Apple is Not Always Emperor in China

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Prior to joining Global X Funds, Alex Ashby lived and traveled extensively throughout Asia.  He currently manages group of six ETFs covering the consumerenergyfinancial, industrial, material, and technology sectors of the Chinese economy.  The Global X NASDAQ China Technology ETF (NASDAQ QQQC) provides investors with exposure to technology companies in China and is designed to be a transparent, cost-efficient way to get access to the country's growing tech and social media sectors. 

[continued from The Future of Chinese Technology – Social Manufacturing?]

Nick Slepko:  AutoNavi (NASDAQ: AMAP) appears to be the Garmin of China, and is the digital mapmaker for Apple (NASDAQ: AAPL) in China.  Is there any reason to think they might succeed where Garmin is failing, and if they lose their connection to Apple, is it likely they would survive?

Alex Ashby:  AutoNavi has been successful in large part because of its focus on software and on implementing this software for mobile mapping and other services – an area that Garmin may have moved a little more slowly on and allowed its competitors in the US to gain traction.  While a partnership with Apple is always important, it shouldn’t be overstated in the case of AutoNavi.  In China, Apple currently ranks sixth in smartphone sales, so investors should also take into account the important partnerships that AutoNavi has been setting up with local players like Sina and Renren as well as other mobile carriers and phone providers.

Slepko:  What are the chances that Chinese IT solutions providers like AsiaInfo (NASDAQ: ASIA) and iSoftStone (NYSE: ISS) will challenge India’s multi-billion dollar outsource champions like Wipro, Infosys, and Tata Consultancy Services?

Ashby:  I think the distinction here again is the competitive advantage that these companies have within China.  As foreign companies look to expand within the country, the natural partnerships are going to be with local firms that have the expertise and capabilities to help them build out their businesses in China.  For example, iSoftStone recently announced a partnership with IBM (NYSE: IBM) to help the company build out a cloud computing center in China, and presumably iSoftStone will be looking to capitalize on more partnerships like this in the future.  AsiaInfo has even more of a domestic focus at the moment, with its biggest customers being China’s largest wireless carriers.  So while these companies may be IT solution providers similar to some of the well-known companies based inIndia, at the moment they don’t appear to be in as direct competition as one might expect.

Slepko:  Why do you have a China tech ETF, but not a Brazil tech ETF as part of the set of Global X’s Brazil sector ETFs?

Ashby:  China is a larger market generally speaking, and has a more developed technology sector than Brazil and therefore has more companies available for investment and for the construction of an ETF.  In discussions with investors and others, it seems that China is developing more of a reputation in technology, whereas in Brazil the consumer story and the banking and financial expansion in Latin America are still the most dominant.  But that can change, and if the [tech] industry develops further in Brazil, it could be a possibility for a future ETF focusing on that part of the market.

 

 

 


Nick Slepko (hukgon) has no position in any company mentioned here at the time of publication.  The Motley Fool owns shares of Apple and International Business Machines. Motley Fool newsletter services recommend Apple and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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