Cisco established operations in China in 1994.
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DALIAN, China — Cisco is “very optimistic” about its growing business with Chinese electric automobile corporations as they expand overseas, the corporate’s Greater China head told CNBC on Tuesday.
The EV segment is the U.S. tech giant’s second-largest for the region — Cisco generates most of its revenue in Greater China from manufacturing corporations, and inside that, electric cars form the most important category, said Ming Wong, vp and CEO of Cisco Greater China.
Chinese EV-makers have ramped up their global expansion within the last 12 months as domestic competition intensified.
Nonetheless, trade tensions have escalated, with the U.S. and sure the European Union, increasing tariffs on imports of Chinese electric cars.
That does not necessarily restrict their growth. Chinese automakers, similar to BYD, are investing in local factories.
Cisco, which provides networking equipment and software for businesses, is working with a minimum of 10 electric automobile customers as they construct factories, offices and research and development centers overseas, in response to Wong.
“Not less than as of now, we do not hear anything from the [EV] customers saying that, ‘Oh, for this reason, we want to stop investing, or we want to decelerate,'” he added.
“It’s actually the opposite way around. Plenty of things happening. They are going to keep pushing, going forward, and we’ll see how this may evolve.”
It’s unclear how much spending such business expansion will generate, said Shiv Shivaraman, Asia region leader, and partner and managing director at consulting firm AlixPartners.
“But you need to expect that there’s going to be manufacturing-related capex in addition to office-related capex,” he said. “And I believe tariffs will certainly speed up, if not increase it.”
Getting China businesses back to growth
The U.S.-based tech company has run into challenges within the China market because the two countries increasingly depend on domestic players within the name of national security.
The corporate’s revenue within the country fell by 25% on an annualized basis within the quarter ended late July 2019, Cisco said on the time.
“What we have seen is within the state on enterprises … we’re just being — we’re being uninvited to bid,” Robbins said. “We’re not being allowed to even participate anymore.”
Sales to carriers declined more forcefully as well, he said.
Looking ahead, Wong is hopeful that the China business can return to growth this 12 months. He didn’t specifically reference the 2019 period in his remarks.
He identified that state-owned and non-state-owned businesses are turning to Cisco as they expand globally. “So we’re shifting our focus and portfolio to that side,” Wong said.
Also supporting Cisco’s business are Chinese web corporations similar to Alibaba which might be expanding globally, Wong said. He added that Cisco also advantages from its ability to attach different graphics processing unit providers together in a market where AI giant Nvidia is restricted.
GPUs are the chip systems powering the training and implementation of the newest artificial intelligence models.
In Cisco’s latest quarterly reporting period, which resulted in late April, total revenue fell by 13% from a 12 months ago, with revenue in Asia-Pacific, Japan and China falling 12% during that point.
Wong identified the newest slump within the Asia-Pacific, Japan and China revenue is off a high base, and he expects it to grow more quickly in the subsequent one or two years.
“Asia Pacific remains to be the best growth area for Cisco,” he said.
— CNBC’s Jordan Novet contributed to this report.
