Posted by: Bruce Einhorn on May 9, 2010
As China's two biggest makers of telecom equipment, Huawei and ZTE, try to get New Delhi to reverse its policy prohibiting Indian companies from buying their Chinese-made products, smaller companies from China have problems of their own in India. The government late last year took steps to stop a flood of Made-in-China phones entering the country. The phones are made by the so-called shanzhai, or bandit, manufacturers. These companies specialize in producing inexpensive, no-name phones; Indian partners often import them and slap on a local brand name. Over the past few years, Indian sales of these gray-market Chinese-made phones have soared; they accounted for 30% of the Indian market in 2009, says Flora Wu, an analyst in Beijing with consulting firm BDA China. That's 40 million handsets, up from almost zero in 2007.
Problem is, many of these shanzhai companies don't put International Mobile Equipment Identity numbers on their phones. Given the way the terrorists who attacked Mumbai in 2008 used cell phones to communicate, having tens of millions of anonymous cell phones in the country creates a major security threat. So last year the Indian government began forcing operators to disconnect phones without IMEIs. That change - as well as the latest moves against Huawei and ZTE - may be leading some Chinese companies to rethink India. Instead of exporting from China, why not produce locally? Like the Japanese automakers that started manufacturing in the U.S. in the 1990s, thereby disarming some of their strongest nationalist critics, the Chinese might be able to win friends in India by investing in the country, creating local jobs and helping to build a local supply chain of manufacturers. One sign of possible things to come: According to the Indian newspaper the Business Standard, China Wireless Technology, a handset maker in Shenzhen, wants to open a factory in India and boost the number of Indian employees from current 200-300 to 1,000. The paper cites Managing Director Sami Al-Lawati saying "we plan to set up a manufacturing facility in 2012." Expect more reports like this in the months ahead.
Posted by: Bruce Einhorn on April 29, 2010
After lots of speculation that a Chinese or Taiwanese company would buy Palm, the struggling smartphone maker is about to go to Hewlett-Packard. And investors in companies like Lenovo, ZTE and HTC should be relieved, according to Sandy Shen, research director of mobile devices and consumer services for Gartner in Shanghai. I spoke to her last week, as talk about an Asian buyer was growing louder. “I don’t think any of the companies should buy Palm,” she said then. “There’s not much left; I don’t know what value any buyer could get from Palm.” Yes, Palm has its operating system, webOS, but that would be of limited value to Taiwanese and Chinese companies that are focusing their efforts on Android and Windows Mobile. “It doesn’t make sense for them to take on a third OS. If you want to be a strong player in smartphones, it’s better for you to specialize.”
What about Peter Chou, the chief executive of HTC, saying (as he told me recently) that the company needed more scale? “Palm’s not going to be giving them any scale, it’s too small.” There might be some logic behind Lenovo buying Palm, since the American company was an early mover in China with the Treo. Even though Palm’s presence is now trivial, “Palm still has some brand recognition and followers in mainland China,” said Shen. “If Lenovo could use its marketing muscle, there might be a possibility for them to have Palm as a meaningful player in China. But outside China it would be just very difficult for Lenovo to have a meaningful market share.” The Palm brand value in China is shrinking, though. “The window of opportunity is closing fast. Now everybody is just talking about Android and iPhone."
Posted by: Bruce Einhorn on April 22, 2010
Even as Bangkok has been hit by political unrest, Thailand’s medical-tourism industry has been surprisingly resilient. Overnight, one person died and 78 were injured when at least five grenades exploded in Bangkok’s financial and tourist district. (Note that this is the updated figure, based on a statement to Bloomberg News by the Health Ministry; earlier, Deputy Prime Minister Suthep Thaugsuban had said three people died.) This was the latest fatal incident in the capital, where 25 people were killed and more than 800 injured earlier this month when the military tried to force the Red Shirts - anti-government protesters who support deposed Prime Minister Thaksin – to end their demonstrations in the city. According to Bloomberg News, about 14,000 Red Shirts have rallied in the center of Bangkok, “where they set up showers next to the Four Seasons Hotel and slept under advertisements for Prada and Louis Vuitton.”
