China Overtakes US as Supplier of IT Goods

Ant writes "CNET News.com is reporting that 'after almost a decade of explosive growth in its electronics sector, China has overtaken the United States as the world's biggest supplier of Information Technology goods, according to a report by the Organization for Economic Cooperation and Development.' From the article: "The most spectacular demonstration of China's ambition to become a consumer electronics heavyweight came in May this year when Lenovo, the Chinese computer maker, paid $1.75 billion to buy IBM's personal computer unit."

Comments

I for one

[daliman]

... welcome our new chinese overlords. Better than the old ones...

if only

[Anonymous Coward]

if only their government didn't suck ass, they could be so great. they have immense cultural momentum, a well reasoned and disciplined populace, and a penchant for churning out intelligent people.

Re:if only

[m50d]

You've never considered that maybe the reason they're doing so well economically is that their government has absolute control and can do unpopular things that it thinks are necessary? Don't get me wrong, I certainly prefer living in a democracy, but it would be a mistake to think a democratic government is the best in every respect.

Re:if only

[Total_Wimp]

This was correctly modded insightful. Assuming the government acted only as a hinderance to the current progress is ignoring the obvious. Ther government has done quite a lot positive to thet things to the point they are today.

The Chinese government has some very big problems, but it also has two really important things going for it.

1)The Chinese government has shown itself to be adaptable. The level of free enterprise that exists today in China was unthinkable 50 years ago. The level of general freedom as well. The government correctly saw that the country could not compete economically without change, so it changed.

2) Change is coming relatively slowly. This has allowed the Chinese people to become comfortable with their new rights and responsiblities and therefore use them more wisely. In the Soviet Union, where change came quickly, the people and government could not effectively make use of their newfound freedoms. The countries suffered as a result. Perhaps if they had had more time things might have turned out differently for them.

More change must come to China. My guess is that it will come, but it will take a few more decades to get close enough to the west that we feel comfortatble.

TW

Is it unexpected?

[jkrise]

The day IBM sold it's PC business, this was only to be expected...

In other news, India overtakes the US as the leading Supplier of Software Services... not too long either.

Re:Is it unexpected?

[Tim C]

Each country has roughly 3 - 4 times the number of citizens that the US has. On sheer numbers alone, you'd expect them to overtake eventually.

Re:Is it unexpected?

[ceeam]

Pakistan has roughly the same population as Japan. I've never seen a Pakistan-made car, or TV-set, or camera...

Re:Is it unexpected?

[Cro Magnon]

Even there, they lag behind. The Japanese were flying planes into ships in WW2.

Re:Is it unexpected?

[metlin]

At the time of independence, both India and Pakistan had identical economic situations. If anything, Pakistan had an advantage - India had to tackle a wide range of diversity as well as a much larger area and population.

The need for change has to come from within. India chose to be a secular democracy and made an effort to better their infrastructure, to educate their population and improve the economy.

Pakistan on the other hand decided that religion and military were more important and they got what they deserved.

Despite being surrounded by two hostile neighbors (Islamic dictatorship Pakistan on the North and Communist dictatoriship China on the East), India still has done well. She's still a democracy and in a nation of more than a billion people, majority of whom are Hindus, India has a Muslim rocket scientist President (who happens to be a vegetarian!), a Sikh economist professor as a Prime Minister and a caucasian Roman Catholic female Ruling Party President -- and her economy is doing extremely well.

Pakistan on the other hand has had a hard time even maintaining democracy for any amount of time, and has a military general dictator and is an Islamic fundamentalist nation.

It's not like the US had great resources when they started out. In fact, Japan did not have any great of an economy after WW-2, which was about the same time that Pakistan got its independence.

To quote Neal Stephenson, gold (and money) is the corpse of value. Real value is in people, in their hearts, heads and their hands.

So, while it might be nice to compare Japan and Pakistan, the need for change has to come from within. Pakistan has made a choice of putting religion about science, of putting military conquests above infrastructure and putting the people and their betterment below everything else.

India made an effort and deserves what she's getting. It's always a choice that people make.

How can that be?

[bit01]

China has nowhere near as many IP lawyers protecting their "valuable intellectual property" as the USA.

Hmm

[jav1231]

Frankly, after the shootings the other day in China I wish we'd stop doing business with them. Our relationship with China is nothing to be proud of.

Re:Hmm

[Narc]

Where I see your point, I don't agree with it.

You can't judge a people by their govt and their ideology, especially such an oppresive one. It's like judging America by Bush. Refusing to do business with them or have any sort of relationship with them isn't quite as simple as "I don't like that cheerleader, she's a prissy cow and ignores me". On a international level, this hurts the people already being screwed over by their govt in the long run more so.

You have to build some form of relationship, positive ones more often than not are better, regardless of your opinion of someone. Positive relations are more effective at bringing about change.

