Thread by @lillianmli

1)The second to last of my convo with Mike from WCM:

“A big trend for Chinese software over the next 10-20 years will be internationalization. We are the first innings of this today. For some tech companies, I suspect the future profit pool globally will be bigger than China...

2) We've seen a couple of big success stories: Zoom and Tiktok have emerged just in the last couple of years. But I think that's the tip of the iceberg.

There are two kinds of plays here.

3) The first is consumer internet/gaming, China is on the bleeding edge. It's almost inevitable that Chinese companies will seek to export business models to the rest of the world.

Examples: Bigo, Yalla, Tiktok, Crossfire (sort of), etc.

4) The second is more interesting - SME tooling products. Chinese companies can potentially disrupt global incumbents with products at a disruptive price and different distribution.

5) Enterprise software and professional / design software (engineering, EDA, etc) will be pretty safe from competition in the medium term.

But there's a lot of interesting opportunities in prosumer and with hardware + software model:

6) Take Autel - They sell diagnostic tools for cars for professional mechanics. The tool is just software loaded onto a commodity Android pad. They can sell in mass channels and price at a 50%+ discount to incumbents. Very disruptive.

7) Fujian Foxit is another. They sell PDF editors - not quite Adobe level, but at a fraction of the price and single perpetual licenses. Adobe's subscription strategy created a huge pricing advantage for them.

8) Agora is a third. In use cases like online education and livestreaming, China is at the cutting edge. Agora leverages learning and export it at a fraction of Twilio’s costs. Longer-term, I suspect Agora's opportunity set is bigger outside of China.
notboring.co/p/bull-and-bea…

9) Chinese companies have historically been bad at managing multinational and multicultural workforces. But the footprint needed outside of China for digital services is often modest and distribution now is easier. The best companies though will develop these "global" muscles

10) Chinese software firms are using the typical innovator’s dilemma playbook: finding the fringe users in the global market - emerging markets, hobbyists, students, etc.
Incumbents may ignore them as it’s not their core markets.
Makings of a good HBS case study in 10-20 years.

11) Investors should be paying attention. For software products that do not require significant localization and have global appeal, China has the potential to produce some big winners.”

12) WCM is recruiting a generalist China analyst. If you are passionate about doing deep fundamental research in China and want to do it as a part of a tight-knit, collaborative, and slightly irreverent team (or if you know someone who’d be perfect)
linkedin.com/jobs/view/2395…

Previous WCM threads btw

https://twitter.com/lillianmli/status/1405549084329615362

https://twitter.com/lillianmli/status/1403010800827129857