For last three years, pretty much every single telecom and networking executive I know has been saying that the future of their respective companies was in Asia. The Asian giants – China, India, Indonesia, South Korea and Japan – have become major consumers of telecom gear, and more recently broadband gear. Nortel, Lucent and other wireless gears have seen Asia become a major part of their revenues. Look at the rapid growth of IP traffic in those countries.
But the most surprising number is the sharp increase in the traffic between Asian countries – 434 percent between 2003 and 2004, compared to 82 percent between European countries. However, one could easily discount that because after all it is coming off a smaller base. But the number to watch is the traffic growth between US and Europe and US and Asia. Average Internet traffic across the Atlantic and Pacific grew 110 and 119 percent, respectively, between 2003 and 2004.
For some, those countries have proved to be nothing less than a proverbial lifeline. Redback Networks, has clawed its way back from near death, thanks largely to Korea Telecom and China’s Chunghwa Telecom. India for instance is building out ethernet-based networks, leap frogging the whole copper loop infrastructure all together. And this has come in handy for start-ups.
It is no surprise Cisco is getting more aggressive in Asia, reports Business Week. Cisco’s Asia sales are about $3.68 billion, or some 17% of total sales. Cisco will have to work hard to hang on to its lead since the compeitition is fierce. Chinese vendors like Huawei Technologies, US based rivals like Redback Networks, Juniper Networks and UT Starcom are not pushovers and have established a beach head in all fast growing economies.
As big Asian customers choose gear for the next decade or two, however, they have other options. One recent example: Industry sources say that while China Telecom handed Cisco more than 40% of a massive contract late last year, Juniper got a similar piece of the action. Cisco used to have an almost total lock on orders from China’s largest phone company. (Business Week)
The article says, Cisco will have to get more pushy in India, where it has about 75% of the router and switch market. Market share is one thing, margins are another. As competition rises, Cisco will see the price pressures, and eventually its margins will drop.