About 1.4 billion consumers, give or take a few hundred thousand—that’s the China appeal. For any business, the single largest consumer populace on Earth is the holy grail of major markets. If your product can make it there—and receive certification under the Communist Party of China’s stringent policies—it won’t even need to make it elsewhere.
For technology companies, though, China is a difficult market to infiltrate. Not only do technologists face intense local competition and the sometimes-impassable barrier of government restriction—just look at Google‘s (NASDAQ:GOOG) recent history in the country—they also face the dual threats of piracy and bootlegging. China is changing, though. Throughout 2011 there were signs that piracy and bootlegging were at least being challenged in the region.
Who stands a good chance of capitalizing on that billion-consumer populace? Who doesn’t have a prayer of succeeding? Here are three companies that will be sitting pretty in China by 2015 and one that won’t be so lucky.
On top by 2015
Apple
Apple (NASDAQ:AAPL) has been reaping the rewards of a technology hungry China for years, but it’s only been in the past thirty-six months, as iPhone mania has swept the country, that the full measure of the Cupertino, Calif., company’s power in the region has become clear. Revenue from China came to $4.5 billion in the third quarter of 2011, 16% of the company’s total revenue. The company is expected to continue rising in 2012. Morgan Stanley issued a note to investors on Monday that said it expects Apple to sell approximately 40 million iPhones by the end of 2013 and that the device could ultimately take a 63% share of the Chinese smartphone market.
Intel
Apple’s success in China reflects the global shift from consumer spending on PCs to spending on portable computing devices such as smartphones and tablets. The PC market is, on a global scale, hurting. It’s greatest hope, though, is in emerging markets like China. In August 2011, Chinese PC sales overtook U.S. sales for the first time, and the country is expected to remain the world’s leading PC market. For chipmaker Intel (NASDAQ:INTC), China represents the future. During the company’s recent fourth-quarter earnings call, CEO Paul Ontelli said that both PCs and smartphones will secure Intel’s place in the region. Intel’s partnership with PC maker Lenovo (PINK:LNVGY) is part of the strategy that will help Intel succeed. Lenovo became the second largest PC maker in the world last quarter. While Intel is providing the chips for the company’s PCs, it’s also working on the Lenovo’s K800 smartphone, which has been developed with Asian markets specifically in mind.
Microsoft
China has always been a sticky wicket for Microsoft (NASDAQ:MSFT). The country was instrumental in making Microsoft’s Windows platform ubiquitous in PCs over the past two decades, but revenue from the region hasn’t always reflected usage. China accounts for just 5% of Microsoft’s total revenue. Why doesn’t Microsoft make more when China accounts for 20% of the PC market? Piracy. Microsoft spent 2011 changing its strategy in the country to try and mitigate those losses. Rather than rely on Windows revenue to lead the way in China, Microsoft forged a partnership with Chinese search giant Baidu (NASDAQ:BIDU) to raise revenue from its Bing search technology. Baidu now provides English search results thanks to Baidu. Microsoft’s willingness to kowtow to Communist party censorship of Bing search results gives it a leg up over Google in the region. Provided the partnership grows, Microsoft’s search business could grow immensely by 2015 thanks to China.
On bottom by 2015
Nokia
Nokia‘s (NYSE:NOK) reign as the world’s biggest mobile phone maker began in large part thanks to the company’s dominance in China. While Nokia’s fall from prominence in the global market is well documented, its fall in China merits special attention. The company’s sales in the region last quarter fell by 40% year-on-year, bringing its total business in China down to $1.3 billion. Nokia plans to release its new Microsoft Windows-powered Lumia smartphones in the country sometime this year, but it may be too late for Nokia to dramatically improves its fortunes there.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.
