Watch out Silicon Valley - Asians can't get enough PCs

Business Asia, Oct, 2000

Dominance of e-commerce by the United States is rapidly set to change as more Asians click on to improving networks -- and the Silicon Valley loses its appeal

FORGET ABOUT mobile phones, wireless technology and electronic gadgets for a moment -- the humble personal computer is driving Asia's phenomenal growth as an internet superpower.

Asians can't get enough PCs.

Research firm IDC says Asia accounts for about 18 per cent of the world's PC sales but, even better, the growth rate is three times as fast as other markets. The implications for e-commerce and the internet are profound.

Research indicates the Asia-Pacific region will overtake Europe and possibly the United States in e-commerce uptake by the mid-2000s.

Sydney University of Technology research suggests that within four years Australasia, Singapore and Korea will be seeing far more intensive e-commerce activity than Europe and, perhaps, America.

The research shows that, by 2004, six of the top seven most intensive e-commerce countries in the world will be in Asia, led by Singapore.

Asia's internet tycoons couldn't be happier.

Masayoshi Son, president of Japan's internet investment giant Softbank Corp, suggests Asia will account for half the number of internet users worldwide in three years.

Speaking at the recent World Economic Forum (WEF) meeting in Melbourne, Son cited a study showing that six months ago there were about 200 million users of the internet around the world, with half of them in the United States. Now there are about 300 million users, with the US portion down to 40 per cent.

Son says by 2003 it is expected the number of internet users will increase to 1 billion -- and half of them will be in Asian countries, leaving 50 per cent to the rest of the world, including the US.

He says countries in Asia, such as China, are building infrastructure to allow people to connect at low cost. But he has concerns about Japan, where telecommunications is under de facto monopoly of Nippon Telegraph and Telephone Corp (NTT).

"We are asking for deregulation in order to allow Japanese to access the world with higher speed and lower cost," Son told the Melbourne conference.

Some of the biggest names in the IT world attended the WEF talks, and they were upbeat about Asia's growing status in the "new economy".

Telstra chief executive Ziggy Switkowski and Microsoft boss Bill Gates are optimistic about the region's prospects. Switkowski says: "Telecommunications and information technology is probably the liveliest and fastest growing industry in the world, and Asia is the liveliest and fastest growing set of economies in the world."

"You have the most populous nations -- China, India and Indonesia -- still at a relatively early stage of participation and unmistakably on the runway prepared to become airborne. And we have the world-class economies of Singapore, Hong Kong, Taiwan and Korea standing shoulder-to-shoulder with some of the best applications of this technology we have seen around the globe."

Gates is moving increasingly into Hong Kong because it is the world leader in internet TV.

A recent Goldman Sachs report on Asia's e-commerce market makes the following observations:

* The Asia-Pacific region should generate about 10 per cent of a forecast US$4.5 trillion in global B2B e-commerce transactions by 2005, with Japan to account for US$297 billion.

* Demand for Asian exports will rise because of the region's role as a supplier of hardware for the new economy.

* B2B-driven competition will force companies to focus on their core competencies and could be the catalyst for increased mergers and acquisitions.

* Collaboration, a key element of B2B, is not seen as a traditional strength of Asian companies -- and alliances will be needed between consortiums and strong dotcoms.

* E-commerce will accelerate in markets such as Australia, Korea, Hong Kong, Singapore and Taiwan, but China will lag and other ASEAN economies will fall even further behind, hurting their competitiveness.

One fear in Asia is that a global shortage of optic fibre will hinder efforts to ramp up high-speed internet access in the region. The shortage means a premium is being paid for fibre -- and Europe and the US can generally outbid poorer Asian entities.

Michael Butcher, Lucent Technology's president of international operations, says roughly a trillion dollars will be spent on hardware, software and services to build the next-generation networks on a global basis.

"That means between 1999 and 2000, to emphasise a particular underlying basic technology, which is optic cable fibre, there will be 16 million kilometres installed ... that goes around the earth 400 times," he says.

"(But) I will tell you that we and most of our competitors -- Corning, Fujitsu and various other manufacturers of optic cable -- cannot keep up with the demand today. We are all doubling or trebling our production facilities and this is a hugely expensive capital investment to build these large optic cable fibre factories. We have a number being built all over the world; we have them in China, we have them in Tokyo. We are commissioning one in Brazil next month and so on. We cannot keep up with the amount of optic cable fibre that is being laid."