Other opportunities for investors
Investors who don’t want to deal with the strategic risk facing Apple Inc. (NASDAQ:AAPL) specifically have other ways to play China’s wireless opportunities. Here are a couple:
Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM)
Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the world’s largest dedicated semiconductor foundry company. It manufactures chips for many of the major companies in the wireless industry, and has recently begun work on QUALCOMM, Inc. (NASDAQ:QCOM)‘s Snapdragon processor and ARM Holdings plc (NASDAQ:ARMH)‘ new Cortex-A57. As China increases advanced wireless usage, demand for the company’s products will continue to grow.
The company recently announced revenue of $4.4 billion and net income of $1.33 billion for its latest quarter, with a 25.7% year-over-year increase in revenue and 18.2% increase in net income. Based on these results, annualized sales are expected around $20 billion and cash earnings at $6.5 billion, producing a fair business value of $18 per share at a standard 14x multiplier.
China Mobile Ltd. (NYSE:CHL)
China Mobile Ltd. (NYSE:CHL) is the leading provider of mobile phone services in China with about 726 million customers, or about 65% of the entire mobile population. The company and its competitors are just starting to push out 3G services into the market. China Mobile Ltd. (NYSE:CHL) has grown its 3G customer base to 114 million, a 30% jump from the previous quarter. The company is also investing heavily to further develop its 3G consumer and commercial business, and should benefit from the eventual step toward 4G.
An interesting short-term headwind is the company’s use of the relatively independent TD-SCDMA standard for its network. This means that Apple, as well as other phone makers, have to adapt their design to that standard. So far, Apple has not reached an agreement with China Mobile Ltd. (NYSE:CHL) on offering a compatible phone, but longer-term, it seems likely that a deal will be struck that will benefit both parties.
Steve Jobs demanded that Apple be a premium product-premium price company. The company now has to decide whether it wants to maintain that strategy or change course. Whatever they decide is a risky proposition, which the stock price seems to have rightly discounted. But investors may realize a noticeable benefit if the company chooses well and implements the choice successfully.
The article Apple’s Product Strategy Dilemma originally appeared on Fool.com.
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