Cisco established operations in China in 1994.
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DALIAN, China — Cisco Systems is “very optimistic” about expanding business with Chinese electric vehicle makers as they expand overseas, the company’s head of Greater China told CNBC on Tuesday.
The EV division is the U.S. tech giant’s second-largest in the region. Cisco derives most of its revenue in Greater China from manufacturers, with electric vehicles making up the largest category, said Ming Wong, Cisco’s vice president and CEO for Greater China.
Chinese EV makers stepped up their global expansion last year amid intensifying domestic competition.
But trade tensions are escalating, with the United States, and possibly the European Union, raising tariffs on imports of Chinese-made electric vehicles.
That doesn’t necessarily limit their growth, however: Chinese automakers such as BYD are investing in factories there.
Cisco, a provider of networking equipment and software to businesses, is working with at least 10 electric vehicle customers to build factories, offices and research and development centers overseas, Wong said.
“At least for now, [EV] “Clients are saying, ‘Oh, we need to stop investing or slow down because of this,'” he added.
“In fact, the opposite is true. There’s a lot going on. They’ll continue to move forward and we’ll see how this develops.”
It’s unclear how much spending such expansion will generate, said Shiv Sivaraman, partner and managing director and Asia leader at consulting firm AlixPartners.
“But we should expect to see not just office-related capital investment, but manufacturing-related capital investment,” he said. “I think the tariffs will certainly accelerate, if not increase, that.”
The U.S.-based technology company faces challenges in the Chinese market as both countries become increasingly reliant on domestic companies in the name of national security.
Cisco CEO Chuck Robbins told analysts in 2019 that the US-China trade war had a “significant impact” on the company’s business in China.
Cisco said at the time that its revenue in the country fell 25% on an annualized basis in the quarter that ended in late July 2019.
“The state government has withdrawn invitations to companies to bid,” Robbins said. “They’re no longer even allowed to participate.”
Sales to carriers also fell even more sharply, he said.
Looking ahead, Wong said he expects the China business will return to growth this year, though he did not specify a timeline for 2019 in his comments.
Wong said state-owned and non-state-owned enterprises are turning to Cisco as they expand globally, “so we are shifting our focus and portfolio there.”
Chinese internet companies such as Alibaba, which are expanding globally, also support Cisco’s business, Wong said, adding that Cisco also benefits from its ability to connect different graphics processing unit providers in a market where AI giant Nvidia is restricted.
GPUs are chip systems that power the training and implementation of modern artificial intelligence models.
Cisco’s most recent quarterly reporting period, which ended in late April, saw total revenue fall 13% year-over-year, with revenue in Asia Pacific, Japan and China falling 12% during the same period.
Wong noted that recent revenue declines in Asia Pacific, Japan and China were coming from higher bases, and he expects revenue to grow even faster over the next one to two years.
“Asia Pacific remains Cisco’s largest growth region,” he said.
—CNBC’s Jordan Novett contributed to this report.
