Asian tech growth hits a wall

IDC predicts that the Asia tech sector will see minimal, if any, growth this year due to global economic slowdown, but predicts a recovery in the second half of 2002.

SINGAPORE--The IT industry across Asia Pacific is expected to register lower revenues due to the global economic slowdown and terrorist attacks in the United States.

According to International Data Corp., the region's IT business--excluding Japan--is expected to hit (U.S.) $66.8 billion by year end compared with $66.26 billion last year, a mere 1.3 percent growth.

Earlier estimates for 2001 were not provided but in July, the research house said that total IT spending in the region was expected to reach $106 billion in 2003.

Last year, Asia Pacific economies spent an estimated $44.7 billion on hardware, $7.2 billion on software and $14.3 billion on services, IDC said.

"Our recent research indicates that IT budgets will be put in place next year at higher levels than they were this year but that spending against these budgets will be postponed until businesses are able to sense that the economy is turning around," Piyush Singh, IDC Asia Pacific managing director said.

The hardware sector will be especially hurt, with a steep slide in the sale of PCs, servers, peripherals and workstations. Alternatively, software sales will remain strong as this sector is still under-penetrated in several countries.

South Korea, Australia, Hong Kong and Taiwan will be the worst affected in terms of IT growth, IDC said, but it expects China to see rapid growth in IT revenues from $16 billion last year to about $20 billion in 2001.

However, the services sector will remain buoyant as companies increasingly use external resources to manage and operate their IT systems. "This trend is fostered by the desire to cut costs as well as the persistent IT skills shortage in most countries," Singh said.

And as a result of the terror attacks, disaster recovery services, security solutions and the enterprise storage market will increase over the next year. "Data and application hosting services could also get a new lease of life," he added.

IDC now expects the region's economy to recover in second half of 2002 as opposed to the first quarter of next year.

By 2003, the Asia Pacific IT market will be back on track with a year-on-year growth of 22 percent, IDC said. It expects a 13.5 percent growth next year as the regional technology sector recovers.

"Companies can’t put off projects or upgrades forever...(so) we expect spending to pick up by mid-2002," Singh said.

The Singapore-based executive called on companies to use the economic crisis as an opportunity to plan, reorganize, focus on their core markets, and invest for the rebound.