August 7, 2001

Thiz Linux aims at huge China market

Author: JT Smith

- By Mike Newlands -

Strong support by the Chinese government for local developers of Linux
operating systems and applications has made mainland China one of the
fastest-growing markets in the world for Linux.

While critics say a shortage of good applications means Linux still has a long way
to go to overhaul the ubiquitous Windows, some new entrants to the
market are turning out a range of applications to feed the growing demand.

In China itself the two top Linux operating system developers are the
government-sponsored heavyweight Red Flag Linux and Xteam, a private company formed by a group of young Linux enthusiasts led by 28-year-old "chiphead" (the
Chinese version of propellerhead) Ren Yi. (Editor: For background on Red Flag and charges it isn't sharing its code with the Linux community, see this NewsForge story.)

The development of Linux in China has been largely spurred by two
factors, the first being a crackdown on software piracy that has made it
much harder to get pirated Windows software and applications like
Microsoft Office bundled with PCs. People forced to buy legitimate software
have found Linux is considerably cheaper. And legitimate manufacturers
like the country's top PC maker, the Legend group, have also found it
more economical to bundle Linux than Windows with PCs.

Secondly the Chinese government has expressed concerns over the
security of closed-source Microsoft products, and has insisted government
departments now use Linux instead.

According to the country's largest software distributor, the Federal
Software chain, 200,000 boxes of Chinese Linux software were sold in
l999, or about 200 times the number of Chinese Windows systems sold. And
the majority of the sales were of products developed by Xteam Software
China Ltd. Figures for last year have not been released, but sales were
even higher, according to Ren Yi.

However, much of the initial concentration on Linux development in China
has focused on systems for servers rather than PCs. This was
illustrated by Legend Group turning to a Linux developer in Korea when it wanted a
product to bundle with its PCs.

Gearing up to become a major player in this promising market is Hong
Kong-based Thiz Technology Ltd., which aims to become the first Linux developer to be listed in the territory, on the high-tech board Growth Enterprises Market (GEM). Beijing-based Xteam has also said it
plans a listing, probably in Hong Kong.

Thiz was founded as a computer hardware trader in 1999 by current chief
executive Albert Li, a 20-year veteran of the financial services
industry. "There was a slim profit margin in the computer hardware business,
and we could see a tremendous market in the Greater China region for
Linux, so we decided to focus our efforts on Linux applications for PCs,
which was the least developed part of the market," says Li.

The first Thiz Linux product was an operating system for PCs, but
unlike rival operating system products it came with a full range of applications built
into it. It also differed from its rivals in its user friendliness, says
Li. "Our Linux product can be installed by one keystroke, and it can
also be uninstalled with one keystroke, so for people who are not
familiar with Linux, it's easy and allays fears of the risk of installing a new
product."

Li says another factor is Thiz being quick on its feet and able to
upgrade products quickly and regularly. "Our customers can get life-time
free upgrades, of our products and technical support, and this is not
matched by other Linux developers in the region," according to Li.

As far as competing in China with the established Linux players, Li
says because the Thiz products are unique and tailored to the needs of the
individual or small enterprise user, so the company occupies its own niche in the
market.

"At the same time we have excellent relationships with distributors in
both Taiwan and mainland China and we have orders in hand for 100,000
packages from each country," he says. In the Hong Kong home base, Linux
is less known than in the other parts of Greater China, and Thiz is
introducing Linux to many people for the first time, Li says.

But the cherry is mainland China with more PCs sold every year than
there are people in Hong Kong. "The Chinese market is extremely large, and
we think there is room to accommodate several players in the industry with
each targeting different sectors. We think we are very strong at
targeting small enterprises and individual users, which is the largest
market," Li says.

He thinks it is excellent news that Legend, which has a more than 30%
share in the Chinese PC market and is the top vendor in the Asia
Pacific, is bundling an Linux operating system with its PCs, even if it is a
Korean-developed system. "If Legend bundles Linux with their PCs, it will become the
mainstream operating system which is very good news for application
developers like us," he says. "We also have hardware distributors who have
agreed to bundle our software, and we think we can become a major
player in this very big market."

Li says it is difficult to predict if and when Linux will overtake
Windows in China, but he has no doubt the market will continue to grow
strongly. "With China's imminent entry into WTO (World Trade Organization),
there will be a tighter control on intellectual property rights in
China, and MS Windows is a lot more expensive than Linux. Coupled with
Chinese government support, we think this will result in a growing demand
for Linux operating systems and applications."

Asked why Thiz has recently launched a server operating system, as this
is not the part of the market it is competing in, Li said it was
necessary to be able to offer a server product as a complement to the
existing range of PC products "so we can provide a one-stop Linux solution to
our customers. Our server product is not a key product and we have no
intention of competing in the already competitive server market."

Turning to fundraising, Li says the company has already been successful
in attracting a strategic investor, a subsidiary of the huge
Taiwan-based chip foundry operator United Microelectronics Corp. "We do not rule
out possible co-operation with other strategic partners. However, we do
not have any particular target at the moment," he says.

With the extra funds from a listing, Li says the company will step up
its sales drive throughout the region, and open its own sales office in
Beijing. He said there had also been interest in Thiz products from
further afield, including mainly Chinese Singapore and Thailand.

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