Go East, high tech

Low labor costs, a tremendous pool of potential customers, and the rise of wireless communications prompts companies to ramp up their rush into Asia.

CNET News staff
3 min read
Korea. China. Singapore. Hong Kong. Japan. Together, the U.S. software industry and other high-tech firms are taking these countries by storm.

Low labor costs, a tremendous pool of potential customers, and the rise of wireless communications in these countries are prompting companies to ramp up their rush into Asia.

Oracle Asia Pacific today announced it will open a new data center in Singapore, making that region its Asia-Pacific network hub. The company plans to invest $1 million into the center, which will serve as a strategic location for serving Chinese, Indian, and Korean markets.

Meanwhile, semiconductor maker LSI Logic (LSI) said its Asian revenue would rise to about 35 percent of its overall revenue pie by the year 2000, a fact that has prompted the company to open a regional headquarters in Singapore. Microsoft (MSFT) says growth in Asia has more than doubled its revenue growth overall.

"Asian countries are developing politically and economically," said Martin Reynolds, an analyst at market research firm Dataquest. "They are desirable sources of low-cost manufacturing and potentially huge markets."

The growth in demand for the products is reflected in the sales growth. In the first half of this year, sales in the Asia-Pacific region of personal computer software from U.S. companies grew 24 percent over last year to $702 million, according to a Software Publishers Association report.

Asia's software revenues
For first half of 1996, in millions
Region Revenues % change from first half of 1995
Japan $498.6 32
Australia and
New Zealand
$105.5 16
Korea $20 17
Taiwan $15.9 -30
Hong Kong $14.6 2
Singapore $11.2 -47
Malaysia $8.6 61
Thailand $7.5 44
India & Pakistan $4.2 -12
China $3.9 46
Other $11.7 278
Total Asia/Pacific $702.6 24
Source: Software Publishers Association

"While the Asian market as a whole remains very strong, some sectors are showing surprising growth rates that indicate the emergence of communications as a 'killer app' for the region," said Ken Wasch, SPA president, in the report. "Email and the Internet will provide a new direction for Asian economies and spur new growth for the software industry."

Gary Grandbois, chief analyst at Dataquest, said companies building in Asia are taking advantage of wireless communications to confront the lack of a wired infrastructure.

"Asia's growing market is going from a nonindustrial to an industrial market," he said. "It's skipping the step of an old infrastructure and jumping directly to cellular telephones," he said.

Joel Engel, spokesman for the Institute of Electrical and Electronics Engineers (IEEE), said wireless communications provide a quick fix because they can be set up quickly.

But he noted that wireless communication is more expensive to build and maintain, while its ability to handle heavy traffic is less than satisfactory.

"Wireless does not have the capacity to support the kind of traffic needed. All of the countries are really ambitiously trying to build a land-based network," Engel said, adding that while building a wired network is expensive, it's necessary if a country is to maintain a modern economy.

A booming population in the region is also making American PC products focus on Asia. As developing countries become powerhouses of consumption, companies want to establish a market share, Grandbois said.

Microsoft's growth in Asia is largely driven by changes in technology, according to spokeswoman Erin Brewer.

The switch from character-based operating systems, such as DOS, to a graphical user interface such as Windows 3.1 has helped, she said. The mouse has made the software more readily accessible to users in Asia that do not have a character-based language.

Said Brewer: "Asia is one of our leading growth markets."