Re:Hmm

[martinmcc]

yeah, They should learn that they should only do bad things to people after flying them to a different country, or if they report things they don't like, or have oil or stuff.

I really don't think America can take the moral high ground on anything atm.

Re:Hmm

[Kev_Stewart]

If you'd spent any time in China you probably wouldn't say that. Or maybe YOU would.

Re:Hmm

[Newton's Alchemy]

You have to build some form of relationship, positive ones more often than not are better, regardless of your opinion of someone. Positive relations are more effective at bringing about change.

Unless the country doesn't have nuclear weapons, then you're of course free to invade.

The "helping the people not the government" argument is utter bullshit. It helps US Corporations to do business in China, period. THAT's why we still do business with them and not in places like North Korea. It has NOTHING to do with helping the average Chinese.

This surprised me... Pentium II ?

[vistic]

"Leading integrated circuit manufacturers, however, have avoided setting up fabrication facilities in China in order to protect their chip designs and manufacturing technology. This means that China is still heavily dependent on imports of advanced chips it needs to assemble electronic products. [...] Also, Tsinghua University has produced a microprocessor that matches Intel's Pentium II."

Wow... a Pentium II? I suppose that's pretty advanced, but I honestly thought they would be able to produce something better on their own.

"impose its own technology standards"?

[sczimme]

From the article:

Also, China's efforts to impose its own technology standards across a range of consumer products, including mobile phones, digital photography and wireless networks, are widely interpreted as a strategy to dominate the global market for information technology goods.

That approach will probably serve them quite well within their own borders, but I don't see how they can hope to impose their own standards on the rest of the world. There are already standards (e.g. 3G) in place across the globe, accompanied by hardware produced by manufacturers in several countries. The Chinese standards would have to displace the incumbents (so to speak) and become widely adopted by those same former incumbents. It sounds like a very difficult - if not insurmountable - obstacle.

Re:"impose its own technology standards"?

[BananaPeel]

1. Move your IP standard to match those in the US 2. Patent you new stuff based on your standards at home and abroad 3. Supply your new equipment at cost into new markets 4. Dominate the market 5. Up your prices fractionally 6. Profit until some other country does the same to you The US IP laws are really a rod for their own backs. IP people just don't seem to get that they can be totally out competed and then have their own IP laws used against them by foriegn companies to exclude them from their own domestic markets..or am I missing something?

Only the beginning

[Markvs]

JP Morgan and some other firms are now outsourcing finance positions to India for the first time. If the US doesn't wake up and go for FAIR trade, FREE trade will cut all of our collective throats.

The Peoples Tivo

[Soporific]

I wonder what selections the party has made for my viewing pleasure today?

~S

Another sign of the US switching

[Anonymous Coward]

From a manufacturing base with huge exports of cars, military goods, computers, electronics and so on, to a services based economy.

Companies like GM, Ford, boeing are all being overtaken by European and Asian counterparts such as Airbus, Mercedes (who of course, recently took over Chrysler), Toyota and so on. Traditional industrial areas such as Arms manufacturing have been undercut by the European weapons giants FN and Heckler and koch, (the designers and makers of the next gen US army replacement rifle that will soon be replacing the M16.

IBM going to China, Chrysler going to Germany, Ford and GM opening plants in Mexico and Canada. America does not actually make that much stuff anymore (Germany remains the number one exporter in the world with China a close second).

But does that matter, is it no longer profitable for companies like IBM or GM to make product in America? Is the real money in IP, like with Microsoft, or with American Pharma giants like Pfizer? Or how does that explain companies like toyota opening up manufacturing plants in America? How does a service based economy provide the jobs necessary for 300 million people?

Re:Another sign of the US switching

[CyricZ]

Ford and GM have had plants in Canada for decades. In fact, Ford is even closing some of their plants in Ontario. I have relatives over there who fear the effect that will have, considering the plants employ many people in their communities.

Re:Why this is

[capt.Hij]

Absolutely right. It is the poor, poor, executives that make the sacrifices here in the US while the over fed, over indulgent, over rich workers make out like bandits. If it were not for the unions those poor robber barrons would have kept our standard of living comparable to China's where it belongs.

</irony>

Free trade is fair trade

[Colin Smith]

What we have at the moment couldn't remotely be called free trade.

Really? Are you sure about that?

[sczimme]

our new chinese overlords. Better than the old ones...

I'm not so sure.

PATENTS & IP

[NigelJohnstone]

I guess giving patents to everyone for everything, lengthening copyright to forever and a day, and criminalizing minor infringements didn't work. Which is funny given that the proponents of this IP regime argue that this is what the USA can make money selling.

Now if only the EU isn't so dumb as to fall for the same rubbish....

The great red planet???

