siliconindia | | October 20137down and the East is on the rise when it comes to IPOs. Further, Chinese capital markets and stock exchanges are playing an increasingly larger role in the IPO process. During 2010 to 2012, for example, 148 Chinese companies completed their IPOs, and 118 listed on the Shenzhen exchange. In contrast, during the same period, the U.S. exchanges accounted for 107 technology IPOs. When measured in terms of proceeds, the IPO picture changes, with U.S.-based companies accounting for 48 percent of the total proceeds raised as compared to 31 percent for the China-based technology companies. (See Figure 2) This suggests that more disruptive innovations are still occurring in the U.S. The greater the disruption caused by a company, the higher its market value tends to be and hence the larger the proceeds. The U.S. numbers were clearly favorably impacted by the 2012 $16 billion Facebook IPO. Facebook's high proceeds were a direct function of the disruption caused by its innovative social media platform. Exclude Facebook, however, and Chinese technology companies would have led in total proceeds.The number of technology IPOs from Asia--and in particular China--is on the rise, but many are not as robust as those in the U.S. and elsewhere in terms of market valuation and proceeds raised. Because of a traditional low cost-base, many Asian startup technology companies historically have competed primarily on price, which does not result in a financially strong company capable of growth and able to withstand global economic volatility and strong competition. We expect this trend to change over the next few years as Asian companies put more focus on product functions and features, yielding higher margins and healthier balance sheets. Sector Growth ­ A Reflection of Macro TrendsA look at the sector breakdown for IPOs over the last three years proves interesting. (See Figures 3 and 4) The Semiconductor and Solar Energy sectors accounted for just over a quarter of all technology IPOs over the three-year period, with most coming from and occurring in China. The Semiconductor sector has been at the center of all major technological evolutions and is clearly playing a key role in the ongoing mobile technology revolution. Another effect of the mobile computing trend can be seen in the low number of IPOs occurring in the Computers & Peripherals sector. As consumers and enterprises continue to focus on tablets and smartphones, the market for traditional PCs continues to shrink, along with the success of startups in these areas. Two more industry trends--cloud computing and social media--are contributing to the solid growth seen in the Internet Software & Services sector.what's next?While no one has a crystal ball and a game-changing innovation could be just around the corner, it's safe to say that Asia--and China in particular--will continue to play a growing role in the global technology industry as the indigenous companies there mature and local capital markets continue to actively support them. Silicon Valley will no doubt continue to play a meaningful role, nurturing startups and industry innovation as it has always done. But as the technology landscape expands, companies, investors, analysts and even consumers will also have to expand their viewpoints in order to have a clear and complete picture upon which to make decisions.
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