December 11, 2007

China's Linux desktop market booms

Author: Chen Nan Yang

Although China's Linux market as a whole doubled from 2003 to 2006 to $20 million per year, sales of Linux desktop software grew more slowly. In fact, the market share of Linux desktop software in China dropped from 16% to 12% in the same period. But according to CCID Consulting, sales of Linux desktop software increased 25.1% in the third quarter of this year, catching up with the quick growth of China's Linux industry as a whole. Several new developments have added fuel to the growth.

The Chinese government's antipiracy movement has had an effect. After the central government published two regulations last year to force its departments and local governments to stop using pirated software, the government has increased its spending on low-cost Linux desktop software. Last year, the antipiracy movement focused mainly on senior province and city governments, but this year it filtered into the junior village and town governments as well -- areas that previously relied on pirated software. Currently, the government is responsible for purchasing accounts for more than one quarter of China's Linux desktop software market, and the homegrown Red Flag Linux leads the government market.

Industry users, such as hotels, lottery sellers, and telecommunications companies, also increased spending on Linux desktop software this year. According to CCW Research, online business in China's hotel industry will have increased more than 30% this year, causing hotels to buy more computers and software to establish or improve their Internet order systems. The low-cost Linux desktop software has earned big market share here.

Emerging markets also add momentum to the Linux desktop market. For example, the estimated 6 million computers that will be sold in China's rural areas in 2007 and 2008 provide a big stage for Linux desktop software.

Hardware vendors have also begun to promote Linux desktop software in the Chinese market. In 2007, computer makers such as Dell and Lenovo preinstalled Linux desktop operating systems in their computers for Chinese buyers. Dell has begun to sell some of its computers with Novell's SUSE Linux in China.

Dark side of the growth

Despite its rapid growth, China's Linux desktop software industry faces some problems. Piracy is still an issue. Using pirated Windows can be easier and cheaper than using a Linux desktop OS. Zhen Zhongyuan, vice president of Red Flag, says that China's Linux desktop market would increase as a "geometric series" every time piracy decreases 1%.

The high uninstall rate of the Linux desktop OS also diminishes actual growth. According to CCW Research, 31.9% of Chinese users uninstall their Linux desktop OS after buying a computer with it included. Some computer retailers themselves uninstall it and install pirated Windows instead if buyers ask for it. Retailers and personal users are more inclined to uninstall it than industry users, who seldom uninstall it because their industry software runs on it.

Additionally, the low-cost advantage of Linux desktop software is diminishing. Microsoft has taken a more flexible pricing tack in the Chinese market, offering increasingly better discounts for Chinese computer producers. An anonymous executive of a Chinese computer producer says that his company considered using the Linux desktop OS at the beginning of this year, but eventually went with Windows because Microsoft didn't charge much more than the service fee of Linux companies. He suggested this could be looked at as a victory for Linux, as it had forced Microsoft to lower its price.

Despite a few problems, the future of China's Linux desktop industry remains bright. Once the country can settle its problems, the Linux desktop industry is expected to continue its fast increase in China.


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