Asia/Pacific (Excluding Japan) Manufacturers Set To Reduce IT Spending Due To Weak Corporate Sentiments

Singapore and Hong Kong, March 4, 2009 – Manufacturing Insights Asia/Pacific, an IDC company, predicts that IT spending by the manufacturing industry in Asia/Pacific (excluding Japan) will take a hit as companies counter the economic recession by reducing their workforce, cutting costs and overheads, and/or stopping production for significant durations. In its latest study, Manufacturing Insights forecasts that manufacturing IT spending will reach US$23.4 billion in the Asia/Pacific excluding Japan region (APEJ) in 2009. This represents a Year-on-Year (YoY) growth of 2.9% but a 7.3% drop compared to the previous forecast published in May 2008. More Insights can be found in the report, “Economic Crisis Response: Asia/Pacific (Excluding Japan) Manufacturing IT Spending 2008-2012 Forecast Update” (Doc # AP664113S).

Debashis Tarafdar, Associate Research Director of Manufacturing Insights Asia/Pacific says, "During an economic downturn, manufacturers face the challenge to contain costs. Often, the response is to reduce workforce and outsource non-core operations. However, when the next growth cycle starts, it is not always possible to ramp up the workforce quickly, particularly where skilled labor is involved."

Tarafdar adds, “Manufacturers need to think long-term and be strategic about cost-cutting measures in order to survive this economic crisis. Effective use of IT can in fact help reduce costs, and improve agility and decision-making capability. This creates a platform for the existing workforce to be more productive. It also enables collaboration across the value chain, and connects outsourced facilities seamlessly with internal operations."

This report provides Manufacturing Insights' forecast update on the market size, short-term outlook for spending growth (2009 over 2008), revised 2008-2012 forecast and compounded annual growth rate (CAGR) for manufacturing IT spending in APEJ. It covers six sub-regions (ANZ or Australia & New Zealand; Greater China; India; Korea; ROAPEJ or Rest of APEJ; Southeast Asia), eight verticals (aerospace and defense; automotive; chemical; metal; pulp/paper; CPG; high-tech; others) and three broad IT categories (hardware; packaged Software; IT services).

Key findings of this report include:

Total IT spending in APEJ manufacturing is expected to reach US$31.2 billion in 2012, with a 2008-2012 CAGR of 8.2%. This is a 5.5% drop compared to our previous forecast of US$33 billion published in May 2008.

The short-term outlook for the APEJ manufacturing sector indicates that manufacturers are tightening their belts in terms of IT spending, particularly in hardware investments.

In the coming months, manufacturers in this region will try to leverage existing assets to deliver maximum value to their businesses. The shift will move from "nice-to-have" to "need-to-have", and short-term Total Cost of Ownership (TCO) compared to Return-on-Investments (ROI) considerations will drive investment justification.

Other than the aerospace and defense sectors in which IT spending is expected to grow by a meager 0.9% in 2009 over 2008, IT spending in the automotive and high-tech electronics sectors will be the hardest hit, growing by only 1.9% and 1.6% respectively in 2009.
While Greater China will experience a sharper drop in manufacturing IT spending in the short-term compared to India, it is also expected to bounce back faster than India by 2012.

For more information about purchasing this report, “Economic Crisis Response: Asia/Pacific (Excluding Japan) Manufacturing IT Spending 2008-2012 Forecast Update” (Doc # AP664113S), please contact Selina Ang at +65-6829-7717 or sang@idc.com.