You might think this would be huge turnoff for investors in Thailand’s hospitals, which count on patients coming from overseas - people who might stay at the Four Seasons, wear Prada clothes and carry Louis Vuitton bags - for an important part of their revenue. So far, though, investors are surprisingly sanguine about the impact of the unrest. Since the Red Shirt demonstrations started last month, the stock price of Bumrungrad Hospital, probably the premier destination in Thailand for international patients, is only down about 8 percent; meanwhile, Bangkok Chain Hospital is down just 1 percent and Bangkok Dusit Medical is actually up by 0.8 percent. (The benchmark Thai index is down 1.7 percent.)
What explains such confidence? In part, the timing of the Red Shirt revolt. As analyst Raweenuch Piyakriengkai of KGI Securities wrote in a report on April 1, the second quarter of the year is low season for the health-care sector, regardless of what’s happening in the streets. “It is the off-peak tourism season which means less international patient traffic,” Raweenuch wrote.
Since that KGI report came out, though, the once-peaceful protests have turned deadly. The situation could get much worse soon, given the huge political and economic divide between Bangkok’s upper and middle class Yellow Shirts and the northeast’s poor Red Shirts. If and when it does, I would expect the Thai hospitals to take a big hit. Medical tourists from Southeast Asia, the Middle East, Europe and America have plenty of other options for their hip replacements or tummy tucks without having to brave turmoil in Thailand.
Posted by: Bruce Einhorn on April 20, 2010
The Indian government is considering liberalization of higher education in the country, a move that would allow foreign universities to establish campuses in India. Check out this story from Monday’s Financial Times for more on the proposed changes. One angle that story misses: How the proposed reforms could help local schools. Consider one problem faced by the Indian School of Business, the B-school based in Hyderabad that is partners with Wharton and Kellogg and has just announced an alliance with Sloan. (For more on ISB, look at my story about the school in the current issue of Bloomberg BusinessWeek here.) Since ISB isn’t affiliated with a university, it can’t give MBAs to its graduates. Indian students don’t mind: Most of the other top B-schools in India can’t give MBAs either, and everybody knows that the piece of paper you get from ISB is an MBA in everything but name.
Still, the lack of MBAs makes it difficult for ISB to attract students from outside the country whose friends and family members and would-be employers aren’t quite so understanding. Not being able to offer MBAs “does make a difference when you are trying to attract international students, particularly students from the Asian region,” deputy dean Savita Mahajan told me recently in an interview in her Hyderabad office. “That has been a challenge for us. When you go to Singapore, Taiwan, South Korea, China, they are more conscious of the [MBA] label.”
ISB’s Dean, Ajit Rangnekar, says he’s hopeful that the proposed education reforms could eliminate the problem, allowing ISB and others to grant MBAs. That would make the school more competitive in recruiting students. Non-Indian students currently make up only about 5% of the student body, says Mahajan. “We will truly be in that [top] league only once we are able to get international students,” she says. “That’s one of our biggest drawbacks now.”
Posted by: Bruce Einhorn on April 12, 2010
Now that Chinese automaker Geely has agreed to purchase Volvo from Ford, will Palm be the next downtrodden Western brand to be swooped up by a Chinese buyer? That’s a possibility now that the creator of the Pre smartphone is, according to this Bloomberg News story and other news reports, seeking bids for the company. As they speculate about would-be buyers, analysts point to several companies from China that might want to grab the U.S. company as a way to jump-start their smartphone sales. Lenovo, the PC maker that has gotten back into the phone business in January after a two-year absence, is one. Huawei and ZTE, the two biggest Chinese makers of phone equipment, might also be interested.
Good luck with that. I’ve written before about the spotty track record of Chinese companies trying to grow globally through M&A.; The best of the lot so far has been Lenovo’s purchase of IBM’s PC division in 2005 – and that’s not saying much. Lenovo is No. 4, behind market leader HP, Acer and Dell, and its global market share in the fourth quarter of 2009 was a respectable 8.9%. That’s thanks largely to Lenovo’s commanding position (33.5% market share) in its home market, though, something that the company didn’t need the IBM deal to achieve. Meanwhile, in the market where the acquisition should have helped the most – the U.S. – the company’s sales have slumped. Something to keep in mind in the days ahead as we hear more about the likelihood of a Chinese company trying to leapfrog to the top tier of the smartphone business by buying Palm.
