There was the roaring twenties – an era that conjures images of flapper girls and the Great Gatsby. Then came another memorably named decade, the swinging sixties, with its miniskirts and rock’n’roll. Will the decade we have just lived through gets it own moniker too? As we all look back over the past 10 years – which got off to a horrific start with the September 11 attack on the World Trade Centre and then came close to a catastrophic conclusion with the world financial system nearly imploding in 2008 – it was in many respects ‘the nasty noughties’.
However, even in a dire decade there are winners as well as losers. And WiC thinks the two biggest winners in the noughties were Hu Jintao’s China and Steve Jobs’ Apple.
Cast your mind back to 2000 and recall how China and Apple were viewed. Few would dispute that they were less important than today. The average person in the US or Europe could comfortably get through the day without mention of either. That’s tougher to do now. No discussion of the global economy can fail to mention China; hardly any conversation about telecoms, music or new gadgets can omit Apple.
It has been a decade in which both have been strikingly successful. First, let’s take China, where the numbers speak for themselves. In 2000 its GDP was Rmb8.9 trillion. HSBC predicts it will be Rmb38 trillion this year. That means the Chinese economy is over four times bigger than at the start of the decade. This year it leapfrogged Japan to become the world’s second biggest economy; last year it supplanted Germany as the world’s biggest exporter and the US as the top car market. It impressed the world with its hosting of the 2008 Olympics and today makes the world’s fastest trains (in a recent test-run one reached 486km per hour). A country that used to be associated with cheap noodles and subsistence farming, now has 189 billionaires and the biggest population of internet users on the planet.
Think back to 2000: at the turn of the millennium China didn’t drive the price of commodities (such as iron ore); few people could have told you the name of its currency; it certainly wouldn’t have presumed to lecture the US on how best to run its economy. The bestseller list wouldn’t have featured books with titles like When China Rules the World: the Rise of the Middle Kingdom and the End of the Western World.
If anything, that power grab has accelerated towards the end of the decade too. China emerged from the 2008 financial crisis with its prestige greatly enhanced. Its government looked surefooted in its policy response and kept the economy growing at double digits. While Western banks tottered, China’s became the world’s most highly valued by market capitalisation. And thanks to its huge foreign exchange reserves, its firms are now criss-crossing the globe purchasing natural resources and even international brands.
If this decade has seen China’s prestige surge more than any other country’s, its corporate equivalent is Apple. In the past 10 years the US firm has moved from the periphery of the business world to centre stage – redefining every business that it touches. It’s hard to think of another company that has had a more transformational decade.
Again, the numbers speak volumes. At the start of the decade Apple had a market capitalisation of $16 billion. After the dotcom crash and tech sell-off, its value barely exceeded the cash it held. That is to say its core computer business was pretty much worth zero. In one of the great turnarounds in business history its market value has since grown to around $294 billion. And, symbolically, its market cap this year overtook that of its old nemesis, Microsoft (coincidentally at almost the same time that China’s economy toppled Japan’s from the world’s number two spot).
Remember the situation in 2000? Back then Apple was largely written off as the loser in the war with Microsoft’s Windows and faced a dwindling PC market share. The mainstream media hardly ever wrote about the company and few investment banking analysts covered it – believing that it was fated to a slow demise, courtesy of Bill Gates. Fast forward to 2010 and it’s practically impossible to watch Bloomberg Television without Apple – and its share price – getting a mention.
What saved Apple from its death spiral was a product launched on October 23, 2001. It was called the iPod and it took the company in a whole new direction. By last September, Apple had reached cumulative iPod sales of 220 million units, making it one of the most successful products of the decade. With the iPod and later the iTunes Store, Apple’s CEO Steve Jobs changed the music industry and got people to pay for tracks rather than illegally download them.
He then changed the dynamics of another industry. On January 9, 2007 Jobs unveiled the iPhone, a smartphone that outflanked industry leader Nokia. It only sold 1.3 million units in its first year, but thanks to its coolness factor, ease of use and upgrade for 3G networks, iPhone sales then soared – Apple has sold 73.7 million to date. This led to the launch of the Apps Store, which created yet another revenue source: selling games for the phone.
Building on the success of the iPhone and its newfound ability to create new markets, Jobs this year launched a product that cynics scoffed wouldn’t sell: the tablet. Halfway between an iPhone (in look and feel) and a laptop (in power and size), its iPad has been vindicated as a commercial success. And the halo effect of all these successful products has even seen a rebound in its core PC business: in the most recent quarter Apple sold 3.89 million Macs, a quarterly record for the firm.
It all adds up to very healthy results. Its profit this year hit $14 billion and just like China it’s well reserved (as of this year’s third quarter, it held $45.8 billion in cash). Apple shareholders could not have wished for a more perfect decade.
The next decade is also about China…
During the noughties, Apple was very successful, but it largely ignored China (or more accurately, ignored it as a place to sell things; it made virtually all its products in the country). Famously, Lenovo’s boss Liu Chuanzhi quipped “We are lucky that Steve Jobs doesn’t care about China.”
He had a point. In spite of having the world’s biggest mobile phone market, Jobs was in no hurry to launch the iPhone in China – the device got its US debut in 2007, but didn’t reach Chinese shelves till last October. Perhaps due to worries about counterfeiting, Apple didn’t have an iTunes Store in China either – one of the central planks of its strategy elsewhere (such as Japan).
However, 2010 seems to be the year when Jobs finally woke up to China’s potential. Apple has now cut the lag time between US launches and those in China: it released its iPhone 4 in China only three months after its introduction to the US. The iPad arrived in September, less than five months after its debut in the US. In October, Apple opened its Chinese language Apps Stores and a local online store (shipping its products free within the country). It has also opened flagship shops in Beijing and Shanghai, and plans 25 more by the end of next year. It claims its four China stores get the highest traffic of any of its shops globally.
Other indications of a new seriousness about China? For the first time Apple released a new number to the analysts: in the first six months, revenue from greater China (including Taiwan and Hong Kong) was up 200% year-on-year to $1.3 billion. It also recently filed (and won) a case with Beijing’s State Intellectual Property Office to stop a lookalike iPhone being sold (the M8, see WiC83) – further evidence of a heightened focus on the Chinese market’s potential.
If you look on the back of many Apple products it states that they are “designed in California, and assembled in China”. In the next decade they will increasingly be sold in China too.
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