For US High-Tech Firms, China Is the Next Frontier

In America, the computer industry makes a fall pilgrimage to its version of the Land of Oz: the trade show known as Comdex in Las Vegas, where the latest whiz-bang products are on display.

Now Comdex is planning a new convention - in China.

It's a sign of the growing importance of Asia - and especially China - to the future of high-tech companies. They will be flocking to Beijing for Comdex/China from Feb. 25 to March 1, 1997.

With an information-technology sector growing at 45 percent a year for the past five years, China "has suddenly jumped to the No. 1 overseas destination for exhibitors" of computer-related products, says Richard Schwab, vice president for Asia development at Softbank Comdex Inc. of Needham, Mass., a co-producer of the show.

Big spender

In fact, China may spend up to $40 billion on information technology in its ninth five-year plan, from 1996 to 2000, a recent study by the US Department of Commerce reckons. This includes meeting basic needs such as telecommunications upgrades and a nationwide banking and credit-card system.

All that spending translates into jobs not just in China, but in manufacturing plants from Oregon to Texas, which stand to gain a piece of the business.

Exports already make up the bulk of US computer-chip sales, so the overseas push is not new. But it appears to be more important than ever.

With the growth of the computer industry slowing a bit in the US, China is more than tempting for US firms, which already control three-fourths of the market there, according to the Commerce Department.

Asia as a whole is a hot market, Mr. Schwab says, because of its rapid economic growth - about 7 percent a year compared with 2 percent in the US and less in Europe. The high-tech sector is growing faster than the overall economy in all these regions.

Big American computer companies have operated in China for many years - IBM, Digital Equipment, Hewlett-Packard, as well as software companies such as Microsoft and Oracle.

"But only in the past two or three years have things really begun to move" for these companies, says Hugo Hsuing in a telephone interview from Beijing, where he is working on preparations for the February conference. Mr. Hsuing is managing director of IDG Asia, a division of International Data Group Inc. (IDG) of Framingham, Mass., which along with Comdex and China's Ministry of Electronics Industries is organizing the show.

The goal of Comdex/China is to bring about 100,000 major buyers together with perhaps 300 major sellers. (It's not aimed at individual consumers, though China has other trade shows that cater to them.)

Products in about a dozen major categories - such as software, network computing, multimedia, office systems, and imaging - will be there for representatives from major corporations and government.

'The time is ripe'

"The time is ripe for such a show," Hsuing says. In addition to moving toward free-market economics, "the government here wants to catch up with the West" in information technology.

For IDG to cosponsor an event with Comdex is unusual, because the firms compete worldwide in publishing and trade shows. But the cooperation in China "is a natural," says Allen Furst, Asia consultant for IDG, because Comdex is known as a heavy hitter in computer trade shows, "while we know China well."

One company that may exhibit at the show is SunSoft Inc., the Mountain View, Calif., software subsidiary of Sun Microsystems Inc., a hardware manufacturer.

"China is such a significant market that it is critical to get in early," says Robert Massoudi, SunSoft's director of marketing for Asia.

"China is going to build an Internet that is really an Intranet [managed inside China] to keep out all of those 'bad' things," he says.

That means that SunSoft's products, which are used in "firewall" computers that protect a network from intrusion, "are going to be much in demand."

Despite their optimism, some US firms experienced in China warn not to expect quick paybacks and to be ready to play by local rules.

Sherman Ting, Oracle's Asian-product chief, told a June conference sponsored by the American Electronics Association that China wants to trade its cheap labor for technology and manufacturing skills.

Schwab of Comdex says China actively seeks joint ventures and other deals that involve its own people and firms. The culture and language are so different, he adds, that this often ends up being a good arrangement.