While "gray markets" may have an influence on Apple's struggles, black markets certainly do as well. A few months ago I wrote about the "Mobile Shanzhai" and the vast availability of counterfeit cellular phones (including the "hiPhone" Apple knock-off).
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With this week's launch of the iPhone in China, Apple became the latest foreign company to seek a slice of the country's booming mobile market. But some analysts point to factors endemic in China's wireless market that are growing too large to ignore -- and which could have serious implications for competitors in the space.
Some industry observers had predicted a tepid consumer reaction to the iPhone's debut in China, where it's being sold by carrier partner China Unicom. So far, those early expectations might not be far off: China Unicom has sold only 5,000 units so far, Reuters reported.
Analysts partly blame the high cost of the iconic handset, which retails for about $730 to $1,000 without a contract, and because of the fact that it's been stripped of Wi-Fi to comply with government regulations.
However, they've also pointed to another factor playing a huge role in Apple's (NASDAQ: AAPL) aspirations for China: The country's vast gray-market mobile phone business, which research firm iSuppli dubbed the nation's "dirty little secret."
Gray-market (define) handsets are made or sold outside authorized channels, enabling their sellers to avoid value-added taxes and government regulation, and other oversight, like quality assurance testing.
In addition to off-color markets, Apple simply isn't that popular in China yet. Most of my Chinese friends who saw my MacBook laptop were perplexed by a computer running without Windows. Windows, like it is for a lot of people in the States, is the only thing nearly all Chinese people have ever had any experience with. This unfamiliarity with Apple has to make the expensive iPhone an even harder sell for Chinese people.
I would think (and hope) that Apple's market will grow in China like it has in America. Whereas five years ago I had never actually used an Apple, I now would never even consider going back to a PC. I've never had one problem - either with the hardware or software - with my MacBook. It never crashes and runs fast, smooth, and virus-free. Web-surfing, photo-editing, and more complex stuff like video and music editing are vastly superior on a Mac compared to a PC. And it wasn't that expensive compared to Windows-based notebooks because I bought a refurbished notebook off of Apple's website (something I strongly recommend).
While in Beijing in June, I saw a slick new Apple store in the 三里屯 district. It was the first to open in mainland China. The more people are exposed to genuine Apple products - whether through iPhone, iPod, laptop, or desktop - the more I think they'll come to embrace them.