BEIJING--(BUSINESS WIRE)--The State Council of the People's Republic of China issued the Notice of the State Council on Issuing Several Policies on Further Encouraging the Development of the Software and Integrated Circuit Industries (GF 2011 No.4) in February 2011. The policies further clarified the significance of the software industry, that is, "the software industry is a strategic emerging industry of the country and significant basis for the national economy and IT applications in society."
China's software will see important opportunities for faster growth and better layout. At the beginning of the 12th Five-Year Plan period, CCID Consulting published White Paper for China's Software Industry Map 2011, which analyzed regional trends of China's software industry based on summarizing distribution characteristics of the global software industry and successful growth patterns and analyzing distribution and resource characteristics of China's software industry. The analysis aims to provide reference for local and national distribution of the software industry as well as relevant macro decisions.
Regional Distribution Is Characterized by Decentralized Concentration as Central Cities Become Concentration Points of Industry Growth
From the 2010 software business income distribution by province in China can it be seen that the focus of China's software industry has been shifting to central cities in the coastal regions as well as central and western China from Beijing and Guangdong. Eastern China saw a software business income of RMB 1,144.9 billion in 2010, or up 31.8% year over year. Momentum of rapid growth was seen in multiple coastal municipalities and provinces in addition to Beijing and Guangdong. As for that income, Jiangsu, Liaoning, Fujian and Shandong provinces saw a growth rate of more than 35%; they combined to account for 35% of the total income, bringing an end to the situation where Beijing and Guangdong combined to represent more than half of the total income (their combined share fell to 35.5% in 2010). Central cities became the main concentration points of software industry growth, as the four municipalities directly under the central government and the fifteen sub-provincial municipalities combined to achieve a software business income of RMB 1,064.3 billion in 2010, or up 32% year over year. Their combined share was 80% of the total income; their growth rate was one percentage point higher than the national average.
Fig. 1 Business Income of China's Software Industry by Region in 2010
http://data.ccidconsulting.com/portal/rootimages/2011/09/30/map8.jpg
Source:
CCID Consulting Software Industry Database, Jul. 2011
The Bohai Rim: the Leader at the High End of the Industry Chain
The
Bohai Rim, including municipalities and provinces such as Beijing,
Tianjin, Hebei, Liaoning and Shandong, is a traditionally important
place for China's software industry. It achieved a total software
business income of RMB 453.19 billion in 2010, or 33.9% of the national
software business income. This region has advantages including: an
obvious industry clustering effect and outstanding HR advantages;
frequent fund raising and M&As among software companies along with
strong growth potential; keeping a close eye on industry trends and hot
issues to seize new growth opportunities; being good at achieving a
situation favorable for corporate growth through channels such as
policies, technologies and capital. Today, the Bohai Rim holds a
dominant position in China's software industry. Beijing is the leader
that pushes software industry growth in this region, as it hosts the
largest numbers of research institutes and advanced software talent in
China. As the leader by competitiveness in terms of intellectual
resources in China, Beijing houses the headquarters of a large number of
local and international software companies as well as major R&D
organizations, enabling it to go beyond the low end through rapid and
frequent technical innovation and to implement a growth pattern focused
on the high end of the industry chain.
The Yangtze River Delta: the Pioneer in Multi-Level Joint Development
As
the most economically active region in China, the Yangtze River Delta
has unique advantages in terms of technical resources and capacity of
comprehensive support, along with strong competitiveness in geographic
location, capital and education, driving the rapid growth of the
software industry. Consisting of Shanghai, Jiangsu and Zhejiang, this
region is an important software product and information service center
in China, where it holds a significant position in the software
industry. The Yangtze River Delta has been paying much attention to the
growth of the software industry over the past few years, as local
governments and companies work together to promote it at multiple
levels, putting it on a fast track across the region. Shanghai, Jiangsu
and Zhejiang saw a combined software business income of RMB 386.85
billion in 2010, or 28.9% of the national software business income. The
software industry is rising rapidly in cities such as Nanjing, Suzhou
and Hangzhou, while others such as Wuxi, Yangzhou and Ningbo are working
to catch up with the former ones. Together with Shanghai, they are
presenting a multi-tier growth pattern characterized by a growing
regional capacity of industrial support and an increasing growth
momentum of the industry.
