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Apple's Decade: The iPhone Taps China

Editor's note: This is the sixth excerpt of an e-book on Apple by Jason Schwarz, an analyst at Lone Peak Asset Management in Westlake Village, Calif. Here are Part 1, Part 2, Part 3, Part 4 and Part 5.

The third catalyst to contribute to Apple (AAPL - Get Report) $500 is Asia expansion. The company took top honors in The Wall Street Journal's Asia 200 survey in 2009, despite reportedly having just 1.6% of the personal computer share in the region and only 0.6% of the total mobile-phone market.

When broken down by attribute, Apple consistently appeared among the top five companies ranked by consumers in Asia. For long-term vision, Apple was second, fifth for quality, fourth for corporate reputation and second for innovation.

In a revealing interview with Kai-Fu Lee, president of Google (GOOG - Get Report) China, PBS' Margaret Warner extracted some valuable information regarding the Chinese Internet explosion. Lee predicts that a quarter of China's 1.3 billion people will be online by 2009. They're not just more numerous than in the United States. They're different. The average American user is 45 while the average Chinese user is 25.

Even though the Chinese economy is helping to increase the size of the middle class, these young users still don't own their own computers. Internet cafes are open 24 hours a day, and for most of those 24 hours, they are packed with young customers engrossed in games, muovies, music videos, and chat rooms.

The Chinese are craving an inexpensive Internet device to further enable their access to information, entertainment and communication. Perhaps an alternative to the Western world's use of laptop computers will fuel a revolutionary wave of Chinese gadget obsession.

Before the government intervened with the China Mobile (CHL) monopoly, the company reported 574 million mobile subscribers back in March 2008; the number of mobile subscribers is expected to grow to 738 million in 2010. To put that number in perspective, consider that the entire U.S. population is just over 300 million. Capturing the Chinese market is the prize of all prizes.
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