China has increased its share of the region's server market to 33-per cent, up from 29 per cent in 2000. However, sales declined in the third quarter of last year, according to International Data Corp. In the last quarter the mainland's server market declined by 6 per cent year on year from about US$525 million to US$500 million, despite shipments increasing from 57,000 to 60,000 units. Hong Kong sales have also been hit, with revenues decreasing from US$107,000 to US$70,000 in the last quarter. Shipments fell from 8,800 to 6,100 units. IDC's director for computing systems Avneesh Saxena said the global economy was the primary reason behind the fall. 'The global slowdown has affected the Asia-Pacific market as well,' Mr Saxena said. In China, the decline in revenue was mainly due to the falling price of servers caused by competition. 'Worsening economic conditions led to a contraction in demand that forced server vendors to take more aggressive measures to garner share,' said Mr Saxena. The decline could have been much worse without government initiatives and demand. The finance and telecommunications industries were the active buyers for entry-level and mid-range servers in both the mainland and Hong Kong. Mr Saxena said the September 11 attacks and their aftermath had exacerbated the regional slump. The 144,581 units shipped in the forth quarter were worth US$1.5 billion, compared to US$1.8 billion for 149,875 units a year earlier. 'The SIAS [standard Intel architecture server] was performing better than the Unix one as the major companies have held back their investment because of the economic climate,' he said. Some Unix server vendors disagreed. Hewlett-Packard (HP) said the economic climate had been hardest on its low-end market. Kris Chan, director of marketing at HP Hong Kong, said: 'We would admit the overall market, not just HP, has slowed down at the low end because the sales cycles of new deals tend to be lengthened because of uncertainties caused by September 11 and the economic downturn.' He expected more consolidation in the server market this year. 'Customers seek ways to lower their TCO [total cost of ownership] in computing platforms and consolidation is the strategy most large enterprises adopt to cut costs in managing and maintaining the resources.' Sun Microsystems said its Unix server sales were slightly affected. Danny Tam, Sun's general manager for global sales, said: 'We still see a strong demand for enterprise servers from our customers. We are very positive that we will remain competitive.' IDC tipped the market to pick up in the second half of this year, providing there was a recovery in the United States economy. Mr Saxena said: 'This means the Asian economies could bounce back by the end of 2002 to early 2003 time frame. China, Korea, Australia, India and Taiwan will continue to offer the most opportunities in the region. 'China will also grow because of the internal investment from corporates and government after its entrance to the WTO [World Trade Organisation],' he said. Meanwhile, another report by Gartner Dataquest found server shipments to Asia-Pacific increased to 576,048 units last year, a rise of 6.6 per cent over 2000. China was the biggest market, with 237,188 units shipped. Gartner's research found that IBM led the worldwide server market, increasing its revenues and market share in both Unix and Intel-based systems.