Tony Sagami: In a new Virgin Mobile commercial, a young Richard Branson tells his friends, “In the future, we’ll be able to talk to each other with our thumbs.”
Even though his friends were skeptical, today there’s an entire generation of teenagers and young adults who now communicate this way — via smartphones, tablets and other mobile devices — called the thumb culture.
Think what you will about the way this segment communicates. But know that they have the ability to spell out some pretty big profits for you, even if you prefer the old-fashioned practice of using a phone as, well, a phone!
Meet the ‘Thumb Culture’
You can see the thumb culture in action in subways, lecture halls, coffee shops, restaurants and airports — with users frantically using their thumbs with remarkable dexterity to type messages and surf the Internet on tiny handheld electronic keyboards.
The thumb culture is becoming so prevalent that there has been a surge in the number of tenosynovitis cases, a repetitive strain injury from excessive typing on miniature keypads.
What I’m talking about is text messaging. Because of its instant delivery and low cost, text messaging has become one of — if not the — primary means of communication for teenagers and young adults.
But it’s not just the “American Idol” fan base that’s generating millions of texts at any given time. (Although Nielsen recently reported that the 13-to-17 set generates a text every 8 ½ minutes.)
In fact, it’s the “Chinese Idol” set that you should be watching closely instead. Here’s why …
China Gives 2 Thumbs Up To These ‘Hand Machines’
The risk of pain and swollen joints aside, text messaging is very popular in America. But one country sends more text messages than anybody else in the world: China.
- One out of every two text messages sent in the world is sent in China.
- In China, mobile phone users sent 26 BILLION text messages on the last Chinese New Year. In a single day!
- The Chinese version of “American Idol,” called “Supergirl,” generated over 700 mobile text message votes per second during its finals — that’s more than 8 million votes!
Mobile phones are much, much more than telephones to Asians. If you travel to Asia, one of the first things you’ll notice is how most Asians walking down the street have mobile phones glued to their ears. Mobile phones have become almost inseparable electronic organs.
In China, mobile phones are called a shouji, which roughly translates into “hand-machine.” That’s an extremely accurate characterization of how mobile phones are used in China.
Sure, mobile phones are used to talk in China, but it would be a big mistake to think of a company like Hong Kong-based China Mobile (NYSE:CHL) as simply a mobile phone provider.
In addition to traditional calling services, China Mobile offers its 600-million-plus customers caller ID, call waiting, call forwarding, voicemail, conference calling, instant messaging and, yes, text messaging.
China has some 859 million mobile phone subscribers, which works out to 74.5% of the country’s population. The U.S. has 285 million phone users, so it is clear that China is a much, much bigger market.
China to Overtake U.S. in Smartphone Market, With No Plans to Let Go of This Leadership
According to the newest estimates from the International Data Corporation (NYSE:IDC), China is on the cusp of surpassing the United States as the No. 1 smartphone market in the world sometime this year, with a 20.7% share of the global market.
According to senior market analyst Wong Teck Zhung:
“Chinese smartphone shipments are expected to take a slim lead over the U.S. in 2012 before the gap widens in the coming years. There will be no turning back this leadership changeover.
“Due to their sheer size, strong demand, and healthy replacement rates, emerging markets are quickly becoming the engines of the worldwide smartphone market.”
Perhaps most importantly, “There will be no turning back this leadership changeover.”
As an investor, then, if you want to place some bets on this burgeoning part of the mobile phone food chain, you darn well better figure out which companies are doing big business in China.
7 Big Potential Winners Of the Smartphone Wars
The IDC report pointed out who it expects to be the clear winners.
“Emerging domestic vendors will be another important engine of smartphone growth as giants Huawei, ZTE and Lenovo continue to ramp up with big carrier orders due to their willingness to produce customized handsets.
“International players such as Samsung and Nokia are also expected to drive volume at the low end with cheaper smartphones.”
The People’s Republic of China ranks highest among the world’s largest smartphone markets.
Can you invest in any of those above international smartphone giants? You bet you can!
Huawei Technology is only traded on the Shenzhen Stock Exchange and unavailable to U.S. investors, but there are plenty of other options to play this trend both on the U.S. exchanges and on other, U.S.-investor-accessible overseas exchanges.
Samsung Electronics (005030.KS) is available on the Korean Stock Exchange and you’d be surprised at how easy, simple and cheap it is to buy/sell stocks on most major foreign stock exchanges, including Korea.
Lenovo (LNVGY.PK) and ZTE Corp. (ZTCOY.PK) are available on the U.S. over-the-counter market while Nokia (NYSE:NOK) is traded on the New York Stock Exchange.
IDC didn’t mention the iPhone, but you can’t leave out Apple (NASDAQ:AAPL) when you’re talking about smartphones.
And don’t forget the companies that supply all the parts that go into smartphones. Here is a partial list of the publicly traded companies that supply parts to the iPhone.
- Qualcomm (NASDAQ:QCOM)
- Broadcom (NASDAQ:BRCM)
- Corning (NYSE:GLW)
- OmniVision Technologies (NASDAQ:OVTI)
- Nuance Communications (NASDAQ:NUAN)
- Avago Technologies (NASDAQ:AVGO)
- TriQuint Semniconductor (NASDAQ:TQNT)
- Skyworks Solutions (NASDAQ:SWKS)
If you’re more of an ETF type of investor, you should take a look at these two:
- Technology Select Sector SPDR (NYSEARCA:XLK), which allocates 10% of its assets to Apple and includes Google (NASDAQ:GOOG) in its top holdings.
- iShares S&P Global Technology (NYSEARCA:IXN) has major exposure to Apple, Samsung Electronics and Nokia.
Personally, I tend to gravitate to stocks over ETFs for the best profit opportunities. But these are only a handful of names worth knowing about in this exciting sector. To get instant access and detailed instructions on my favorite ways to play the Asian growth engine — including potential telecom plays like the ones we discussed today — click here to join my Asia Stock Alert service right away!
Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended inUWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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