Where Is Apple's Real Competition?

Where is Apple’s Real Competition?

Over the last few years, many investors would argue that Apple, Inc. AAPL has fallen out of favor with most of the market.  A quick look at the long term charts will give some credence to these arguments, as there was a very quick drop in market valuations relative to the 2012 all time high for the stock.  Recent lows fell below $400 less than a year later, so we can see that the overall trajectory has met relatively extreme volatility in a short period of time.  The stock price has stabilized since then and we are now trading back near the $600 mark.  But is all of the cause for concern really over?  Should we expect another run at the record highs for the stock?  Have viable competitors emerged that can put further dents in Apple’s market share?

Chinese Competition

When we are looking at newer names that might be named as emerging competitors, China is generally the first word that gets a mention.  In other areas, we can see examples of compared search outlets in Google, Inc. GOOG and Baidu BIDU.  Google has had difficulties establishing a major presence in the Chinese search market, and this has led to widespread speculation that Baidu will be able to use its market share as a platform to jump into other regional markets.  First here would be emerging Asia and then if there is sufficient momentum at this stage, Baidu might have an opportunity to make a move into Europe or North America.  

In the mobile device space, similar arguments have been made about Apple and XiaoMi, which has already earned the reputation as “China’s Apple.”  But the comparisons here leave much to be desired, and there is little reason to view these comparisons with much credibility.  For those that don’t know, XiaoMi is a relatively new company and has made some significant progress over the last four years.  Most of the company’s ability to capture market share has come from their willingness to focus on social media as a way of attracting attention from mobile users.  

True Global Presence

But what is really important here is the fact that there is little reason to believe companies like XiaoMi will be able to develop a true global presence in the way that companies like Apple and Google have already accomplished.  “Most of the government advantages that have allowed companies like Baidu and XiaoMi to establish a strong foothold in China are not present in other parts of the world,” said Ryan Holdman, markets analyst at Corner Trader.  “This is going to make it very difficult for these companies to create the same sort of trajectory that marked their early entrances into the market.”  For these reasons, it makes sense to keep relatively calm when assessing the prospects of companies in the emerging markets tech space.  It is not so easy to remove established giants, and there is not much to suggest that these Chinese names would even be the ones that could do it.