SMARTPHONES: New Apple, Google Moves Focus on China Apps

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Bottom line: Tim Cook’s latest trip to China and Google’s new investment in a Chinese voice recognition technology firm reflect efforts by both to build up app-making infrastructure to thrive in the increasingly important market.

Google invests in voice technology firm

Leading high-tech giants Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG) are both in the China headlines today, led by the third visit this year to the country by Apple CEO Tim Cook to promote app development for his company’s iPhones. Meantime, Google is in the headlines for its new investment in a fast-growing maker of an app that uses voice recognition technology, which many companies believe will be central to mobile devices of the future.

Neither of these stories is huge and instead both are mostly incremental, underscoring the growing importance that China is playing in the global market for high-tech gadgets. In recognition of that fact, Apple realizes it needs to build a robust field of locally-based app developers to make sure its iPhones can maintain their place in the world’s largest smartphone market.
Google, meanwhile, is looking enviously at Apple as it tries to figure out its own way to re-enter China, after the high-profile shuttering of its locally based search engine in 2010 due to a dispute over censorship. We’ve seen growing signs that Google is preparing to re-enter the market, most likely with its less sensitive Nexus brand of smartphones. Such a move would require the company to build up its own locally-based technology, which may be an important driver of its new investment in a company called Mobvoi.

Let’s begin with the latest China trip by Apple’s Tim Cook, which marks his third visit to the country this year. What’s most noteworthy about this trip is that Cook made himself accessible to reporters at a number of events, but didn’t say anything really noteworthy. I’m certain he was asked repeatedly about early sales for Apple’s recently released iPhone 6s, but the lack of related news shows he declined to give any progress reports.

Instead, the reports contain mostly word of Cook discussing local app development and attending a related meeting, which appears to be his big priority on this trip. (Chinese article) Cultivation of such developers is important for Apple, since all iPhone apps can only be used on Apple’s own brand of smartphones. By comparison, apps for the rival Android operating system (OS) are more attractive to Chinese developers, since they can be used on the big majority of locally-sold smartphones that use the free OS developed by Google.

Investing in Voice

That explanation forms a good transition into the second news bit, which has Google investing an unspecified amount in Mobvoi, in the third-round of fund-raising for the start-up voice recognition technology specialist. (Chinese article) The reports say Mobvoi has received $75 million in funding to date, and the latest investment values it at a relatively large $300 million. Mobvi’s own webpage also points out that the company was founded by a former Google employee, and says the company makes an Android-based voice recognition app.

This particular investment is probably relatively small, perhaps worth up to $40 million at the most. But it does show that Google continues to eye the China market, not only for its Nexus smartphones but probably for other future devices that will rely heavily on the voice recognition technology that Mobvi makes. Such technology was a key element of Apple’s recently launched watch, and is suitable for smaller wearable devices that may not be suitable for use with a keyboard.

I wrote earlier this week that Google may be close to re-entering China after recently setting up locally-based servers and forming a manufacturing partnership for its Nexus phones with well-connected Chinese partner Huawei. (previous post) This latest investment looks like another step in Google’s march back to China, and could ultimately auger a local roll-out of not only its smartphones but also other wearable devices like its Google glasses.

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