iPhone in China Update – Updated March ‘09

Update 3/08/09: Update – March 8, 2008: Discussion points for March (now) China Unicom/Apple Summit in Cupertino

Two iPhone in China deals in the works?

Update 6/28/08: iPhone 3G in China – Path cleared for a deal

Update 6/17/08: Apple and China Unicom Rumors

Update 6/09/08: CNBC’s Jim Goldman sat down for a post WWDC 2008 Keynote interview with Steve Jobs … key subjects – 3G iPhone, lower price, SDK & new app store and “I think you’ll see those (China & Russia) happen later this year”. 

Discussion points: 3G launch, pricing and market-share + Steve Jobs’ mention of China & Russia + discussion of AAPL performance > HERE

Confirmed: 6 million iPhones sold since initial launch!

Steve Jobs June 9, 2008:

“The two big ones we just didn’t have a chance to get closed were Russia and China… and I think you’ll see those happen later this year… we have to get through the regulatory bodies in China, which we’re in the process of doing, and I think later on this year you’ll hear some announcements.  70 countries is a lot of countries and we’re launching 22 of the biggest on July 11th” 

Primary video interview > HERE

Update 6/02/08: More speculation re iPhone’s rumored chipset > HERE

Update 5/29/08: iPhonAsia has reviewed numerous current reports which indicate that the newly formed China Uniom/Netcom will receive a W-CDMA 3G license when telecom restructuring dust has settled (in 3 to 18 mos). If this proves true, China Unicom may become an alternative to China Mobile as a partner for Apple (iPhone) in China.  It may also be possible for Apple to work with both carriers.

Note also the just announced 5/29/08 iPhone deal in Hong Kong and Macau with Hutchison Telecom Intl. Ltd.  Hutchison runs a W-CDMA network in Macau.

                

iPhone in China: All’s Well That Ends Well

Shakespeare once wrote a play entitled “Much ado about nothing” … a whimsical comedy with many twists and turns. In the middle of the play, Claudio humiliates Hero and accuses her of lechery on their wedding day and abandons her at the altar.  Yet new romance blossoms and at play’s end we have a merry dance and celebrate a double wedding.

Some might argue that wild speculation over an Apple iPhone deal with China Mobile might be the basis for a sequel to Shakespeare’s comedy.  “Much ado about nothing” is a catchy title.  Perhaps a better name for this play would be “Someone’s just makin’ this stuff up”… a Steve Jobs quip during an interview with CNBC’s Jim Goldman.  Yet I like the title of another Shakespeare play – “All’s well that ends well.” Like all good dramas, this one has a beginning, a middle and ending.  I am happy to report that we are past the middle acts and the end is in sight … It looks to be a happy conclusion for Apple and China.  Like Shakespeare’s “Much ado” play, the finale might include a “double” wedding (see end of post for explanation).

Today we are treated to another act in our play … more quotes attributed to China Mobile’s Chairman.  The Press never misses a chance to ask Wang Jianzhou about Apple’s iPhone and they had such an opportunity at the Boao Forum in Hainan, China. See below …

Excerpt from the Reuters report filed by Eadie Chen…

Discussing delays in bringing Apple’s (AAPL.O) iPhone to China, Wang said China Mobile was very interested in doing so because many of its customers were hungry for the phone.

The mobile operator said in January that talks with Apple Inc (AAPL.O) on launching the U.S. company’s popular iPhones in China had been called off, although Apple has never commented officially on the issue.

“The door is always open and as long as our clients like it, we will actively push for it,” he said.

Wang added that the two sides had reached a consensus on some manner of cooperation but had yet to discuss a range of technical issues. He did not elaborate.

The Chinese news portal Chinaview.cn also reported from Boao Forum about China Mobile and “discussions” (or not) with Apple.  The Chinaview site offered one succinct and frequently reprised quote from Wang Jianzhou … (Re iPhone) “Our door will remain open as long as there is customer demand.”

Perhaps the most newsworthy iPhone item from the Boao Forum was Wang Jianzhou’s reference to China Mobile reaching “consensus on some manner of cooperation” with Apple.  This “cooperation” could be something substantial or it could be “much ado about nothing” … yet it does indicate that some level of discussions have taken place.  And that is “news” given the virtual “cone of silence” surrounding any China wireless carriers’ talks with Apple.

iPhonAsia Editorial Comment:

iPhonAsia has been postulating for some time that the impending China telecommunications industry restructuring has had some impact on iPhone negotiations.  See > The China Game: Apple has a chance and > China’s TD-SCDMA may not be an eternal flame.

