Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Why Apple Inc. (AAPL) Is the Only Domestic Tech Giant That Can Succeed In China

Surely by now you’ve heard that Apple Inc. (NASDAQ:AAPL) is having a grand old time in China. The Mac maker is now up to $26.6 billion in trailing-12-month sales in the “Greater China” region, a 31-fold increase from all of fiscal 2009. That’s incredible success over the span of just four years, but there’s another notable absence here.

No other domestic tech giant has ever been able to put up that kind of growth in the Middle Kingdom. Why is Apple Inc. (NASDAQ:AAPL) the only one that can succeed in China?

Apple Inc. (NASDAQ:AAPL)

Microsoft Corporation (NASDAQ:MSFT): Piracy
Chinese consumers have a very low propensity to pay for intellectual property, including software. That’s evidenced by incredibly high piracy rates for software; bootleg copies of content are readily available everywhere. There’s even rampant piracy in the enterprise. That has made the it incredibly difficult for Microsoft Corporation (NASDAQ:MSFT) to penetrate the country, since it’s a software company.

A Business Software Alliance report from May 2012 pegged software piracy rates in China at a whopping 77%. For example, an illegal copy of Microsoft Office can be had for just $2, significantly less than a legitimate version that costs $64. As high as that 77% figure is, that’s actually an improvement.

When former Chinese president Hu Jintao visited the U.S. in January 2011, Steve Ballmer grilled him on intellectual property issues in China while saying that 90% of Microsoft users in China use pirated versions. Selling software in China is a tough proposition considering how Chinese consumers feel about actually paying for it.

Microsoft’s Surface tablet is a different story, though, as a device with integrated hardware and software. The software giant began selling Surface tablets in China in October. However, Surface isn’t yet a meaningful business relative to Microsoft’s core software offerings. China also has a ban on video game consoles, so there’s no hope for its Xbox 360.

For now, there’s no way for Microsoft to see monster growth in China.

Google Inc (NASDAQ:GOOG): Censorship
As one of the biggest proponents of an open Internet, Google Inc (NASDAQ:GOOG) was always bound to butt heads with the Chinese government over censorship issues. The search giant famously pulled out of China in early 2010 over censorship, redirecting users to its Hong Kong site where it was free to display uncensored results. That was an opportunity for, Inc. (ADR) (NASDAQ:BIDU) to continue growing its share as the “Google of China.”

China is a hard market to ignore, though, with a swelling population of netizens. Two years later, Google said it was pushing back into the Middle Kingdom. The company then added a warning when results may be censored, which was just recently removed last month since it was proving more trouble than it’s worth.

Even though Android is the dominant mobile platform, grabbing over 90% market share in China, that ubiquity is not doing Google any favors. Since Android is open-source, OEMs are free to grab the source code and modify it as they please, and what pleases them is removing all of Google’s ad-supported apps and services in favor of more popular local alternatives like Baidu. That’s why Baidu is the default search engine on 80% of Chinese Android phones.

Android benefits Baidu more than it helps Google.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.