On Nov. 9, in a conference call, Chambers (Cisco’s CEO) made a striking prediction: “It would not surprise me to see India actually challenge China, in terms of our business revenue, [in] three to four years.”
Chambers’ statement certainly goes against conventional wisdom. After all, China boasts a $1.6 trillion economy that’s growing at a 9% annual clip, and it’s the world’s largest market for many products. India, with the same 1 billion-plus population, has a $700 billion economy that’s growing at 7%.
What drives Cisco’s thoughts for playing its cards on India?
Deregulated telecom market
India’s growth rate is going to pick up, partly because of deregulation of its telecom industry which is leading to vast invetments in new Internet infrastructure. In contrast with China’s centrally controlled economy.
Entrepreneurship
Upcoming wave in Indian entrepreneurship together with tougher laws on intellectual property rights. This will make the nation an attractive place to set up R&D and venture operations.
Market dominance
In China, Cisco faces strong competition from Huawei Technologies and Harbour Networks Co., in India, you’ve got nobody that can be considered as a serieus competitor. Furthermore, tough competition in China forces Cisco to cut their known high gross margins, resulting not only in lower profit margins but also declining market share.
Immature infrastructure
Much of India still lack phone lines, carriers are installing higher-capacity Ethernet cables all the way to homes, the same cables found on Cisco office and consumer gear. This will ke it easier to interconnect with them trough Cisco networks.
India’s favourable preference
Longstanding suspicions between India and China are hurting Cisco’s rival Huawei. Recent concerns of India’s goverment adressing that Huawei might leak militarily sensitive information about India’s infrastructure to Chinese officials
As Cisco shifts focus to India, someone is going to learn a tough lesson: Cisco if it leaves too much business on the table in China, or its rivals, if Cisco has guessed right about what it believes is the best growth market of them all.
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