Will China Eat U.S. Networking Vendors' Lunch?

Think that all China manufactures are cheap toys, brand name knockoffs, and cheap clothes? Then you haven't been paying attention.

But you will be, soon enough.

While you were looking the other way, China has become a networking powerhouse. It's been eying the U.S. market for some time, as Cisco president and CEO John Chambers told analysts during an earnings conference call back in November of 2004. Chambers warned that Cisco is facing many new competitors from Asia, most notably China, and that he expects that the competition will increase in the future.

Well, the future is now. Last week, the Bejing-based China Daily reported that the Chinese networking manufacturing giant Huawei is planning to move into the North American market through alliances with North American vendors, possibly including Lucent and Nortel.

It's not just the future we're talking about, but the present. Because this week, a Dittberner Associates report found that Huawei is the worldwide leader in the worldwide VoIP media gateway and softswitch market, with a market share of nearly 25%.What does this mean to U.S. network vendors? They should forget trying to compete on cost --- it's extremely unlikely they'll be able to manufacture hardware less expensively than can be done in China. When it comes to making commodity items, China will win.

Where the U.S. can win is in new technology, innovation, integration, and value-added features and services. Cisco's Chambers acknowledged that in his conference call with analysts in November of last year.

For network administrators, China targeting the U.S. is a good thing. It means more competition and less-expensive products. So as long as U.S. manufacturers focus on innovation rather than stamping out commodity items, we all win.