Far East Still Growing, Set for Apple to Take Advantage
Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
To say that Apple (NASDAQ: AAPL) considers China to be one of its biggest markets is no surprise. In fact, CEO Tim Cook has stated in the past that China could be the company’s principal revenue-driver at some point in the future.
China’s telecom trio
Whether or not Apple continues to make progress in this country remains to be seen. Right now, Cupertino is moving in the right direction with its China Unicom (NYSE: CHU) and China Telecom (NYSE: CHA) partnerships, which are the second and third largest telecom carriers in China, respectively.
China Mobile (NYSE: CHL) still represents the proverbial uncaught whale, however, as it is China’s and the world’s largest telecom operator with over 700 million subscribers. This total represents a little over twice the number of subscribers held by China Unicom and China Telecom combined. China Mobile also sports the quickest 3G-subscriber growth in the country, according to BGR.
As has been the case for the past few years, China Mobile and Apple are still in negotiations over a deal that would bring the iPhone to the telecom’s customers, and there’s no use speculating on the possibility of a deal here.
We’ll share this article with you if you have time to read it. It covers the situation quite nicely, but it boils down to the fact that CEO Li Yue and China Mobile want a bigger piece of Apple’s revenue pie than it’s willing to give, particularly regarding iTunes revenue.
China Unicom and China Telecom sport more Cupertino-friendly contracts, which makes sense given their lack of market positioning against the larger China Mobile.
Moving on, when you combine this telecom potential with a smartphone market at large that is growing by leaps and bounds, the sky is the limit.
Digitimes recently touched on a yet to be published report by IDC, stating the following:
“China's mobile phone shipments registered at 97 million units in the first quarter of 2013, up 15% compared with the same period in 2012, while China's smartphone shipments totaled 78 million units in the first quarter, a growth of 117% compared with the same period in 2012.”
When you look at those numbers, it is easy to see that Apple is in good position to take advantage. The China smartphone market is growing fast, with more than 100 percent growth when compared to the same period of last year.
Along with a China Mobile deal, it would be interesting to see what a lower priced iPhone would be able to bring to the company in terms of sales in China, but it’s important to note that existing sales are solid. Here’s another tidbit from the Digitimes piece:
“In the first quarter, Apple ranked the fifth with a market share of 9% and a link relative ratio of 21%. The shipments of iPhone 4 (8GB), which is an excellent performer, grew by 211% over the previous quarter.”
Obviously, Apple is growing its market share in China but it’s far from the top spot; right now Samsung continues to rank number one in China with a market share of 19%. There’s another country in this region worth watching too, though, that may surprise you. This time it’s on the tablet side of things.
Tablets in Taiwan
There is no denying the fact that tablet sales appear to be on the rise in almost every nook and cranny of the globe. While this is more so the case in some areas than others, Taiwan is beginning to see some major growth. This is somewhat of a surprise to many, being that the region has oftentimes been stuck behind the frontrunners.
This could be a big opportunity for companies such as Apple and Google (NASDAQ: GOOG). Both companies are looking to push its respective tablet to fresh markets, and with Taiwan growing so fast it is a natural fit. Another Digitimes report detailed just how these companies are seeing demand shape up here:
“Demand for tablets in the Taiwan market is growing fast, with nearly two million units to be sold in 2013 including mobile telecom carriers' contract-bundled sales and sales of Wi-Fi versions through retail chains, according to executive vice president and chief sales & marketing office Maxwell Cheng for Consumer Sales & Marketing Division of Far EasTone Telecommunications (FET).”
Once again, these numbers are nothing when compared to the sales in more established regions such as the United States and Europe. That being said, every market has to start somewhere, and it appears that Taiwan is beginning to hit its stride. For a better idea of just how far things have come, this forecast is just about double the sales volume of 2012. Here is more on what to expect:
“In the Taiwan market, 7-inch models are estimated to account for 70-80% of sold tablets, Cheng pointed out. FET sells 20,000-30,000 tablets bundle with contracts a month through its retail network and is confident of attaining target sales of 300,000 units for 2013.”
If Apple and Google have any plans of taking the reins in Taiwan, it would make the most sense to push smaller tablets. In the case of Apple, for example, its iPad mini would appear to be the more popular option thanks to its smaller screen, and Google’s rumored Nexus 7 2 would fit here nicely as well. We’re particularly curious if Apple plans to push a newer iteration of its iPad mini, but we’ll have to wait and see.
The fact of the matter is that both companies have the opportunity to gain a better foothold in the Taiwanese tablet market in the years to come, and with steady growth, now is the time for these companies to start jockeying for position. Across the Formosa Strait, Apple can boost its market share in China in one of two ways: (a) a deal with the country’s largest telecom China Mobile, or (b) a cheaper iPhone. If you’re holding Apple, it’s not out of the realm of possibility that both scenarios can come to fruition by the end of 2013. Learn more about Insider Monkey’s investing strategy here.
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This article is written by Chris Bibey and Jake Mann. Insider Monkey's Editor-in-Chief is Meena Krishnamsetty. Meena has a long position in Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, China Mobile, and Google. 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!