Techpreneurs eye Asia-Pacific as safe haven amid U.S.-China trade tensions

Workers in a manufacturing plant of a semiconductor in Laguna do their job.

HONG KONG, China—There’s something to be gained from these trade tensions after all. And Asian countries could win big.

Technology giants are now looking to Asia and the Pacific to help them wade in the deep waters of the US-China trade conflict, and they expect to reap the rewards starting next year.

As it is, HP Inc. Asia Pacific and Japan President Ng Tian-Chong said it’s good to do business in Asia Pacific and Japan right now because it is the fastest-growing region in the world. And HP has benefitted from the strong growth in the region as the company posted a 17-percent year-on-year growth, according to Tian-Chong.

Globally, he said the company posted a 12-percent year-on-year growth. It was able to add $6.4 billion to its topline in its global operations and $4.2 billion in “free cash flow to the company.”

And the future looks even brighter, even amid these trade tensions. Tian-Chong said a global company like HP has had its fair share of challenges and has enough contingencies to address problems that could come along the way. He believes there are opportunities amid all these challenges.

“Asia is full of rich opportunities; and the three big things that are happening here,” Tian-Chong said during a forum here organized by Canalys Ltd. “There’s a very big demographic change and innovations happening in Asia.”

He said, sans citing sources of data, that 22 of the 41 megacities of the world would be in Asia by 2030.

“We are going to have the biggest number of affluent households, and a big increase in the young of the work force, the millennials coming to work, etc.,” Tiang-Chong said. “I think all of this presents a lot of opportunities for us to look at while we deal with the challenges as they show up.”

A complete portfolio

LENOVO Chairman and Chief Executive Officer Yang Yuanqing, for his part, said the company is already making four devices every second and 37 motherboards per minute. These are produced by Lenovo on its own without original equipment manufacturers (OEMs), Yuanqing said.

These are being manufactured in the largest laptop factory in the world, Lenovo’s facility in Hefei, China, which is over 3 million square feet or the size equivalent to 42 soccer fields, he added.

The company remains bullish, especially with the growth of smart devices worldwide, which is expected to reach over $20 billion by 2020, Yuanqing said. He added this is more than double the figure posted in 2017. These devices are expected to “fuel the intelligence of our homes, offices and the entire industries.”

Yuanqing said the data center business is the fastest-growing among the top players, as well as statistical companies. In order to cope, Lenovo is aiming to remain at the forefront of innovation. They are continuing to work on devices with “computing power with advanced algorithms.”

“The advanced algorithms combined with Big Data technology and industry know-how will form vertical industrial intelligence and produce valuable insights for every value chain in every industry,” Yuanqing said. “When these three building blocks all come together, intelligence will change the world.”

The drive to automate and improve business operations is one of the main things for companies right now and technology firms are enjoying the creative ways by which their products and services are being used.

Robotic process

AN opportunity seen by technology firms is robotic process automation (RPA), an emerging form of business-process automation technology based on the notion of software robots or artificial intelligence (AI) workers.

RPA “will be a big hit” and that firms should get into these to transform their businesses, Canalys President and Chief Executive Officer Steve Brazier said during the forum.

UiPath Inc. Asia Pacific Vice President for Partners Paul Kessler confirmed this in an interview with the BusinessMirror and said many industries such as finance, insurance and even manufacturing have come to them looking for RPA solutions.

Opportunities to upgrade and improve businesses, mainly in terms of increasing efficiency, exist for other industries. Kessler said some interest has even come up in unorthodox industries such as in agriculture.

“Just taking what we do well and just having a conversation with somebody in a completely different vertical space, they’re seeing applications pop even beyond the obvious ones that we are being chased on right now,” Kessler told the BusinessMirror.

Making money

AMID the boom in AI, RPAs and IoT (Internet of Things), the infrastructure side of technology companies have also skyrocketed this year.

Dell EMC Inc. Asia Pacific Japan (APJ) Senior Vice President and General Manager Ng Tian Beng said their infrastructure business has been a major driver to the company’s growth this year.

