China's small businesses set for PC boom

There are 8.34 million small and midsize businesses (SMBs) in China--99 percent of which are small with between one and 99 employees, according to AMI-Partners. The research firm added that medium businesses with 100 to 999 employees make up the remaining 1 percent of the Chinese SMB market.

AMI estimates that 60 percent of China's small businesses still do not use PCs in their daily operations. However, 72 percent of these companies will be looking to purchase an average of 1.3 units during the next 12 months, raking up orders totaling almost 5 million PCs, according to AMI.

But PC makers need to understand that this particular group of users tend to be price-sensitive, Diana Ng, a research analyst at AMI-Partners' Singapore office, said in a statement.

"Before PC vendors can smile their way to the banks, they need to know that this target group are careful with IT spending," she explained. "These SMBs tend to shop around for the most competitive price before making any IT purchase decisions."

According to AMI, small businesses that still do not have PCs often prefer homegrown brands such as Lenovo, over other foreign brands. The research firm noted that these brands are preferred over others because they are perceived to be "products with world-class technology at competitive price points."

One in 10 SMBs surveyed by AMI planned to buy a notebook computer in the next 12 months, with the majority indicating interest in purchasing a Lenovo machine.

"Lenovo is likely to remain as the market leader in the next 12 months," Ng said. "Coupled with the acquisition of IBM's PC business, the strengths from each company will result in strong and innovative product offerings at affordable price levels."

With the launch of Lenovo's new ThinkCentre desktop PCs designed for SMBs, the PC maker already recognizes the potential of this market. According to IDC figures, Lenovo topped the PC market in the Asia-Pacific region in the second quarter of 2005, with 19 percent of the total market share.

Apart from garnering sales from SMBs that do not possess PCs, vendors can also look forward to continuing support from their current customers.

According to AMI, 35 percent of SMBs indicated they would buy products from the same brands they currently use. This, said Ng, could pose a challenge for other PC makers looking to grab a slice of the SMB pie.

"This trait proves to be another obstacle for PC players who not only have to contend with pricing (competitively against) other brands, but to also formulate strategies and programs to convince and convert loyal customers to switch brands," she said.

Among foreign brands, Dell has the highest market share in China's SMB market, AMI said. The U.S. PC maker holds 9 percent market share in desktops and 22 percent of the notebook segment. Hewlett-Packard owns 4 percent and 5 percent of these market segments, respectively.

"Given that Dell has manufacturing centers in China, they have now started to enjoy some level of cost advantages as compared to other foreign PC players," Ng noted.

Foreign brands eyeing a piece of the Chinese SMB market need to decide on which is a more viable business option, she said. Either pursue small businesses that do not have PCs, or capture a bigger share of the PC market from among the PC-owning SMBs, she added.

Long Li Yann of ZDNet Asia reported from Singapore.