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"India, China IT set for center stage"

Panel Discussion: June 7, 2001

Both nations' industries brimming with potential, manpower, know-how

Min Weifang, chairman of Peking University Founder Group Corp. of China; Narayana Murthy, chairman and chief executive officer of Infosys Technologies Ltd. of India; and Koji Nishigaki, president of NEC Corp., gave lectures and discussed "How are Information-Technology Industries Changing the Asian Business Scene?" The following is a summary of the discussion, which covered such issues as strengthening cooperation between industry and schools, the IT industry's contributions in job creation, and the sharp growth of the IT industry in China and India:

Moderator: What is the real strength of the IT industry in China and India?

Min: China is still behind Japan, the U.S. and Europe, although both hardware and software businesses are growing sharply. New government policies that encourage efficiency, competition and self-governing of businesses are a major reason for the dramatic growth of the IT industry in China in recent years. For China and other Asian countries and regions to catch up with industrialized countries, integration of different IT-related areas is needed. IT companies in China and other developing Asian nations must depart from depending on technology transfers from overseas, and enhance their abilities to innovate technology on their own.

Murthy: The situation is similar in India. Just like Taiwanese firms did from the late 1970s to early 1980s, Indian high-tech firms are growing at a rate of 30-45% a year on strong exports. Software exports are still relatively small at $6.2 billion, but they are growing rapidly. Ironically, the use of IT in India is still very low.

Nishigaki: Business leaders at Japanese IT companies are in awe of the speed of technological development in China and are a little afraid of it. There is a large number of science and engineering students and a large supply of highly capable, willing entrepreneurs, including those returned to China after studying and working in the U.S. Since cooperation between industry and schools is going well, it is likely the growth of China's IT industry will become apparent in several years. Domestic manufacturers have high shares of personal computer and telecommunications equipment markets in China.

In India, software businesses are leading the development of the IT industry. As a provider of IT services, which include not only software development, but also maintenance, repair and other software-related services, India appears to have found a path toward global success.

Moderator: One of the characteristics of the growth of the IT industry in Asia is that supply chains and other systems that complement IT businesses in the area have developed rapidly.

Murthy: Infosys Technologies' cooperation with other firms has focused mainly on combining knowledge that is complementary. The company has supplied software that covers overall know-how in drilling and trading of oil to a Singaporean firm by cooperating with firms that have expertise in the oil business.

Min: It is no longer the best strategy for companies to try to make everything by themselves. They should raise cost effectiveness by procuring the best-quality parts at the lowest price. Founder is primarily a software firm, but it is expanding into hardware and purchasing parts from foreign companies. The firm currently buys central processing units from Intel Corp. of the U.S., and other parts from Taiwanese and Japanese makers.

Nishigaki: A Vietnamese parts plant of Tokin Corp., an NEC metal parts subsidiary, is an example of supply chain systems that encompass multiple countries/regions in Asia. The technological level of the Vietnamese plant has become so high that it is now easier to start producing new parts at the plant than at Tokin's plant in Japan.

Moderator: Has India already reached the top level in the world when it comes to software development?

Murthy: The global market share of the Indian IT industry is still minor, but further development can be expected if the industry can make the most of India's strengths and if the telecommunications infrastructure improves. India has many English-speaking people willing to work around the clock, high quality control standards and a large pool of excellent engineers at universities.

In terms of technological level, Indian IT companies are high enough to participate in major projects in industrialized countries as a partner. These days, Indian companies are almost always involved in breakthroughs in cutting-edge technologies and Indian-made software is playing and important role.

However, Indian companies are too dependent on the cooperation with U.S. firms. Indian IT companies must find ways to provide their knowledge and technologies to the market through cooperation with Japanese and European firms.

Nishigaki: Japan has long been the driving force of economic development in Asia, but it is becoming less so recently. China is becoming a major force in the IT industry in the region by initiating multinational projects involving countries such as South Korea and Japan, together with Taiwan.

Because high-quality electronics products can be made easily as long as they use good parts, the gap in the levels of manufacturing has become almost negligible between Japan and other Asian countries. In the area of software development, India is rising very quickly. Nowadays, two in five first-class software engineers in the U.S. are said to be Indians. Japanese people should feel more threatened by Chinese and Indian people's willingness to work harder.

Based on this view of the diminishing lead of Japanese companies, Japanese businesses, including NEC, will not be able to survive unless they recognize the need to be a part of the emerging division of labor in Asia and concentrate on the areas they are good at.

(The Nikkei Weekly July 30 Issue)

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.