Summary of Conference Call Notes Industry Overview - The conference call focuses on the **technology sector** in China, specifically regarding **China Telecom (CT)** and its server tender results. Key Points and Arguments Server Tender Results - CT's server tender results indicate a **28% year-over-year growth** to **Rmb17 billion** [1] - The **localization rate** for CPUs in the tender increased from approximately **37% to 68%** [1] - CT has guided for a **22% growth** in computing capital expenditures (capex) for 2025 [1][2] Market Share Dynamics - Significant shifts in market share were observed, with **Lenovo, Power Leader, and ZTE** gaining the most, while **H3C, xFusion, and Inspur** saw substantial declines [4] - Inspur's decline is attributed to its recent inclusion in the **US Entity List**, which may further impact its market share [4] - xFusion is also considered vulnerable due to its ties with US sanctions [4] Localization Trends - The localization rate for the 2024-25 server tender reached **67.5%**, with **49%** of that attributed to **Huawei's Kupeng** [3] - The demand for locally developed cloud and AI technology is expected to drive further increases in localization rates among state-owned enterprises and government entities [3] Future Projections - CT's upcoming server tender for 2024-25 will involve **156,000 servers** [3] - The **cloud capex** for both CT and China Unicom (CU) is projected to grow over **20% year-over-year**, while China Mobile's (CM) capex is expected to remain flat [2] - Accelerating AI development in China may necessitate an upward revision of CM's cloud capex guidance in the second half of 2025 [2] Financial Performance and Risks - ZTE reported over **40% growth** in server revenue in the second half of 2024, but faces challenges due to lower margins (3-5%) compared to telecom equipment (40%+) [4] - The potential for an earnings miss at ZTE is highlighted, maintaining a rating of **Underperform (UNPF)** [4] Competitive Landscape - The top winners of CT's 2024-2025 server tender include: - **1. xFusion**: 17.9% - **2. Huakun Zhenyu**: 13.6% - **3. Power Leader**: 12.8% - **4. ZTE**: 10.3% - **5. Fiberhome**: 9.3% - **6. Inspur**: 7.2% - **7. H3C**: 7.0% [5] Historical Comparison - Comparison with the previous year's tender shows a decline in market share for xFusion, Inspur, and H3C, which were the top three players in 2023 [5] Additional Important Insights - The localization rate has nearly doubled from the previous tender, indicating a significant shift towards domestic suppliers [3][9] - The competitive pricing strategies of companies like Lenovo, which offered prices **13% below** the average of other winners, are influencing market dynamics [4] This summary encapsulates the critical insights from the conference call, highlighting the evolving landscape of the technology sector in China, particularly in relation to server tenders and market share shifts.