China's software development industry is on the rise, with a projected revenue of $1.2 trillion in 2021. American tech giants are taking notice, but challenges like piracy tactics and U.S. sanctions persist. Here, we dive into five of China's largest and most influential software companies, including Alibaba Group Holdings Ltd., JD.com Inc., Huawei, Tencent Holdings Ltd., and China Mobile.
Basics
The global software landscape is rapidly changing, with China emerging as a significant player. In 2021, China's software development industry is expected to generate a remarkable $1.2 trillion in revenue, with profits making up 14.5% of this figure. This growth is driven by China's ability to produce a substantial number of software engineers annually. While American tech giants continue to dominate, Chinese software companies are gaining ground, and the possibility of China challenging the United States as a technological competitor looms.
Despite the impressive growth of China's software development industry, concerns about Chinese piracy tactics have been raised by American tech companies. As a result, the U.S. government has implemented sanctions to safeguard intellectual property (IP).
Alibaba Group Holdings Ltd.
Founded in 1999 by Jack Ma and other entrepreneurs, Alibaba Group Holdings Ltd. (BABA) is a well-known e-commerce retailer that aids small and medium-sized Chinese businesses in selling their products digitally. Alibaba develops and implements various technologies, including mobile commerce infrastructure, cloud computing, logistics platforms, and fulfillment networks to achieve this. Its wholly-owned subsidiary, Alibaba Software, provides payment and banking services known as Alipay. As of 2021, Alibaba's market capitalization is $463.7 billion with revenue of $109.5 billion for the fiscal year ending 2021.
JD.com Inc.
Founded in 1998 and based in Beijing, JD.com (JD) is China's largest Internet company by revenue and leading online retailer. With over 1,200 warehouses, JD's fulfillment network covers 99% of China's population and offers a wide range of products, including clothing, cosmetics, fresh food, household goods, furniture, appliances, and electronics. JD's New Business segment provides logistics, business, and technology services. In 2020, JD's net revenue grew by 29.3% to $114.3 billion, while the number of annual active customer accounts surged by 30.3% to an impressive 471.9 million.
Huawei
Founded in 1987 by a former Chinese military officer, Huawei is a global telecommunications market leader with a presence in over 170 countries and a workforce of 197,000 employees. The company is renowned for manufacturing smartphones, smartwatches, laptops, and telecom equipment, ranking as the world's second-largest smartphone seller, trailing only Samsung.
In 2020, Huawei posted an impressive annual revenue of $136.7 billion, marking a substantial 71% increase over five years. However, Huawei has faced significant challenges, including economic fallout from the global pandemic and pressure from U.S. sanctions. The U.S. placed Huawei on a blacklist, cutting off its critical computer chip supplies and restricting its business dealings with American companies. In August 2021, Huawei reported its largest-ever revenue drop, generating $49.6 billion in revenue for the first half of the year, with smartphone sales taking the most substantial hit, witnessing a 47% revenue decline compared to the previous year.
Tencent Holdings Ltd.
Headquartered in Shenzhen, Tencent Holdings Ltd. (TCEHY) operates as an investment company with a focus on online advertising, fintech, and value-added services. The company offers a wide range of online and mobile games, along with various Internet and mobile applications. Tencent is also a social networking giant in China, with its WeChat messaging app boasting over 1.25 billion monthly users as of the second quarter of 2021. As of August 25, 2021, Tencent's market capitalization stood at $584.5 billion. In 2020, the company reported an annual revenue of RMB 482.1 billion ($74.4 billion), representing a significant increase of 27.9% compared to the previous year.
China Mobile
China Mobile Ltd., a state-owned enterprise, primarily operates as a mobile service provider rather than a software designer. Nevertheless, it boasts a substantial software team among its workforce of over 450,000 employees. Based in Beijing, China Mobile's reach extends to more than 942 million mobile subscribers, making it the world's largest phone company by this metric. Although the majority of its customer base is Chinese, China Mobile also serves customers in Pakistan and Hong Kong. The company had a market capitalization of $134.9 billion, with annual revenue reaching $111.3 billion in 2020.
Conclusion
China's software development industry is rapidly growing, with several companies rising to prominence. While American tech giants continue to dominate, Chinese companies are making strides in the market and could pose a challenge to the United States as a technological competitor. However, concerns about Chinese piracy tactics and U.S. sanctions remain. Overall, the future of China's software industry is promising, but the road ahead is not without its challenges.