Three Chinese tech companies to watch this year

Alibaba was only the beginning.

Chinese tech companies are poised to make a huge splash this year as they push beyond their borders and invest heavily in international expansion.

"The big trend to watch is Chinese companies looking to become big players in the U.S., Europe and around the world. Alibaba started a wave, which we are going to see pick up major momentum this year," said Yuval Reisman, the general manager of Chinese operations for the software firm ironSource, which helps Chinese Internet companies target a global market.

"The companies who will succeed moving forward are those who ride this wave."

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Increased spending on research and development is one catalyst helping drive this momentum. In fact, the country is forecast to spend more on R&D than either the U.S. or the European Union by the end of the decade, according to report by the Organisation for Economic Co-operation and Development published in November.

However, the rise of Chinese tech companies in the U.S. and beyond is just on the horizon. And some of the biggest players are already making headlines.


Lei Jun, chairman and CEO of China's Xiaomi
ChinaFotoPress | Getty Images

"There are a few of these tech companies that will make a lot of noise this year," said Edith Yeung, a partner at 500 Mobile Collective Fund, which invests in mobile app start-ups in the U.S. and China. "But the No. 1 will definitely be Xiaomi."

The Chinese handset maker is valued at a whopping $45 billion, making it the most valuable private tech company in the world. And as of last the second quarter of last year, it's also the top smartphone vendor in China, beating out Samsung for the most shipped handsets, according to data from Canaly's.

But the company's ambitions reach beyond China. The company has already pushed its way into markets in Southeast Asia and it could soon elbow its way into the already crowded U.S. smartphone market, said Yeung.

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But Yeung said the company may first enter the U.S. market with smart home appliances.

While best known for its mobile devices, Xiaomi also has a range of home products ranging from TV-set top boxes to air purifiers, and has been making a big push into the smart home space.

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In December it announced an investment in the Chinese appliance maker Media, and earlier this month it unveiled a "smart module" that can be installed in its partners products to make them connected devices.

Because smart home technology has so much momentum in the U.S., Yeung said it's likely the company will make its connected home debut sooner rather than later to get an edge in the space.


An employee uses a computer as she deals with a customer at a Huawei store in Beijing on March 24, 2014.
Mark Ralston | AFP | Getty Images

Huawei Technologies, which is the world's second-largest equipment telecommunications supplier, is another Chinese company forging ahead in foreign markets.

The Shenzhen-based company said earlier this month that it had invested between 39.5 billion yuan and 40.5 billion yuan (just shy of $8 billion) on R&D in 2014, which is a 28 percent increase from the previous year.

While the company doesn't have access to the U.S. market because of spying concerns, its smartphone expansion in emerging markets in Latin America and Africa has helped catapult the company's revenue growth.

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In 2014, Huawei's sales increased 20 percent to 287 billion yuan ($46 billion), the company's chief financial officer, Cathy Meng, said this month at a press conference. That growth was driven by a 32 percent increase in its consumer business, which was spurred by the company's handset sales.

In total, Chinese smartphone brands accounted for 453.4 million units shipped worldwide in 2014, or about 40 percent of all handset shipments, according to the research firm TrendForce.

Huawei, which ranked No. 5 in smartphone shipments last year, shipped about 70 million units, according to TrendForce.

And because Huawei, which is the world's second-largest equipment telecommunications supplier, has close ties with operators worldwide it may have an edge over its competitors this year, said Bryan Wang, an analyst at Forrester Research in Beijing.

"Huawei is in a better position to tap into the global market because they already have good relationships with carriers all across the world," Wang said.


Tencent Holdings Ltd. application icons are displayed on an Apple Inc.
Brent Lewin | Bloomberg | Getty Images

Besides hardware companies, Chinese software companies, especially those that are mobile-focused, are expanding outside their domestic market this year.

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"Mobile and app-focused companies are making the strongest push to focus on foreign markets like the U.S. This makes sense, since they are in possession of the ultimate global commodity: apps," Reisman said.

"The rise of mobile has accelerated the globalization of the tech industry, and while China has a huge mobile market, the global market is still three times the size."

One of the most notable of these companies is Shenzhen-based Tencent, industry experts said.

Tencent has a stronghold in Chinese social networking platforms. The company owns the popular Chinese messaging app WeChat, which boasts over 450 million monthly active users (MAUs). But it also owns instant messaging software service QQ, that has some 820 MAUs, and the social networking site QZone, which has 629 million MAUs.

According to a recent report by the social media marketing firm We Are Social, those three properties account for half of the top six social platforms around the world.

Tencent will continue to push its mobile messaging technology into emerging markets including Latin America, North Africa and India, said Wang. But their reach into the U.S. may continue to come in the form of investments in other tech companies, especially those that are mobile focused.

Some of Tencent's mobile investments in the U.S. already include companies like SnapChat, Playdots, Amplitude and Whisper Text.

But the company will also likely increase its push for a piece of the U.S. mobile messaging market by making investments to promote its own WeChat app, Yeung said. The company has already made several significant hires in the U.S. to help grow the WeChat brand and is looking for new ways to market it.

For example, at the International Consumer Electronic Show, WeChat partnered with Caesars Entertainment and Ayla Networks, which is an internet-of-things platform provider, to demo how the app could be used as a remote control in a smart hotel room. Whether or not use cases like this will catch on remains to be seen, but there's no question Tencent is vying for a piece of the U.S. market.