Dive Brief:
- Cisco announced it will partner with upstart Chinese computer company Inspur Group Co, the Wall Street Journal reports.
- U.S. tech companies face mounting hurdles doing business in China, where local rivals have made major headway lately.
- Cisco has lost significant sales to local competitor Huawei Technologies Co. over the last couple of years.
Dive Insight:
Once leaders in the Chinese market, U.S. companies now face tough competition from local rivals. Allegations by Edward Snowden that U.S. tech firms’ products were used by the U.S. government to spy on China did not help. As a result, the Chinese government has increasingly been backing its own players.
Market firm IHS estimated Cisco’s market share in routers sold to China was just 10.8% in the second quarter of 2015, while Huawei accounted for 67% of the market. Bernstein Research said that ten years ago, Cisco accounted for more than 50% of router sales in China.
“There are certain geopolitical dynamics that we have to navigate,” said Chuck Robbins, Cisco’s chief executive. “It’s been a tough couple of years.”
Cisco and Inspur say they are considering options that include Inspur reselling Cisco networking gear and jointly developing hardware. Other U.S tech companies are reportedly considering similar partnerships with Chinese tech companies in an effort to improve sales there, which has become increasingly important as tech sales in the U.S. have slowed.