[dbleoslow]

When I was growing up in the 80's, there was a big anti-communist thing going on (Most notibly, the great war epic Red Dawn). There was also a big "buy American" movement due to a strong Japanese economy. Now we have a communist economic powerhouse and noone seems to be raising a stink. Why is that? My only thought on this is that with China, US executives are still making money. The Japanese kept everything from manufacturing to management in-house. China just does the manufacturing and leaves the US management to their big salaries. I think you will only see the "Made in China" issue come to the forefront when they start managing everything, thereby screwing the US upper management.

Re:The great red planet???

[antifoidulus]

It's just scary to realize how similiar the Chinese economy is to the Japanese economy of 20 years ago, and how China is pretty much guarenteed to hit the wall within the next decade, just like Japan did. Remember, Japan started off the same way as China did, with a fixed currency, starting with the "low hanging fruit" so to speak of labor intensive manufacturing, had a central government that plays a huge role in the economy(Japan's government, at least pre-Koizumi, was democratic in name only pretty much), as well as growth that seems focused soley on exports and constructing stuff to export more. Hell, you even have at first a blatant disregard for the environment at first until some major events really wake you up(in Japan events like the mecury poisining in Kagoshima, in China the Haribin chemical spill). Hell, they even have the same demographic issues, China is just about 20 years later than Japan. However, Japan hit the wall when it turned out they couldn't export any more than they were already exporting. Now Japan is finally posting above 1% growth for the first time in about 15 years, but even then exports to places such as China play a large role. Japan's consumer spending is still depressed compared to places like the richer EU countries(everyone's spending is depressed compared to US consumers) I foresee China hitting such a wall as well. Already there are more factories than there is demand for their products, and signs of speculation are increasing rapidly.
Of course the big difference is China has 10x the population and nukes....

Re:The great red planet???

[greg_barton]

It's just scary to realize how similiar the Chinese economy is to the Japanese economy of 20 years ago, and how China is pretty much guarenteed to hit the wall within the next decade, just like Japan did.

Yes, and the difference now is that the Chinese economy is propping up the American government, both by financing our massive debt/deficit and providing our consumer based economy with cheap goods, fueling our economy and tax base. What happens when the Chinese economy hits a wall and that support goes away, eh?

In a way, it's overstated

[bobdotorg]

I'm typing this on a 12" Apple PowerBook. Made in China. It's currently charging my 'Assembled in China' iPod. These would be tallied into the Chinese total, though they are clearly 'American' products and the bulk of their profits go to the (shareholders of the) American company.

While the advances in the Chinese IT industry are nothing less than phenomenal, I suspect that it will be at least a few decades before The States is knocked from the #1 position in IT.

In an oblique way, TFA says the same thing:

It is foreigners who have driven much of the growth, with heavy investment from global giants like Intel, Nokia, Motorola, Microsoft and Cisco Systems. Figures from the Chinese Ministry of Commerce show that companies that had received overseas investment accounted for almost 90 percent of 2004 exports of high technology products.

Oh yeah - and this OECD study only measures exports, not production. With Americans also leading the world in resource hoggery, American production may still lead Chinese production.

Re:Really? Are you sure about that?

[metricmusic]

They are doing something about it.

http://www.voanews.com/english/2005-12-11-voa20.cf m

Wait, we were #1?

[Caspian]

I'm surprised we were even #1!

I've NEVER seen ANY piece of computer equipment say "Made in the USA" in the past few years. In fact, I can't even recall any that said "Assembled in the USA". Ditto for Canada (our 51st state, eh?).

Everything you buy seems to be made somewhere in Asia. Usually China, sometimes (for slightly higher-quality stuff) Taiwan, or (for the GOOD stuff) Japan. Occasionally Korea, Malaysia, etc.

Re:Wait, we were #1?

[CyricZ]

The only reason America was better off the latter half of the 20th century was because it wasn't devastated by severe war during the first half.

Remember, significant portions (including the populations) of France, Germany, the Netherlands and Belgium was destroyed twice during the first two world wars. The western Soviet Union took quite a beating, too. Of course, Greece, the Balkans, Eastern Europe, North Africa, Japan, China, Korea, and many Pacific islands were also quite devastated by conflict.

It's no wonder that those who were able to progress, rather than rebuild, took the lead.

subtle paranoia

[digitaldc]

"China is quickly becoming an innovator and, as we know, it has the money to turn those ideas into weapons," he said.

Why is it that commentators and news writers are always paranoid about China becoming a dangerous military superpower, yet apparently noone has a problem investing billions of dollars in the country as well as freely using their cheap labor to manufacture goods? Wal-Mart says about 60% of their goods are manufactured in China. Why all the paranoia if we are so willing and able to use them to make a profit?

