Cisco has been battering headwinds in China since it built the People’s Republic internet backbone. Forbes thinks its Chinese income may have fallen 30% since 2012, and the reasons in hindsight were predictable.
Security concerns and the rebirth of Chinese techno-patriotism created the perfect storm. The only way to weather it, seems to be a joint relationship.
But, will Inspur prove to be the perfect partner? Its controlling stake is in the hands of the Assets Investment Holding Co., a state-owned agency.
The Inspur Connection to the Heart of China
Inspur – meaning ‘tides’ in China – has two main business arms, software development and server hardware manufacture. It’s international profile launched in 2005, when Microsoft invested $30 million US. Since then it has gone from strength to strength, notably participating in the production of printed circuit boards for the Chinese Tianhe-2 Supercomputer, revealed in June 2013 as the most powerful supercomputer in the world.
The Inspur Stake in Cisco’s Heart
Cisco’s woes started in 2013 when Edward Snowden claimed that American agencies were modifying U.S. made equipment to spy on foreign governments. This led to a Beijing campaign encouraging consumers to switch to locally branded manufacturers. By July 2014, several Chinese industries began to favour Inspur’s Tiansuo K1 as their preferred server over Western imports. This followed on more security concerns and active support from government.
The Core of Inspur’s Deal with Cisco
In line with other similar U.S. / China deals, Cisco announced a $100 million US joint venture with Inspur in June 2015. As this deal rolls out, Inspur is becoming a conduit for its technology, and networking and cloud computing products. Forbes reports its sales have been ‘growing sharply’. It expects more Cisco cash will flow from west to east, as the benefits of respecting culture and working within a supportive Chinese local government environment continue to roll in.