Supply chain
Asian Edge: The deployments of US Internet service providers
Rodney Chan, DIGITIMES, Taipei

Apple, Microsoft, Google, Amazon and Facebook are five major Internet service providers of the US. Their relationships with China have gradually turned from collaborations to confrontations, as the country has been citing national security or the need to grow local enterprises to bar the US firms from the China market.

Apple's smartphone application processors are made by TSMC. Google has installed datacenters in Taiwan, has recently activated one in South Korea, and has acquired HTC's smartphone team.

Currently, there are over 400 datacenters worldwide, of which 147 are equipped with over 5,000 servers each and owned by Amazon, Microsoft or Google. In addition to North America and Europe, the three Internet service providers have also constructed 28 datacenters in East Asia - in Japan, South Korea and Taiwan.

Their competitions against China-based Internet service providers are being undermined by the US IT industry's structural disadvantage: over reliance on demand from Western countries. Google, Amazon and Apple are all facing the same issue and for markets such as India and emerging countries in the Asia Pacific area, they lack the appropriate personnel and the determination to actually go deep into those markets.

In Apple's case, the company has 41% of its revenues coming from North America and 23% from Europe. If Japan's 9% is included, the US smartphone vendor has nearly three fourths of its revenues generated from advanced economies. Meanwhile, Apple's revenues have been heavily relying on its smartphone sales, which account for over 60%. The company's iPads and iPods are already not seeing much growth.

With Apple's failure to achieve good sales for its new smartphones and its strategy focusing on promoting entry-level and mid-range smartphones in China and India not working as intended, Apple's hardware business apparently has reached a bottleneck.

For business opportunities from smart city and smart home in Asia Pacific's emerging markets, China-based makers, which have a lot of experience in making deployments in the rural area, are expected to have advantage over US-based makers. The China government's Belt and Road Initiative (BRI) is also expected to help its makers tap into the emerging markets in Asia Pacific.

(Note: This is part of a series of articles by Digitimes president Colley Hwang on the latest developments of the IT industry in the wake of the US-China trade war.)

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