Apple iPhone will be just fine in China, thanks

Apple Online Store“After months of anticipation for the ‘official’ iPhone release in China, the news last week was not so exciting: only 5,000 iPhones sold over the first weekend,” Apple Investor News‘ Frank Cioffi writes for MarketWatch.

MacDailyNews Take: By whose count? Not Apple’s or China Unicom’s from what we can tell.

Cioffi continues, “Even the typically bullish, and usually correct, Gene Munster of Piper Jaffray called this ‘a disappointment’ and lowered his China 2010 iPhone sales forecast from a range of 1 million to 2 million to 550,000.”

“What does this news really say about the prospects for iPhone growth in China and worldwide? Not much,” Cioffi writes.

Here’s why:
1. Apple Inc. is already profiting in China from gray market iPhone sales. In fact, the China Market Consulting Group estimates that 3.5 million Chinese already owned unlocked iPhones prior to last week’s launch.
2. Apple’s carrier limitations, for China and elsewhere, are temporary and will resolve themselves.
3. The iPhone is just getting started, with new models and technologies coming.

Cioffi writes, “Last week’s China ‘disappointment’ was a short term blip in the long term growth prospects for one of the dominant technology products of the decade.”

Full article here.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

31 Comments

  1. The problems for the iPhone in China are similar to the problems with the iPhone in India. I was in India recently and my iPhone worked great. Most of the time I got better coverage than with ATT here.

    Everyone in India has a cell phone from the very wealthy to the person who sweeps the street. These phones are used to make calls and for SMS texts, but not for much else. The average person in India does not have much access to the Internet. Unless you are fairly well off, you don’t have Internet access at your house and therefore have not become “addicted” to it and it is not a priority for most Indians. There are Internet cafes for most people who want to check their email once a day.

    The power of the iPhone is really the Internet in your pocket. But it is difficult to sell this to a population that is not Internet addicted. The other problem is that unlike the US there are no long term carrier contracts are therefore no carrier subsidies for cell phones. Most Indians are on a prepaid plan. Given this, the iPhone sells for over $600 which is a tremendous amount of money for all excepts the ultra-wealthy and therefore the poor sales numbers in India and China. I did meet a physician in India who had an iPhone, but he really didn’t know what to do with it other than make calls and it was more of a status symbol for him.

    This is not just for the iPhone, but any smartphone would have trouble penetrating these markets. This is a temporary problem though, as more Indians utilize the power of the Internet, they will gravitate to smartphones more and more. In fact, most Indians who have cell phones have never had a land line, and I suspect a similar thing will happen with smartphones. I suspect that a large portion of people will go straight from no Internet access to smartphone access only with no direct connection at home. This is mostly due to the fact that building hardwired connections whether it be phone lines or internet cable lines is much more difficult in India as opposed to placing wireless towers.

  2. Frank Cioffi and PhxDoc are both correct. The only exception I have with PhxDoc is the rapidity that China is adopting 21st Century technology. Until 2002 I had an office in both Chengdu and Beijing. My experience is that cellphones are more popular than land lines because of the cost ($1,000 deposit) and the wait to get it (up to one year). But like PhxDoc states, it is an infrastructure issue. Before writing China off as too poor to buy the iPhone consider this: there are more millionaires in China (by US standards) than there are here. This is a country emerging from 60 years of economic oppression (socialism/communism) and as always happens the weakthy appear before the middle class does. Reagonomics is correct. Whether it is politically expedient to admit it or not, trickle down has always been how economies work.

    Bottom line is that right now a crippled iPhone (no WiFi) costs more from China Unicom, than a full featured one does on the gray market. The next iteration of the iPhone (will include WiFi) coupled with lower prices from China Unicom will cause a surge in iPhone sales.

  3. “I hope China’s “carrier limitations” for consumers are more temporary than in the US.”

    Carrier limitations are not a contractual problem. Realistically only ATT is large enough, and has a network that can properly support the iPhone. As much as people argue for a Verizon agreement, Verizon’s CDMA network is not compatible with the iPhone, nor is its data capability anywhere near that of ATT’s. CDMA is incapable of simultaneous voice and data communication, and as much as Verizon touts its coverage, its network data rates aren’t much better than dial-up. Verizon’s current data network would absolutely collapse under the weight of iPhone data usage. A universal LTE upgrade will not be complete until well into 2016, and only then if Verizon commits the capital to do it (which Verizon has shown it is not willing to do).

