Cisco and China have had a rocky relationship recently. In an effort to repair this partnership, Cisco plans to invest $10 Billion to further progress the high-tech market in China. Having a large share of the market in China is important to the success of Cisco’s business.
China is quickly becoming one the biggest networking gear markets in the industry. Although Cisco has been doing business there for over 20 years, the company has been slipping in popularity. This could be due to a variety of reasons. First, Cisco was accused of allowing the NSA secretly to use their routers for spyware. Additionally, more homegrown competitors have emerged in China such as Huawei and ZTE.
Cisco has been feeling the effects of this situation as their sales are down 20% in China compared to last year. Such a substantial investment will hopefully energize the market to turn to Cisco for networking gear.
“With these new partnerships and initiatives, Cisco is investing in the next generation of Chinese technology innovation, helping capture the opportunities presented by digitization and committing Cisco resources to ensure success together,” said Chuck Robbins, Cisco Chief Executive.
Time will tell whether this renewed commitment will help Cisco restore its previous success. Due to the Chinese government being aware of NSA activity and the U.S. instructing telecom companies to not use equipment from Huawei or ZTE, it will certainly be a long road back. The encouraging part is that steps are being taken to repair this issue. It is important for the Chinese and U.S. government to reconcile if Cisco is to experience any future growth in China.
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