Ticonderoga on Networking & IT Hardware: Highlights From Day 5 of Our China-Taiwan Tech Trip

Ticonderoga on Networking & IT Hardware: Highlights From Day 5 of Our China-Taiwan Tech Trip by Brian White

White said, "Data Points Are Pointing Toward a Full-Blown Smart TV From Apple. At a China electronics trade show today, we picked up data points that are suggesting a Smart TV launch by Apple (Nasdaq: AAPL)( Buy) could occur near the end of this year. Our research suggests this Smart TV would go well beyond the miniature $99 second-generation Apple TV that the company released last fall and provide a full-blown TV product for consumers. We have indicated in numerous reports in the past that we felt Apple would eventually enter the $100 billion LCD TV market, and this data point suggests the company appears to be moving down this path at a faster pace than the market expected. The combination of Apple’s powerful ecosystem, industrial design savvy, powerful brand and ability to reinvent product categories could make Apple a powerful force in the TV world over the next few years."

China Telecom Aggressively Ramping 3G Subs. Our meeting with China Telecom (NYSE: CHA)(NR) highlights plans for a strong 3G ramp in 2011. China Telecom is targeting the addition of 17 million 3G subscribers in 2011, or more than double the 12.3 million 3G subscribers exiting 2010. We believe the three leading carriers in China are targeting an aggregate addition of at least 67 million 3G subscribers in 2011 versus 47.1 million at the end of 2010. As such, we believe this year will be a big year for the ramp of the 3G mobile phone in China, a positive for Cogo (Nasdaq: COGO)(Buy), which generates approximately 25% of sales from the mobile phone market with a focus on China. Regarding a possible iPhone 4 launch, we believe China Telecom’s financial discipline may prevent a deal this summer; however, we ultimately expect the two companies to reach reasonable terms but we may have to wait until the launch of iPhone 5.

China Mobile Continues to Invest and Looking Forward to 4G TD-LTE. Our meeting with China Mobile (CHL, $46.59, NR) highlighted the company’s goal of aggressively ramping up its 3G subscriber base, while preparing for the ramp of a 4G TD-LTE network and spending aggressively on capital expenditures that are expected to reach RMB132 billion in 2011 (vs. RMB124 billion in 2010). For 2011, China Mobile is targeting the addition of more than 25 million 3G subscribers or more than double the 20.7 million 3G subscribers at the end of 2010. Although China Mobile does not have an official agreement with Apple, we believe the carrier now has over 3 million iPhone subscribers on its network, similar to China Unicom (NYSE: CHU)(NR), which has an official agreement with Apple. China Mobile also remains focused on the ramp of its 4G TD-LTE network in seven trial cities this year; however, a commercial launch sounds more likely to be a 2013 event. When this commercial network is up and running, we believe China Mobile will introduce a 4G TD-LTE iPhone."

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