“Factories here churn out iPhones that are exported to the United States and Europe. Then thousands of them are smuggled right back into China,” David Barboza reports for The New York Times.
“The strange journey of Apple’s popular iPhone, to nearly every corner of the world, shows what happens when the world’s hottest consumer product defies a company’s attempt to slowly introduce it in new markets,” Barboza reports. “The iPhone has been swept up in a frenzy of global smuggling and word-of-mouth marketing… An iPhone purchased in Shanghai or Beijing typically costs about $555. To unlock the phone and add Chinese language software costs an additional $25.”
Barboza reports, “These unofficial distribution networks help explain a mystery that analysts who follow Apple have been pondering: why is there a large gap between the number of iPhones that Apple says it sold last year, about 3.7 million, and the 2.3 million that are actually registered on the networks of its wireless partners in the United States and Europe?”
MacDailyNews Take: It’s no mystery unless you’re an idiot and/or trying to manipulate AAPL.
Barboza continues, “For Apple, the booming overseas market for iPhones is both a sign of its marketing prowess and a blow to a business model that could be coming undone, costing the company as much as $1 billion over the next three years, according to some analysts.”
MacDailyNews Take: On paper, maybe. In reality, Apple makes a profit on each iPhone sold. Those with at least half a brain understand that this iPhone unlocking craze is clear evidence of massive future iPhone successes as it is introduced into each country. The bleeding edge, first adopter, high-price-paying iPhone unlockers will be dwarfed by the average Joe and Jane who do not want to hack their US$400+ investment. This tremendous iPhone grey market also strengthens Steve Jobs’ already formidable negotiating position with the likes of China Mobile and other carriers vying for iPhone around the world.
Barboza continues, “Negotiations between Apple and China Mobile, the world’s biggest mobile-phone service operator with more than 350 million subscribers, broke down last month, stalling the official release of the iPhone in China.”
MacDailyNews Take: Don’t believe everything you read in The New York Times. Repeating rumors that have been clearly refuted is just poor journalism. Apple CEO Steve Jobs told CNBC on January 15, 2008, that rumors of on-again, off-again negotiations with China Mobile are simply untrue; just a single China Mobile rep. has flown out to Cupertino only once. There are no ongoing negotiations, just a first meeting, Jobs explained. Jobs wants iPhone in China, but details will come later.
Barboza continues, “Some analysts say abandoning the locked phone system and allowing buyers to sign up with any carrier they choose, in any country, could spur sales. ‘The model is threatened,’ Mr. Wolf, the analyst, said. But ‘if they sold the phone unlocked with no exclusive carrier, demand could be much higher.'”
Full article here.
[Thanks to MacDailyNews Readers “Ken C.” and “Citymark” for the heads up.]
MacDailyNews Take: We highly doubt that someone of Steve Jobs’ business acumen entered into this market without a plan that considered such basic concepts as selling unlocked devices vs. exclusive carriers and the possibility of changing these models in the future.