Tian Beng said their server business grew 42 percent and its storage business, 33 percent, and with the rate of its success, executives at Dell are now worried that their success could mean higher quotas for 2019.

In fact, Chen and Tian Beng were candid enough to admit that they are already nervous when it comes to their quotas for 2019, since the company recorded “fantastic” numbers in 2018.

“You need a portfolio. You can’t be just selling a server product by itself; you can’t be selling a data-protection software by itself. You really need to be selling and solving a business challenge and you can do that with our portfolio,” Tian Beng said. “And I think that this is why we are seeing this huge momentum both globally and in the region, partners are believing in this value proposition that we have.”

Brazier agreed and said that amid the demand for public clouds and IoTs, hardware remains a key part of technology businesses globally.

“Selling servers, storage, PCs and selling networking are still lucrative businesses. Maintaining them and installing them and securing them. Everyone will tell you at conferences, ‘Go to IoT’ [or] ‘Go to AI;’ and IBM loves to hype the next big thing before they have a business that follows it. You should do some of those things. We are not telling you not to do some of those things,” Brazier said. “But also, be very proud to run [to] these big established businesses where you can still make a lot of money.”

Fostering creativity

DELL EMC APJ Chief Operating Officer Dmitri Chen said it is important for companies to focus on innovation by fostering creativity, expanding their customer base and doing it in the fastest way possible.

Chen said this is key because companies must work on a wide range of products that can provide solutions for various business challenges. He said technology companies should know how to work on new product and service development; across the multi-cloud layer; and across different traditional applications.

But innovation is not easy. One of the ways by which this is made possible is through automation. As a company, Chen said, Dell EMC is looking for ways to better improve its services to consumers and how best they can help them make the transition, particularly where automation is concerned.

“Automation is so critical in order to help free up budget and resources that can be reinvested in innovation. It’s a consistent conversation that we end up having based on customer feedback, you know, looking for ways to try and run as efficient a business as possible. A lot of times the customers are concerned about their ability to go embed a culture of innovation and creativity and fresh ideas,” Chen told the BusinessMirror.

Digital divide

EMERGING markets who have high inequality when it comes to technological solutions are seen as part of what is driving the potential in the region. Many companies such as Lenovo have found that while personal computer sales are down in advanced countries in the world, the PC market is still thriving in countries like the Philippines.

Lenovo Central Asia Pacific Vice President and Chief Operating Officer Ivan Cheung told the BusinessMirror that currently, Japan and India are the biggest markets for the company. In Japan, Lenovo’s market share is 50 percent.

Cheung said the Philippines is the fourth-largest market, just behind Indonesia, Hong Kong and Thailand. The Philippine market, Cheung said, is very important, especially in the last five to six years because of the growth of the PC market. This is the reason the Philippine market is a top priority for Lenovo.

While he does not claim to be an expert, Lenovo Philippines General Manager Michael Ngan said this could be due to the number of first-time PC buyers in the Philippines. Many Filipinos in the provinces are buying their first computers, and companies like Lenovo are benefitting from it.

Saturated market

NGAN said that while Manila is already a saturated market, there are opportunities in reaching out to provinces where demand for technological products like PCs is higher. Going to the provinces and being able to reach first time buyers in these locations are driving the PC growth in the Philippines. Cheung said the country has consistently posted an annual growth of 6 percent to 7 percent.

Lenovo’s GM in the Philippines also explained that conditions make it ripe for consumers to finally buy their first PCs at this time because of Internet speed. He said that, while Internet speed in the country has been the slowest and most expensive in Southeast Asia, the telecommunication networks have been improving.

One major change is the entry of the third telco player, Mindanao Islamic Telephone Co. Inc. (Mislatel), which is a consortium between Udenna Corp. and China Telecom. This, he said, is giving confidence to more consumers that buying PCs is a worthy investment.

Cheung added that in advanced markets, workers do not need to buy their own PCs because these are provided for by many, if not all, companies. However, in emerging markets where many companies have not reached a high level of revenues and profits, their workers may need to buy their own laptops and this is driving PC growth even faster.