Re:Ain't what it used to be

[Chris Bradshaw]

They really weren't "selling out", Lenovo had the business all along, the products were just branded differently. I am an avid Thinkpad user (Linux support was and is killer). I just recieved my brand-new Thinkpad T43p in the mail from Lenovo, and I can honestly say that they have made significant improvments (quality wise) since the name change (since the T42 even). I currently own 4 thinkpads (two old x300's, a T23, and now a T43p) and I am really impressed with this particular model. I say they improved the T43 over the T42 by putting titanium composite on the bottom now along with the usual lid.

I think Lenovo would be slaying the proverbial Golden Goose if they mucked with the formula. I hate to sound like a troll, but I can't stand by and watch my favorite laptop manufacturer get bashed for something they are not guilty of...

Services moving overseas, too

[EmagGeek]

I've read a lot of posts about how the US is becoming a services-based economy. I have news for you, the services are being offshored as well. I went to my doctor for my annual physical last month, and while there was a nurse in the office performing the physical, the doctor was on an LCD screen from his office in, you guessed it, India.

Did you also know that there are law schools in India now that teach AMERICAN law and not Indian law? I'm guessing that paralegals and other support functions in Law will shortly be available for cheap offshoring.

I used to think that Medicine and Law would be the last things to go, but it seems I was wrong about that. As I scramble to find a safer profession than Engineering, I'm not even sure where to go. I thought of teaching, and then realized that there are movements afoot to move this overseas, too, with a cheap security guard in the classroom to maintain order and a cheap teacher overseas in front of a camera.

So, while it's not so untrue that America is becoming a services based economy, I think it would be more accurate to say that it is becoming an UNSKILLED or lesser-skilled services economy.

Re:Services moving overseas, too

[vidarh]

All of this is just temporary and here is why: Each time these countries start eating into a new segment of Western economies, they move towards equalising salary levels.

Engineers in Bangalore for instance have seen their salaries skyrocket over the last 5 years, and as a result they are becoming less competitive and companies are increasingly looking at other parts of India to outsource to, and to cheaper countries.

But it has also meant that many companies that might have considered offshoring at the prices 5 years ago don't see that high an incentive any more.

Eventually there will be an equilibrium. These kinds of positions simply aren't comparable to minimum wage manufacturing jobs that require little to no training and can be done by anyone, and so they contribute to massively drive up salary levels in the areas companies outsource to.

The trickle down effects may even get sufficient to start driving up overall prices in these countries - it certainly has driven up prices for housing for instance in many outsourcing hotspots.

The net result is that while I can understand that some people are concerned for their jobs, this won't cause an implosion of the job market for engineers in industrialised countries - for that the cost of engineers in the main outsourcing locations is rising too fast, and most alternatives have "problems" such as lack of people with sufficient skills in English.

Ultimately, for the right people this is also an opportunity: While the Indian software industry is still mostly offshoring based, for instance, the growing IT sector in India also means the opportunities for Indian based software houses are increasing. Ultimately we'll be seeing increasing amounts software exports from companies that will need people to work on site with customers in the west - there's always work that can't be done remotely.

So? No country can

[SmallFurryCreature]

Doesn't it crack anyone up that germany of all countries has the gall to tell the rest of the world what is right or not? For that matter japan? Yet both want a seat on the security council. Lets see, we have had two world wars both started by the germans. How about eh. NO.

Application denied forever. Comeback in a thousand years and maybe we lets you back.

England? Read up on their empire and it is their politics that led to the whole mess in the middle east with how the formation of Israel was handled, they should have created a palistine at the same time or at least given Israel better borders (the whole golan heights issue is because it gives syria a very easy front to attack from and a very difficult for Israel to defend). Oh and who created the situation between India and Pakistan.

So the axis nations are out. Maybe france? Can you say vietnam? No thanks and that leaves out the US as well. China is out for obvious reasons. Russia? Oh boy no.

Maybe a small country like say my own the netherlands? Nope, indonesia and our other former colonies show that we are just hitlers on a miniature scale and anyway our behaviour during WW2 was appaling.

The belgians? Please they got a goverment so corrupt that it makes the italians look capable.

Australians? Maybe after they do somthing to right the wrong committed against the natives.

It doesn't exactly leave anyone? Sooner or later pretty much every country has done stuff in the last century that shows that if a country/society/ethnic group has a change they will murder rape and slaughter those they think of as less important.

The only reason some countries at the moment behave is because they would get their asses kicked if they didn't. Nazi sympathy in germany is still sky high but the russians would never tolerate them getting in a position of power to the power that be in germany sit on it at the moment but still refuse to deport war criminals or lock them up.

No kiddo, no country can take the moral highground. Wich isn't going to stop anyone of course because rule one of real life. It ain't bad if it is you doing it.

Yeah but...

[infinite9]

Yeah but have you ever seen a japanese-run minimart?