Wednesday, November 4, 2009

iPhone's Meager Launch

There wasn't iPhone hysteria when the product was released a couple days ago.


Image from

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.

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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).

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.


Anonymous said...

If the iPhone cost over a $1,000 here at launch it wouldn't have made a big splash either. A cell phone that costs what most Chinese don't make in 6 months, ummm yeah, not gonna go over real big no matter how wonderful it is.

Apple needs to run the margins a lot closer or even take a loss for a few years to tap that huge market.

I love the new Mac/PC commercials where PC is "its not gonna have any of the problems that windows-- had". Thats been my mantra since buying into the Vista hype, not gonna get fooled again.

Was it more difficult having a Mac over there? I am wanting to finally go Apple with my next laptop purchase but worry that if I do end up in China that having a Mac/iPhone will make things more difficult. Any suggestions? Also I have heard from others that the best thing to do is buy the laptop here but the cellphone over there. Any thoughts on how to approach these two issues for someone going from west to east would be appreciated.

Mark said...

Lots of western computer products in China cost significantly more there than the same one does here. Maybe not as much higher as the iPhone is, but just about all (higher-tech/newer) western electronic devices are more expensive in China.

I wouldn't say that it is difficult having a Mac in China. I had a friend who had problems with his Mac and he was able to get it worked on there. It's not as if nobody has one over there. It's just that they haven't been exposed to them as much and most people have never seen one or would consider buying one.

Buying a laptop here and phone there sounds like a good idea. Laptops will be cheaper in the US. I wouldn't bother with buying a phone in the States because the frequencies and such are not the same as the States. You can also get several basic Motorola or Nokia models for dirt cheap.

Anonymous said...

Related video

Taylor O said...

Wow, without a contract it leaves bare the math of what an iPhone really costs. Have you seen that monthly plan of easily $100 plus dollars a month x 36 months? It's vastly higher than other options. For some reason everyone in the US is ignoring the Total Cost of Ownership and merely looking at initial phone price. Facebooking is not worth $4,000 after phone, bills and tax.