Cisco established its offices in China in 1994.
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DALIAN, China – Cisco is “very optimistic” about growing business with Chinese electric car makers expanding abroad, the company’s head of Greater China told CNBC on Tuesday.
The EV segment is the U.S. tech giant’s second-largest in the region – Cisco generates most of its Greater China revenue from manufacturing companies, and within that, electric cars are the largest category, said Ming Wong, vice president and CEO of Cisco Greater China.
Chinese electric vehicle makers have stepped up their global expansion last year as competition intensified at home.
However, trade tensions have worsened as the US and likely the European Union have increased tariffs on imports of Chinese electric cars.
This doesn’t necessarily limit their growth. Chinese car manufacturers like BYD are investing in local factories.
Wong said Cisco, which provides networking equipment and software to businesses, is working with at least 10 electric car customers building factories, offices and research and development centers abroad.
“At least at the moment we don’t hear anything about it [EV] Customers said: “This is why we have to stop investing or we have to slow down,” he added.
“It’s actually the other way around. Lots of things happen. They’re going to keep pushing and keep pushing and we’ll see how it plays out.”
It is unclear how much spending such business expansion will generate, said Shiv Shivaraman, head of Asia and partner and managing director at consulting firm AlixPartners.
“But you should expect that there will be both manufacturing-related and office-related investments,” he said. “And I think tariffs will definitely increase, if not increase.”
We get Chinese companies back on track for growth
The US-based technology company is facing challenges in the Chinese market as the two countries increasingly rely on domestic players in the name of national security.
Cisco CEO Chuck Robbins told analysts in 2019 that the U.S.-China trade war had had a “significant impact” on the company’s business in China.
Cisco said at the time that the company’s revenue in the country fell 25% on an annual basis in the quarter ended July 2019.
“What we’ve seen is the state versus corporations … we’re just not being invited to bid,” Robbins said. “We’re not even allowed to participate anymore.”
Sales to carriers also fell more sharply, he said.
Looking ahead, Wong is confident that the China business can grow again this year. He did not specifically refer to the 2019 period in his remarks.
He noted that both government and non-government companies turn to Cisco for their global expansion. “That’s why we’re shifting our focus and portfolio to this side,” Wong said.
Cisco’s business is also supported by Chinese Internet companies such as B. supported Alibaba that are expanding globally, Wong said. He added that Cisco also benefits from its ability to connect different graphics processing unit vendors in a market where AI giants are large Nvidia is restricted.
GPUs are the chip systems that power the training and implementation of the latest artificial intelligence models.
In Cisco’s most recent quarterly reporting period, which ended in late April, total revenue fell 13% year-over-year, with sales in Asia Pacific, Japan and China falling 12% during the period.
Wong noted that the recent slump in Asia Pacific, Japan and China has resulted in a large drop in sales and that he expects faster growth in the next one to two years.
“Asia Pacific continues to be the highest growth area for Cisco,” he said.
—CNBC’s Jordan Novet contributed to this report.
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2024-06-25 09:37:34
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