Don't Fall for This Tech Head Fake

China this week unveiled a new supercomputer that would have ranked as the fourth fastest in the world according to the latest rankings of these sorts of systems, according to China's Xinhua news agency.

Interestingly, the announcement is a victory both for China and for the United States. For China, the newly named "Milky Way" supercomputer is a tangible demonstration of the country's prowess in technology -- an image it is working hard to cultivate via its national high-tech development program.

But Milky Way is also a win for the U.S. in that the system was built from processors supplied by Intel (Nasdaq: INTC  ) and Advanced Micro Devices (NYSE: AMD  ) , reports IDG News Service.

Not surprisingly, Chinese scientists aren't content with partial victory. "After it's installed in Tianjin, we plan to add hundreds or thousands of China-made CPUs to the machine, and improve its Linpack performance to over 800 teraflops," Zhou Xingming, one of the Milky Way project's administrators, told Xinhua.

Loose translation: Sure, U.S. technology is good, but we think we can do better.

Domestic companies are already trying. Lenovo has more than double the PC market share of Hewlett-Packard (NYSE: HPQ  ) in its home country, and it is the dominant supplier to buyers in the rural countryside.

Apple (Nasdaq: AAPL  ) , meanwhile, is now selling an almost-iPhone to buyers on the mainland thanks to government restrictions that prevent its handsets from shipping with a Wi-Fi radio.

Among supercomputer suppliers, IDG says that China's government-backed Dawning will compete with IBM (NYSE: IBM  ) and Cray (Nasdaq: CRAY  ) in developing supercomputers. The government overtly supports Dawning, as it does with many domestic tech firms.

We're too early in the cycle to know what the long-term effects of China's tech policy will be. But it seems clear that we can expect fewer American imports and more domestic investment. Perhaps the Chinese may even employ a tech-focused stimulus plan.

Either way, tech investors may do better to forget China and try India instead. While China has illustrated the tech power necessary to build something great, India has the market and the demographics necessary to take advantage of that technology. Read more on why I think India is ripe for better returns.

What do Fools think -- would you rather invest in China or India when it comes to the tech sector?

Intel is an Inside Value pick. Apple is a Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the market-beating Rule Breakers stock-picking team. He had stock and options positions in Apple and a stock position in IBM at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is meditating at the moment.


Read/Post Comments (5) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 30, 2009, at 3:47 PM, vincenzo02 wrote:

    China will compete with "Cree?" I don't think so. Perhaps it should have read "Cray?"

  • Report this Comment On October 30, 2009, at 3:48 PM, vincenzo02 wrote:

    China will not be competing with "Cree" but with Cray.

  • Report this Comment On October 30, 2009, at 4:26 PM, TMFMileHigh wrote:

    Hello vincenzo02,

    >>China will not be competing with "Cree" but with Cray.

    Exactly right. A Friday swing and a miss from me, and I thank you for the correction.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On October 31, 2009, at 11:49 AM, iewgnem wrote:

    "India has the market and the demographics necessary to take advantage of that technology."

    Half of India don't even have electricity, how do I invest in a tech sector that don't have electricity?

  • Report this Comment On October 31, 2009, at 3:18 PM, kennyboy81 wrote:

    because half of india = 600 million people.

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