The Pearl River Delta: the Demonstrator with an Outstanding
Innovation Environment
As one of the most important software
industry bases in China, the Pearl River Delta boasts high industry
concentration and houses numerous well-known companies in the industry.
As for software development, this region pays attention to creating a
good environment for innovation and industry growth. It has created a
mature and complete industry chain. The software business income always
keeps steady and rapid growth in this region, which represents an
annually growing share of China's software industry. Guangdong Province
saw a software business income of RMB 241.71 billion in 2010, when it
held the lion's share, or 18.1%, of the national software business
income. The Pearl River Delta boasts outstanding advantages in terms of
geographic location and a good business environment for startups. The
country-leading e-government, the development of IT applications in
local cities and strong demand from business customers combine to
provide software companies with a group of targeted customers with
immense potential. The region also comes with superior strength in terms
of industry application software, providing it with considerable growth
potential of the software industry. In addition, solid electronics
manufacturing in the Pearl River Delta provides the rapid growth of the
embedded software sector with a natural platform for takeoff. The
availability of common sector-specific technology development platforms
for the industry, such as the technical support center for public
services for digital homes, the technical support center for public
services for Linux and the technical support center for embedded
software, has created an excellent innovation support environment for
the growth of the software industry, thereby effectively increasing the
capacity of innovation in the industry. Developed cities in terms of
software industry, such as Shenzhen and Guangzhou, are producing
increasingly obvious ripple effects across the software industry in the
Pearl River Delta.
The Western Delta: a Powerful Pursuer with Late-mover advantages
"Central
cities drive industry growth" as an overall nationwide trend is obvious
in western China, in particular. Central cities hold more outstanding
positions in this region, where Chengdu, Xi'an and Chongqing combine to
represent 90% of the software business income, creating a Western Delta
in the regional distribution of China's software industry. This region
boasts abundant human resources, outstanding capabilities of technology
research and low labor costs, which are all natural advantages for
developing the software industry. Shaanxi, Sichuan and Chongqing saw a
combined software business income of RMB 99.55 billion in 2010, or 7.4%
of the national software business income. The Western Delta is creating
its competitiveness in the industry chain through low costs; it has gone
through a process where it started up the software industry from scratch
and focused on satisfying the demand in the domestic market before
participating in the international division of work. Today, this region
takes an active part in global competition and consolidation, as
numerous transnational companies have set up R&D centers here while
carrying out software and service outsourcing businesses. Meanwhile, the
Western Delta is introducing more innovation elements and learning
international experience in knowledge innovation, laying a solid basis
for sustainable innovation. With increasing core competitiveness, it is
going beyond the low end to change its role in the industry chain
"One Belt, One Axis and One Delta" as the Overall Characteristic
Fig. 2 Distribution of Major Cities in China's Software Industry
http://data.ccidconsulting.com/portal/rootimages/2011/09/30/map9.jpg
Source:
CCID Consulting Software Industry Database, Jul. 2011
One belt: the software industry belt in the eastern coastal regions ranges from the Bohai Rim in the north through the Yangtze River Delta in the east to the Pearl River Delta in the south. It covers the most important cities in China's software industry such as Beijing, Shanghai, Guangzhou, Shenzhen and Nanjing, making it the leading group in the industry.
One axis: the central growth axis ranges from Hebei Province in the north to Hunan Province in the south. It covers numerous central municipalities and provinces with an annual average software industry output of more than RMB 10 billion by province. It serves as the extension of the software industry in the eastern coastal regions into the inland.
