“The shock wave caused by the Apple iPhone has been spreading from the US to China at an unbelievable rate. Savvy entrepreneurs have been purchasing hundreds of thousands of iPhones in the US and Europe, then “cracking” the operating system to allow the device to be used on any GSM network. According to China Mobile, the biggest wireless carrier in China, there were about 400,000 cracked iPhones using its cellular network service at the end of 2007, representing one out of every 10 iPhone shipments announced officially by Apple. The figure surprised us as it is fourfold of that we estimated before,” Anty Zheng reports for In-Stat China.

MacDailyNews Take: There’s nothing like granting Steve Jobs massive bargaining power and carte blanche to negotiate from a position of strength.

“We have never doubted that the iPhone will achieve greater success than iPod in China if Apple teams with China Mobile to launch its Chinese version. There are two reasons. Firstly, different from the US where the smartphone market is fairly limited, appealing primarily to business users, The smartphone market in China, though, is an entertainment-oriented individual consumer market. The main reasons that Chinese mobile users purchase smartphones include entertainment (such as music players, cameras and video) and to access mobile Internet applications (such as IM, e-book, and games). We believe the iPhone will be favored by these consumers as it can better meet such demand. Secondly, high-end handset buyers significantly outnumber high-end mp3 player buyers. We estimate that 20% of handsets sold in China in 2007 cost more than 4,000 RMB (US$533). In another words, there are an estimated 28 million potential users for the iPhone in China.,” Zheng reports.

“Further, the iPhone is not just a successful product. In-Stat feels that the iPhone is leading the way to a new generation of smartphones that are very different from their older counterparts. One important trend is that revolutionary UI and UE, enabled by touchscreens and 3D sensor technologies, will be widely used in the next generation of smartphones in China and around the world,” Zheng reports.

“Also, the trend toward the mobile Internet will drive handset makers to deliver more smartphone models. More Internet applications, such as social networking, maps, search, and e-mail, will be developed for smartphones, and these will make the iPhone and other smartphones more attractive to mobile users who like to use their handsets to pass the time. In turn, the mobile Internet will become a new selling point for smartphones, and drive up sales. Taking the long view, In-Stat believes that the smartphone is evolving into a increasingly wide range of mobile devices, where cellular voice communications are just one function of the converged appliance,” Zheng reports.

For more information about Chinese smartphone market, check out In-Stat’s recently published report titled “Mobile Internet and GPS Change the Future of Smartphones in China,” available online at: http://www.instat.com/Abstract.asp?ID=279&SKU=IN0703655CWW

[Thanks to MacDailyNews Reader “Mike in Helsinki” for the heads up.]

Well, now, there’s a rotating, mile-high by mile-wide, blinking neon billboard screaming “Apple’s iPhone will rule the world!” One question remains, of course, is that large and bright enough for Wall Street to finally be able to see it, read it, and understand what it means?