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GM, Apple, GE ride China's growth

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pink_2 March 22, 2012 (Chinavestor) There has been a lot of buzz about Apple Inc. (NASDAQ:AAPL) lately after the company offered insight what it intends to do with its enormous cash pile. But that shouldn't be the only news moving the stock. Apple Inc. (NASDAQ:AAPL) has a lot of potential in China, the largest smartphone market in the world by the end of this very year. Besides Apple, General Electric (NYSE:GE) and Wall Mart (NYSE:WMT) has a lot at stake in China, not to mention General Motors (NYSE:GM).

Monthly Passanger car sales in  China

autosales_China_201203

Source: Guinness Atkinson, 2012 March

 

 

Why China, investors may ask. It may be a large market but how many Chinese can truly afford a $500 iPhone or iPad? Well, the truth may be just not what average investors would think. First of all, Apple Inc. (NASDAQ:AAPL) lined up China's third largest mobile carrier China Telecom (NYSE:CHA) this very month as its second partner in China. What makes this relationship all that important is that China Telecom (NYSE:CHA) has the largest smartphone user base relative to its subscriber base, making it a prime candidate to distribute smartphones in developed, affluent urban areas. The same is true for China Unicom (NYSE:CHU), China's second largest mobile carrier. In contrast to these two smaller players, industry leader China Mobile (NYSE:CHL) is big in rural areas but its smartphone base of 33 million is just 5-6 million more than that of China Unicom (NYSE:CHU) or China Telecom (NYSE:CHA), respectively.

This suggests Apple Inc. (NASDAQ:AAPL) has a solid foundation in China right now. Considering that smartphone shipments are expected to grow to 137 million units in China, a 50% jump from last year, the Asian country will overtake the U.S. as the largest market for such devices. Apple iPhones are a lot more affordable from an end user point of view that many may think. China Telecom (NYSE:CHA) started to sell the latest iPhone for RMB430/month ($68/month) with a 2 year subscriber agreement.

General Electric (NYSE:GE) derives over 60% of its profits from overseas with China being the largest market of those countries. And just how much China is driving some key U.S. companies these days, take a look at FedEx Corp. (NYSE:FDX) today. The company reported a surge of profits for Q3 and guided higher yet is trading lower by 3.5% due to more evidences that China's economy is cooling off.

General Motors (NYSE:GM), the largest auto maker in the world, is selling more cars in China than in the U.S.! While profitability is far from that of the U.S., China remains a key battle ground for global auto makers.

All told, China plays an increasingly important role for U.S. companies yearning growth. Apple Inc. (NASDAQ:AAPL) is not going to sell more phones in China in 2012 than in the U.S. but General Motors (NYSE:GM) will sell more cars in there. And Apple is catching up, fast...



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