Computer use among China's vast population is projected to boom in the next few years, with an estimated 10 million computers a year being sold in 2002, according to executives at Pacific HiTech, which recently set up new offices in China. Despite the growth rate, however, the market comes with its own set of unusual circumstances that could favor Linux and HiTech in particular, at least in the short term, say analysts.
"It is a formative time. The battle for market share has just started," said Cliff Miller, Pacific HiTech's chief executive officer.
For one thing, Linux doesn't require the latest cutting-edge machine to satisfy its hardware demands, Miller said. Linux will run on hoary 386 computers. The operating system itself also doesn't cost as much, even when sold by distributors such as Pacific HiTech.
For another thing, TurboLinux supports the use of the huge character sets found in many Asian countries such as Japan and China.
The original code of Linux is freely available and may be modified by anyone, so Chinese citizens or government agencies can modify the program to suit their own needs, Miller said. In comparison, the code in proprietary operating systems like most versions of Unix are off limits, he said.
And on a more exotic note, Linux can't be held hostage to international trade squabbles or even more serious political disagreements, Miller said. "If your software is from a company in a country not friendly to your own, watch out when you go to war," Miller noted.
Analysts viewed the move into the Chinese market with cautious support.
"I think it's a significant foray into a potentially very large market for Linux," said George Weiss, an analyst at Gartner Group. "That's a very smart move...based on [Pacific HiTech's] strong position in Japan and the fragmented nature of the Linux market making it difficult for lesser-developed countries to get a handle on the Linux market."
But Bill Peterson, an operating system analyst with International Data Corporation, was more restrained.
While Pacific HiTech does indeed appear to have a stronger Chinese presence than competing Linux distributors, Peterson noted that there's a big difference between getting your Linux product installed on computers and making money off that popularity. Companies only need to buy one copy of the operating system, which they then replicate and install it as often as they want, he said.
He agreed with Miller that Linux has a big performance advantage, though. "Any [Linux] distribution can run on older Intel-based hardware pretty effectively as a client or server," he said. "Clearly there is a potential for countries where a huge up-front hardware costs are not an option. Current [releases] of Microsoft operating systems are useless to them, based on their hardware needs."
But the biggest obstacle is probably the sheer complexity of the country, with its enormous population and telecommunications regulatory maze, Weiss said. Providing technical support for Linux in China "could be quite an undertaking," Weiss said.
The difficulty of providing support could also sap an important revenue stream. Although Linux is free, several companies, such as Red Hat, Caldera, and SuSE, make money by selling the operating system bundled with installation guides, support options, and additional software. Without ground forces, HiTech may not be able to capitalize on these ancillary services.
If anything, Pacific HiTech has experience and contacts in the Asian market. The company has more than half of the Japanese Linux market share with an estimated million units distributed in 1998, Miller said. By contrast, the company in the U.S. doesn't have the brand name recognition of Red Hat, Caldera, or SuSE, Peterson said.