% 10.4% 9.8% 9.6% 9.0% 9.2%
Tape -2.9% 10.7% 9.3% 8.9% 7.9% 6.6%
Storage total 5.9% 10.5% 9.8% 9.5% 8.9% 8.9%

Peripherals
Printers and MFP's 7.6% 5.2% 4.6% -0.2% -1.4% 3.1%
Smart Handheld Devices 25.8% 9.2% 10.6% 7.7% 6.1% 11.7%
Other Add-ons 14.0% 13.3% 7.0% 4.9% 4.5% 8.7%
Peripherals total 16.0% 8.6% 7.7% 4.3% 3.3% 7.9%

Networking equipment 10.3% 8.4% 6.8% 9.6% 10.9% 9.2%

Hardware total 12.9% 10.9% 8.1% 6.4% 6.0% 8.8%

Packaged software total 14.9% 16.9% 17.2% 16.1% 15.8% 16.2%
Services total 19.0% 19.3% 19.0% 16.2% 16.9% 18.1%
Total IT 14.1% 12.9% 11.0% 9.4% 9.4% 11.3%
Source: Worldwide Black Book, July 2006

©2006 IDC #LA3656 13

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Published Under Services: BRIC: Brazil, Russia, India, and China Executive Market
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14 #LA3656 ©2006 IDC