Data-storage specialists led by EMC and Hitachi Data Systems (HDS) have turned their late start in China to their advantage, catching mainland and international firms as they expand their computing infrastructure. Industry experts say demand for external storage systems in the mainland is upbeat, despite the recent Sars crisis, the lingering worldwide economic slowdown and restructuring in the country's telecommunications industry. Sales of external storage systems in China reached US$230 million last year, representing 8,289 terabytes worth of data capacity, according to research firm Gartner. Total Asia-Pacific sales hit US$1.17 billion and 39,765TB of storage capacity. A terabyte is a measure of computer storage capacity worth about 1,000 gigabytes. New demand in China for both mid-size and high-end storage systems has been credited to investments being made by foreign companies, including large multinationals, preparing their facilities on the mainland for deregulation of key industries. Gartner analyst Mike Chuba said new government regulations around the world on the preservation of corporate data would also increase storage needs in many commercial markets. 'The five-year outlook is that the demand for storage will accelerate in multiple directions and dimensions,' Mr Chuba said. This demand includes storage capacity requirements from mainstream consumers, who have high-speed connections to vast data resources on the internet. Matthew Boon, vice-president Of Gartner's hardware and systems research team in the Asia-Pacific region, said sales of external storage systems in China last year were driven by international firms moving their manufacturing and research and development facilities there. EMC's mainland growth has come from increased demand for its entry-level Clariion storage system, which the Massachusetts-based company sells directly and through a co-branding deal with Dell Computer. Dell, which has a manufacturing facility in Xiamen, has been expanding aggressively in the mainland, adding storage systems to its catalogue of business personal computers and servers. EMC Asia Pacific vice-president Gary Jackson noted that EMC still sold more Clariion products in the mainland than Dell did, but he said that the alliance with Dell remained a key asset to widening the use of EMC technology in the domestic market. 'Although there have been some spending constraints in China, we have been registering multiple-digit sales growth from both domestic and international companies,' he said. 'But we are not satisfied. There is still plenty of room for improvement and that is why we are in the process of building our channel reseller programme from province to province.' Brian Knott, North Asia regional director for StorageTek, said adequate market coverage was key for data storage firms, as 'most sales are made at the province and city levels'. 'The major server vendors - IBM, Hewlett-Packard and Sun Microsystems - have had a distinct advantage due to their extensive distribution channels in China, developed through long-term investments in this market,' he said. 'The merger of Hewlett-Packard and Compaq has increased the leverage of the major server vendors as they are able to exert more pressure on their distributors to sell or promote only their products, making it harder for the storage specialists to recruit or leverage the strongest distribution channels.' For this reason, he said the storage vendor OEM (original equipment manufacturer) relationship in China was vital. EMC has its partnership with Dell to help it in the mainland. HDS has HP and Sun reselling versions of its high-end Lightning enterprise storage system under their own brands. Peter Pau, vice-president and general manager at HDS North Asia, said the company's China market has grown up to 80 per cent a year since it started direct operations in late 2001. HDS had cornered big deals - ahead of its direct competitor EMC - out of a storage expansion initiative by the Ministry of Railways, he said. 'Nationwide server and storage consolidation projects in the banking sector have provided us with significant sales for both our Lightning and mid-range Thunders enterprise storage systems.' Mr Knott said StorageTek moved into China in 1999, ahead of EMC and HDS. 'We have always been strong in tape storage products, but our current focus in on selling our high-capacity disk storage systems and lifecycle system management services.' He said there had never been a better time for storage specialists to push new products and services in China because demand from the government and both large and small companies was growing. But Gartner said storage vendors needed to add more value to their products and price these competitively.