Restructuring Underway

The good news for iPhone fans is that China’s telecom industry is now in full-on “change” mode.  The restructuring process will take a few months to unfold, however, the important details appear to have been hammered out by the Ministries and telecom companies.  This will help to clear the path for more mundane matters such as an iPhone deal.

How might this restructuring impact Apple’s potential carrier partners?  In a nutshell: China Unicom is busy building out their GSM capabilities, China Telecom is hiring up their CDMA engineering teams and China Mobile is occupied with TD-SCDMA trials.  The other news bulletin is that China Mobile may not be limited to China’s indigenous “TD” 3G. These unconfirmed reports (rumors) suggest that China Mobile will be licensed to run TD-SCDMA and W-CDMA 3G.  China Unicom may join the W-CDMA party. That leaves CDMA2000 for China Telecom.  Still more reports hint that China’s TD-SCDMA will need to be supported by all of China’s major telecoms. Hence more than one 3G license could be issued to all of China’s big three carriers.  If this is clear as mud, not to worry; official 3G license announcements should be forthcoming soon after the Summer Olympics. 

NOTE: The next gen iPhone chipset* will likely support several world standard 3G protocols.  The yet-to-be-launched TD-SCDMA, however, remains a large question mark for inclusion in next gen iPhone chipset.

*Rumored to be Infineon’s S-GOLD 3H and Intel’s Silverthorne ap processor. NOTE: Intel has officially dubbed the Silverthorn and Diamondville chips “Atom” 

image courtesy BDA

China Wireless Carriers’ Motivation to Close an iPhone Deal

Now that national telecommunications restructuring plans are set and underway, China’s wireless carriers can turn their attention to third-party “deals” that will align with their business plans. There are now many compelling reasons for China Mobile, and other “soon to be” officially 3G licensed China carriers, to close a deal with Apple.  The list of reasons is long, but a few stand out –

·       iPhone drives data-plan usage and this can compel subscribers to go “on contract”

·       Post restructuring, China Mobile will have legitimate wireless competition and hence the motivation to sign a deal with Apple … that is if China Telecom or China Unicom don’t get there first.

·       New SDK and App Store will (prediction) become wildly popular and many of the “coolest” apps may be unavailable to jail-broken iPhones.

It is now beyond obvious that iPhone is driving massive usage of wireless data-plans.  China Mobile has managed to maintain average-revenue-per-user (APRU) while growing their subscriber base by some 5 to 8 million users per month (about 2/3rds are pay-as-you-go versus “on contract”).  Yet China Mobile is very intent on bringing more subscribers “on contract” with a data-plan (China Mobile’s Monternet platform) and there is no mobile handset that comes close to iPhone in terms of data-usage.  An iPhone agreement (an official, “no hack necessary” fully up-gradable iPhone) represents a fantastic means for any China carrier to move subscribers to multi-year contracts.  See post > It’s all about Data.

Double Wedding: (married to a carrier and a higher priced mistress)

Consider that in China, Apple may (pure speculation) follow a dual distribution strategy … that being a locked-to-carrier(s) and a premium-priced unlocked iPhone See > 
Apple is open to new iPhone business models Moreover, Apple may work with more than one carrier in China - Two China carriers for iPhone?

The new (yet to be formally announced) 3G iPhone may prove to be more hack resistant, yet there is no end to the resourcefulness of locksmiths. Unlocking in China could become far less a problem if Apple works out (with TBA carriers’ blessing) a two-tier offering … a locked iPhone with a 2-year contract and a premium-priced unlocked iPhone in the same market. This would follow the iPhone in France via Orange model (French law prohibits handsets from being locked to a network for more than 6 months). Such a move by Apple would preserve the revenue sharing model (albeit at a slightly lower revenue share as I imagine 20 to 30% would choose buy the “unlocked” iPhone), and at the same time deliver a death-blow to China’s black-market for iPhones.

Setting the right price-point for the unlocked iPhone will be important. If the premium for the unlocked iPhone is too high, black-marketers will engage in arbitrage (unauthorized unlocking options at a lower cost). If the premium is modest, or “just right,” buyers who want to unlock will opt for the “official” easily upgradable iPhone that will come with a warranty and w/o the need to hack or jail-break.

Distribution in China

Official iPhones in China can be sold through carrier partner(s), new Apple Stores (Sanlitun, Qianmen and more to follow) and many Apple authorized resellers.  Apple can also sell iPhone in China online and possibly through other China electronics/wireless distributors such as D-Phone and Shenzhen Aisidi.

All’s well that ends well. 

See also > The China Game: Apple has a chance