Summary
- Macro uncertainties have stolen the limelight, but Asia’s innovative small giants are rising out of the shadows.
- Asian Small Giants are enabling many large, global companies, by working together as strategic partners in a larger ecosystem.
- We find these small innovative companies to be compelling investment opportunities that underscore our rationale for holding them in client portfolios.
By Yan Taw (YT) Boon
Macro uncertainties have stolen the limelight, but Asia’s innovative small giants are rising out of the shadows.
From lockdowns to rate hikes and slowing growth, sentiment on the state of the economy doesn’t seem to be improving. While some might choose to wait for the light at the end of the tunnel, we prefer to look toward companies that are already rising out of the shadows. We affectionately call these the Asian Small Giants—lesser known but highly innovative companies that we view as pioneers in their own right.
Asian Small Giants are enabling many large, global companies, by working together as strategic partners in a larger ecosystem. Everyone knows the Amazon ( AMZN ) Kindle, but who has heard of E Ink, the Taiwanese company behind electronic ink technology that has made e-books a reality? How about the innovators supplying to Intel to enable advanced chip manufacturing, the valued partner to Cisco ( CSCO ) empowering high-speed data transmission, and which is backing Apple ( AAPL ) devices’ displays that let us enjoy videos in 8K?
Markets may have yet to fully stabilize, but we have seen many Asian Small Giants are posting solid earnings results, as they have demonstrated strong competitive advantages and growth potential. E Ink is expanding its addressable market to electronic price labels for retail stores, and even into automotive for color-changing cars and digital license plates. Thailand-based Fabrinet ( FN ), which manufactures optical networking components for Cisco, is benefiting from robust demand for high-speed networking in data centers. As the world focuses on increasing semiconductor capacity, Singapore-based AEM is reaching new heights as it gains market share in System Level Testing for Intel’s ( INTC ) leading-edge chips. For the consumer, new Apple devices will feature high quality displays enabled by Japan-based Dexerials, a leading supplier of optical and electronic materials.
In our view, these Asian Small Giants are key beneficiaries of secular trends such as digitalization and improving connectivity. Better yet, they are delivering strong growth potential as they have weaved themselves into the innovation value chain. Although largely overlooked—especially in a market environment like the one we are in—we find these small innovative companies to be compelling investment opportunities that underscore our rationale for holding them in client portfolios.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
Has Asia Lost Its Sizzle?