One delta: Chengdu, Chongqing and Xi'an as three major cities in western China constitute a "Golden Delta" of China's software industry in the western regions. Although they are behind the software industry belt in the eastern coastal regions in terms of industry output, these regions have seen rapid industry growth over the past few years. With rapidly increasing industry concentration and overall strength, they are important regions with great potential for the future growth of China's software industry.
Regional Evolution Analysis of China's Software Industry
The Overall Regional Distribution of the Industry Will Present an
Evolution Trend Characterized by Ripple Effect
As for the
regional distribution of China's software industry, there will be a
growing trend characterized by ripple effect. Beijing and Guangdong
combined to represent slightly more than one third of the national
software business income in 2010, compared with a 50% share in 2001;
with software parks in major cities, the software industry has entered a
period of rapid growth in provinces such as Jiangsu, Liaoning, Fujian,
Shandong, Sichuan and Zhejiang thanks to support from local governments.
The immense growth potential of new fields such as cloud computing, the
Internet of things, the mobile Internet and service outsourcing, in
particular, has triggered a new round of industry competition. Local
cities have been focusing their efforts on developing those new fields.
In addition, domestic and international software giants are racing to
set up R&D and service centers in China amid a new round of shift of the
global information industry led by software and services. Domestic
cities are working to attract attention from leading companies through
high-quality services, good environments, full support, reasonable costs
and sufficient human resources, leading to increasing competition among
regions as destinations of the shift.
Eastern China Goes Deeper to See a Multi-Tier Growth Pattern
Characterized by Differentiation and Collaboration among Tiers 1, 2 and
3 Cities
Industry-leading cities such as Beijing, Shanghai,
Guangzhou and Shenzhen must upgrade the structure of the software
industry and enhance their competitiveness at the high end due to
limited growth potential, sharply increasing costs and population
carrying capacity close to the limit. It is necessary for the industry
to move to Tiers 2 and 3 cities. A look at countries and regions such as
the United States, Japan, India and Taiwan shows that none of them
develops the software industry in Tier 1 cities. The sustainable and
rapid industry growth can be guaranteed only through the large-scale
development of Tiers 2 and 3 cities. Nonetheless, the software industry
in such cities across China is far from being a large-scale one. As the
manufacturing is being shifted toward central and western China and
southeast Asian countries at a faster rate, developing a modern
industrial system driven by both modern service industry and advanced
manufacturing has become a general trend in eastern China. Eastern
prefecture-level cities are eager to develop modern service industry. As
a driving force for the deep integration of IT applications with
industrialization and the transformation of the economic structure, the
software industry will become a major one that eastern prefecture-level
cities race to develop. Three industry clusters that compete with each
other while sharing resources and dividing work among each other will
come into being in eastern China – the Pearl River Delta cluster led by
Guangzhou and Shenzhen with collaboration from cities such as Zhuhai,
Xiamen, Fuzhou, Dongguan, Foshan, Huizhou and Zhongshan; the Yangtze
River Delta cluster led by Shanghai and Nanjing with collaboration from
cities such as Hangzhou, Suzhou, Wuxi, Yangzhou, Zhenjiang, Ningbo and
Jiaxing; the Bohai Rim cluster led by Beijing with collaboration from
cities such as Tianjin, Dalian, Shenyang, Jinan and Qingdao.
Central and Western China Presents a Spot Distribution Led by Central
Cities
The software industry is something that combines talent,
capital, technologies, environments, cultures and infrastructures. With
the faster rise of central and western China, regionally central cities
led by Chongqing, Chengdu, Xi'an and Wuhan are seeing rapid economic
growth. With abundant education resources and a large number of research
institutes, those cities satisfy requirements for developing software
and information service industries as highly knowledge-intensive
industries. Meanwhile, they have obvious advantages in terms of talent,
costs, policies and cultures, along with a growing ability to attract
various production elements. With the shift of service outsourcing and
product R&D to central and western China as well as much attention from
local governments, central cities in this region will have greater
growth potential in future industry competition.