“Word on the ground is that PC will continue to move because now more and more people are confident to buy more devices, you can now get more connected,” Ngan told the BusinessMirror. “But even if these are not present, I still see the market as very big because of the huge first-time buyers.”

Opportunities amid uncertainties

IN order to take advantage of opportunities and navigate through the uncertainties, Brazier highlighted the need for quality personnel who will carry on their shoulders the weight of making all these innovations possible for companies.

Apart from the usual jobs such as software engineers, computer engineers and other professions, there is the emergence of new jobs such as tariff engineers. These experts will specialize in trade in order to maximize the benefits of multilateral and bilateral trade for companies.

Brazier said the need for skills has never been higher. It is important for companies to continue acquiring skills, by recruiting people, particularly skills in security, cloud, artificial intelligence and analytics.

“When I did my speech about future jobs, obviously another job is going to be tariff engineering. Yes. And specializing. And this will be a new role we should advise our children to start getting into,” Brazier said.

These new experts and additional personnel will be able to navigate the terrain, especially amid the trade tensions and future trade disruptions that could affect technology and all other businesses in the near or far future.

US, China

CANALYS Senior Analyst Jordan de Leon said they expect China and the US to have a tug-of-war in terms of increasing their investments across Asia and this bodes well for businesses in the region. When it comes to China, de Leon said there will be no slowdown in its efforts to increase its production and manufacture of semiconductors.

De Leon said China imports $200 billion worth of semiconductor equipment from the US. With the trade tensions, Canalys expects that China will be less reliant on the US and increase its dependence on countries like South Korea, Japan and Taiwan. This shift has already become evident with China’s semiconductor imports from South Korea reaching 7.8 percent in the past quarter.

“In the future, we could very well have China coming out of China, an exact copy of the Intel processors,” de Leon said. “Even further into the future, what could that lead to is we have two ecosystems: one for the US, one for China, which may not interoperate with each other.”

There are no real and definite  winners in a trade war. However, de Leon said with some manufacturing firms moving out of China, some countries are winning. He cited as example a company called “Extra Textile,” which has already moved its manufacturing operations in China to Vietnam and Cambodia.

“And the company that assembles Mac books is also moving away from China,” he added sans citing the source of his information.

Spreading risks

DE LEON believes that “when these companies move and build new factories they are not going to be old factories.

“They are going to be the most advanced factories in the world. They will be smart factories,” de Leon said. “Really, it means opportunities for you to build smart factories. So [invest] in robotics, software, automation, security, IoT and edge. Real, real exciting opportunity for many of you, as these companies move.”

Ultimately, what is important for companies, Brazier said, is to not be complacent. There are opportunities and there are also risks. What is important is for companies to be agile and be able to adjust to the changing times.

Brazier said Jeff Bezos of Amazon himself is not convinced that Amazon will be a forever business. He said companies should learn from Amazon and manage their risks better. Brazier advised companies to spread their risk.

“If you go all-in on one cloud, nasty things might happen. The company might go bankrupt. The company might get hacked. They might have a catastrophic system failure,” Brazier said. “Or perhaps, more likely, the way the world is going at the moment, there might be a political event, which means they are not willing to serve you in your country because they are blocked for regulatory reasons. There are many reasons why you don’t want your risk in one place.”

 

Image Credits: Nonie Reyes

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Cai Ordinario

A professional journalist for over a decade, Cai U. Ordinario currently writes macroeconomic and urban development stories for BusinessMirror. She has received awards for excellence in reporting on the macroeconomy and statistics. She was also cited for her contribution to statics reporting by the National Statistical Coordination Board (now the Philippine Statistics Authority). She is a recipient of journalism fellowships including the Jefferson Fellowship from the Honolulu-based East West Center. She is currently completing her Masters degree in Communication at the University of the Philippines. She graduated with a degree of Bachelor of Arts Major in Journalism from the University of Santo Tomas.
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