China set to surpass U.S. in PC purchases

Microsoft tells Congress of shift, saying that more than 95% of PCs in China run Windows but that piracy is a big problem

When it comes to IT, China likes to build big, whether it's the world's largest supercomputer or city-size complexes dedicated to cloud computing. Now, China is close to adding something else to its list of big tech things: the world's largest market for PCs.

China is set to surpass the U.S. in PC shipments either this year or the next, according to market estimates by analysts.

When that PC market line is crossed, it will be one more benchmark illustrating the increasing spending power of China's 1.3 billion people. But China's growing PC market will also matter to U.S. companies, particularly Microsoft.

More than 95% of Chinese PCs today run Windows, and well over 80% of enterprise PCs are using Microsoft Office, Stuart McKee, national technology officer in Microsoft's public sector, told the Committee on Oversight and Government Reform during a special U.S. House of Representatives hearing on high-tech growth policies on Monday.

"China will soon be the largest PC market in the world," said McKee in his testimony at the on-the-road hearing held in San Jose. But the piracy rate for the business software industry in China stands at about 80% "and is even higher for Microsoft products," he said.

McKee urged the committee to develop a comprehensive strategy for dealing with piracy.

Both IDC and Gartner expect China to surpass the U.S. in PC shipments in the near future.

In 2010, the U.S. had 20.4% of the worldwide PC market, with 71.7 million shipments, versus China's 19.3% share at 67.8 million shipments, according to Gartner. The analyst firm believes China's PC shipments will exceed those of the U.S. this year if China's market grows at 12%.

IDC believes that China will surpass the U.S. in total shipments in 2012, and it is forecasting that PC shipments this year in China will increase 10.8% year over year, versus 4.7% in the U.S. It put U.S. shipments last year at 75 million, and at 63.8 million in China.

Once China surpasses the U.S. in PC shipments, a market the U.S. created, will it matter at all to the American psyche?

One person who doesn't think so is Jonathan Hill, assistant dean and director of special programs and projects at Pace University's Seidenberg School of Computer Science and Information Systems in New York.

Analysts and early tech adopters are much more focused on mobile devices such as tablets and smartphones than on laptops or desktops, said Hill. But if at any point Chinese software makers begin to dominate, "then you would have a significant event for the U.S. psyche," he said.

Hill doesn't see a Chinese operating system that can replace Windows at this point, but that's probably because the emphasis in China has been on mobile. He points to Chinese Web service company Baidu's interest in developing a mobile OS as one sign of this interest.

Much of U.S. manufacturing of PCs is now done in China. Dell has major operations in the country, as does Hewlett-Packard. IBM sold its PC division to a Chinese company, Lenovo, in 2005.

The shift in manufacturing raises questions about whether the U.S. will continue to lead in the development of hardware and software.

Robert G. Vambery, a professor of marketing and international business at Pace University, sees China being at the forefront of development in the next decade or two.

"Chinese scientists and engineers have been and continue to be trained in the most advanced aspects of the field at U.S. universities as well as research and development centers," Vambery said. To fill midlevel engineering and production control management needs, China has been training up to five times as many engineers as the U.S. does and continues to do so, he said.

Rob Enderle, an analyst at the Enderle Group, called China's ascension in PC shipments "significant" but said it is "only one of a number of trends suggesting China is replacing the U.S. as the top world power."

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed . His e-mail address is pthibodeau@computerworld.com.

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