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  Router Market Grows 8.2%, Fueled By China's Broadband Growth  
September 2, 2008

China's network equipment market has grown steadily in 1H 2008, and routers have reached 3.973 billion Yuan, up 8.2% YOY. Demand for routers has been driven, ultimately, by China's growth of broadband users, which has reached 76 million, 9.6 million of which are new users. Also, broadband usage is gradually becoming the norm in China's business offices.

Aggressive implementation of FTTH by broadband operators, such as China Telecom and China Unicom, has driven midrange to high-end router growth. For China's enterprises, they have also focused more building and upgrading their networks to support China's burgeoning e-commerce, online marketing and collaboration applications. This has also supported the growth of routers, especially for multi-services routers that can integrate VoIP, security, wireless, and VPN, for example.

Vendors have responded. Cisco launched its ASR 1000 in 1Q08, followed by its video monitoring solutions in 2Q08, which works with its ISR platform. This configuration can realize physical security, connected video monitoring, and other applications, such as unified communication, network security, VPN and mobile; and strengthening Cisco's position in China.

Huawei and Juniper also launched multi-services routers as well in China. H3C launched the MSR 20-1X series multi-services routers, which realized favorable market response in 1H08. These products provided benefits in Intranet applications, and integrated wireless, security and storage.

In 1H08, Cisco, Huawei, and Juniper are major vendors in the high-end telecom operator market. H3C and ZTE round out the top five in the high-end. Huawei, ASB and ZTE are the major vendors in the midrange to low-end markets. For Intranet applications, Cisco and H3C were the market leaders. Maipu, Ruijie and BDCOM focused on specific applications and industries, and actively pushed to the higher end of the market.

Vendor positioning in China in 1H08 continues as it has been for the past two years. Leading vendors leveraged their technical advantages into higher-end router markets targeting telecom operators and enterprises. Lower-tier vendors competed on price, niche markets, and China's more rural Tier 3 and 4 cities. However, top vendors are moving into the midrange and low-end router markets in China. Looking towards 2H08, more direct competition will ensue between leading and second tier vendors, with leading vendors hoping to enlarge their market share in China.

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