  4. Wow. Apple does not sell the crippled phone so well in China and you guys have to defend it. I would like to see one negative experience with an Apple product or position taken by Apple on this site? Until then, this is simply a fanatic site, nothing more. News should not even be in the website.

  5. …”3.5 jailbroken iPhones in China. Lots of fun for the ikee crowd!”

    Most of those iPhones aren’t jailbroken. They are just unlocked. Major difference.

    Unlocking is a fairly simple process that doesn’t alter the rest of the iPhone OS. Jailbreaking creates problems with future updates and is not something one would want to do unless one knows exactly what one is doing.

  6. “Wow. Apple does not sell the crippled phone so well in China and you guys have to defend it. I would like to see one negative experience with an Apple product or position taken by Apple on this site? Until then, this is simply a fanatic site, nothing more. News should not even be in the website.”

    Only an uninformed idiot would say the above. NO smart phone is selling well in China because of the limitations the Chinese MPT (Ministry of Post and Telecom) puts on them.

    The reason for those limitations is the fact that China’s LARGEST cell carrier is STATE owned. Allowing full featured handsets would force them to upgrade their network, which is not what a STATE owned company wants to do. THEY AREN’T DRIVEN BY THE PROFIT MOTIVE LIKE PRIVATE ENTERPRISE IS.

    Because of the iPhone (gray market sales within China) those limitations are being lifted within the next year. Not surprisingly, this time frame coincides with China Telecom’s planned upgrade to a 3G network. Look for an agreement with China Telecom once their network is substantially upgraded.

  7. Shutter Upper:

    Which particular commenter defended it? Can you quote? What on earth are you talking about? Are you actually serious??? From all I can see, everyone was in fact piling it on (to quote acid: “Official iPhone – no Wifi, one carrier. Jailbroken iPhone – Wifi + any carrier. Yeah, real hard to figure.”)

    There is no shortage of serious Apple bashing by MDN takes WHEN it is warranted (for example, when MobileMe is launched poorly, to mention just one instance).

    I’m really not sure what type information do you expect to receive on this site. Unbridled, unapologetic enthusiasm for everything Microsoft (the way you get it at ZD-Net and CNET)? Well, the “Mac” part in the MDN’s name should give you a clue…

  8. “1. Apple Inc. is already profiting in China from gray market iPhone sales. In fact, the China Market Consulting Group estimates that 3.5 million Chinese already owned unlocked iPhones prior to last week’s launch.”

    Wow…who wrote this seriously flawed statement. Apple is not “already profiting” in China. You can think of it the same way as the used market:

    I’ll give you a scenario:
    Apple –> Carrier –> Buyer –> Grey Market Buyer
    i. Apple sell to carrier for $500
    ii. Carrier sell to buyer for $200
    iii. Buyer sell to grey market buyer for $400

    1. Is Apple getting $500, $1100, or $900 at the end?
    2. With step iii, is Apple earning more, less, or the same compare to just i & ii?

    Lastly, after going through the three steps. Is Apple marketshare doubled from 1 to 2 user?

    If you are able to answer these question, then how you say Apple is “profiting” form the grey market?

  9. …”Apple is not “already profiting” in China.”

    How can it not? When a person buys an iPhone to take it to China, he HAS to pay Apple money for that phone, right? For every iPhone sold, Apple is paid (some $600 or so).

    China is most definitely NOT a used-iPhone market. Vast majority of those millions of iPhones currently in China were bought in the US (and elsewhere) specifically to be brought into China. In the countries where iPhones are sold unlocked (without contract), the iPhones were bought outright. In the US, they were bought, put on AT&T plan, immediately terminated the plan, paid early termination and went to China.

    None of these phones would have otherwise been sold, if China as a market did not exist. So, how is it possible that Apple profits from sales of ALL other phones, except from those that end up in China?

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.