IBM to share technology with China in strategy shift -CEO

Inspur Digital Enterprise Technology

23/03/2015 11:54

By Matthew Miller and Gerry Shih 
    BEIJING, March 23 (Reuters) - IBM Corp  IBM.N  will share 
technology with Chinese firms and will actively help build 
China's industry, CEO Virginia Rometty said in Beijing as she 
set out a strategy for one of the foreign firms hardest hit by 
China's shifting technology policies. 
    IBM must help China build its IT industry rather than 
viewing the country solely as a sales destination or 
manufacturing base, Rometty said at the China Development Forum, 
an annual Chinese government-sponsored conference bringing 
together business executives and China's ruling elite. 
    "If you're a country, as China is, of 1.3 billion people you 
would want an IT industry as well," the chief executive said on 
Monday. "I think some firms find that perhaps frightening. We, 
though, at IBM ... find that to be a great opportunity." 
    Rometty's remarks were among the clearest acknowledgements 
to date by a high-ranking foreign technology executive that 
companies must adopt a different tack if they are to continue in 
China amid growing political pressure. 
    A number of U.S. technology companies operating in China are 
forming alliances with domestic operators, hoping a local 
partner will make it easier to operate in the increasingly tough 
environment for foreign businesses. 
    China has been pushing for the use of more Chinese and less 
foreign-made technology, to grow its own tech sector and in 
response to ex-U.S. National Security Agency contractor Edward 
Snowden's leaks about U.S. cyber surveillance.  ID:nL4N0V75IM  
    IBM's sales in China have stabilized after a sharp drop that 
began in the third quarter of 2013 following Snowden's 
revelations. The Armonk, New York-based company reported a 1 
percent slide in revenue in China during the fourth quarter of 
2014, compared with the prior year.     
    IBM's new approach allows Chinese companies to build 
everything from semiconductor chips and servers based on IBM 
architecture, to the software that runs on those machines.  
    Last week IBM said Suzhou PowerCore Technology Co will begin 
producing a version of IBM's Power8 chip to run on Chinese-made 
servers. Its POWER line of processors is often used for 
intensive calculations in financial services, where Chinese 
banks have been required by new government regulations to use 
more domestic vendors. 
    The U.S. company had already announced a series of 
partnerships with Chinese vendors and now packages its database 
software with products from Inspur  0596.HK , a server hardware 
maker and IBM rival, and has also struck agreements with Youyou, 
a Beijing-based software firm. 
    Other vendors are making similar efforts. 
    SAP SE  SAPG.DE  Greater China head Mark Gibbs for instance 
said in October the company sought to be a "complementary player 
to the Chinese market" by selling its software on hardware made 
by Lenovo Inc  0992.HK  and Huawei Technologies. 
 
 (Editing by David Holmes) 
 ((Gerry.Shih@thomsonreuters.com; +86 133 0137 8331;)) 
 
Keywords: CHINA TECH/IBM