Cisco has joined forces with a Chinese computer company, Inspur Group, in an attempt to bolster their presence in China as foreign tech companies feel the sting of an increasingly competitive local market.
The company announced a $10 billion USD pledge aimed at deepening their presence in the country this summer, though they’ve struggled to keep their position in the market since Snowden’s 2013 NSA revelations implicated their equipment in spying and surveillance operations. According to research firm Dell’Oro Group, cited in the Wall Street Journal, Cisco’s revenue has dropped approximately 30% since 2012.
The partnership with Inspur could potentially help them take back some of their previous market without trust issues looming over their head. China has made open moves to remove foreign technology from some of its most important industries, including banking.
Cisco isn’t the only company looking to endear itself to a volatile, and sometimes hostile, market. Dell recently announced a $125 billion USD investment in Chinese R&D operations, to be spent over the coming 5 years. Last week Intel revealed a $67 million USD investment in a series of 8 technology companies, focussing on hardware and cloud-based systems.
At the same time, Xi Jinping attended a meeting in Seattle this week with a number of high profile tech leaders including Apple CEO Tim Cook and Microsoft CEO Sataya Nadella. It shows a clear drive from both the government and U.S. tech companies to strengthen relationships, despite the troubled relationship between China and foreign tech.
While the solo entry of any foreign tech firm is a complex process, partnering with a Chinese partner has helped a handful of foreign companies make inroads. This week U.S. speed and cyber security services company Cloudflare announced they had partnered with Baidu, aiming to expand to over 50 server stations in the coming year, something they would have been unable to do without support from the Chinese search giant.
Cisco could be hoping to harness some of the same magic with their latest local partnership, though it could take time to build back trust in the Chinese market following the Snowden allegations.
Things have been looking a little less grim for the U.S. company on the mainland recently, equipment orders had declined %20 in their third quarter, a number that dropped to just %3 in the quarter ending in July, apparently their best quarterly performance in the two years since 2013.