Cisco Expresses Optimism on Expanding Business with Chinese Electric Vehicle Makers

EVs

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Cisco is “very optimistic” about the growth prospects of its business with Chinese electric vehicle (EV) companies, as these automakers ramp up their global expansion, according to Ming Wong, Vice President and CEO of Cisco Greater China.

The EV segment has emerged as Cisco’s second-largest revenue stream in Greater China, trailing only its manufacturing business. Within the manufacturing sector, electric cars form the largest category, reflecting the robust demand for Cisco’s networking equipment and software among Chinese EV-makers.

Chinese EV companies have been accelerating their global presence amidst increasing domestic competition. This expansion comes despite escalating trade tensions, with both the U.S. and potentially the European Union imposing higher tariffs on Chinese electric car imports. Companies like BYD are countering these challenges by investing in local factories abroad.

Cisco is currently collaborating with over 10 electric car customers, assisting them in building factories, offices, and research and development centers overseas. Wong emphasized that, contrary to concerns, these customers are not scaling back their investments due to trade tensions. “It’s actually the other way around. A lot of things are happening. They will keep pushing forward, and we’ll see how this evolves,” Wong stated.

The extent of spending driven by this business expansion remains uncertain, according to Shiv Shivaraman, Asia Region Leader and Partner at AlixPartners. However, he anticipates significant capital expenditures related to both manufacturing and office expansions. “Tariffs will definitely accelerate, if not increase it,” Shivaraman noted.

Navigating Challenges in the China Market

Cisco has faced challenges in China due to increasing reliance on domestic players by both the U.S. and China, citing national security concerns. In 2019, Cisco’s CEO Chuck Robbins highlighted the impact of the U.S.-China trade war, which led to a 25% drop in revenue from China in one quarter. Robbins noted that Cisco was often excluded from bidding processes and sales to carriers declined sharply.

Despite these challenges, Wong remains hopeful about a return to growth for Cisco’s China business this year. He pointed out that both state-owned and non-state-owned enterprises are turning to Cisco as they expand globally. “We are shifting our focus and portfolio to that side,” Wong said.

Chinese internet giants, such as Alibaba, which are expanding globally, also bolster Cisco’s business. Additionally, Cisco benefits from its ability to connect various graphics processing unit (GPU) providers in a market where AI giant Nvidia faces restrictions.

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