The Case for a TD-SCDMA iPhone 3G
iPhonAsia believes there is a case to be made for Apple and China Mobile collaborating on a special production run of iPhone 3G. I am calling this TD iPhone 3G as it would include a chipset that supports TD-SCDMA and China Multimedia Mobile Broadcasting CMMB – streaming CCTV mobile TV. What might this mean for Apple? A minimum 2 million units (upfront pre-paid purchase) of TD iPhone 3G in China.
iPhonAsia would like to emphasize that this TD iPhone 3G is pure speculation and remains an outside chance. In the table below, I have included arguments for and against a special TD iPhone 3G in China. Last month I placed the Vegas odds at 10 to 1 against such a TD production run. Given recent developments in China, the board has now moved and those odds are now 3 to 1 against.
I would like to also emphasize that regardless of whether a TD iPhone 3G is introduced in China, an iPhone deal will be consummated in China. The most likely timeframe for an official announcement is after the Olympic Games.
For readers interested in more details surrounding the motivations and political infighting that is now underway in China surrounding TD-SCDMA, I might recommend that you read the iPhonAsia post – iPhone 3G in China – Path cleared for a deal. This post includes a hypothetical scenario (latter half of the post) – Un-redacted minutes – Internal China Mobile Executive Briefing – which explains exactly why China Mobile might agree to favorable terms with Apple for production of a TD iPhone 3G. This post also includes some excellent reader comments. Thank you to readers. Keep them coming. I appreciate your insights.
Why there will be a TD iPhone
Why there won’t be a TD iPhone
· Apple has built a China version of the App Store. Just for laughs? Not!
· Apple has built in special Chinese character recognition into iPhone 2.0 software.
· China Mobile is under intense pressure from State Ministries to make TD-SCDMA a success, and yet the current crop of “TD” wireless handsets are not selling well despite the propaganda that they are (TD handsets are heavily subsidized + giveaways to Olympic officials + inflated sales numbers being reported).
· TD handset sales will remain disappointing unless there are cool handsets (iPhone) available that will that capture the imagination of the public and spark interest in data-services.
· Given the many inherent risks in setting up a separate production run for a TD iPhone 3G with a chipset that supports both TD-SCDMA and China Multimedia Mobile Broadcasting CMMB – streaming CCTV mobile TV, Apple will not agree to this unless they have a pre-sale deal in hand. Given the pressure China Mobile is facing, they will agree to take quantity upfront (purchase TD iPhone 3Gs for inventory). This quantity may be in excess of 2 million units.
· NOTE: FBR Capital Market analysts Craig Berger and Robert Pikover have done recent channel checks on (Foxconn) iPhone production in China during the 3rd quarter though the end of 2008. They expect Apple to build 15 million iPhone 3G units in 2008. One notable element in their report was the projection that Apple would produce 2 million generation one iPhones during the balance of 2008. This is notable because Apple has ended sales of the gen-one model and the iPhone 3G is backward compatible to all non-3G networks that the gen-one model supported. So why build the 2 million gen-one iPhones? Perhaps they are not gen one iPhones at all, but rather 2 million units of a TD iPhone 3G model?
· NOTE: A special production run of iPhone, with TD-SCDMA and CCMB chipsets, would take many months of pre-production planning and testing. A minimum of 6 months and as much as 18 months. Hence, even if Apple and China Mobile cemented a deal in June 2008, a TD iPhone 3G might not be ready until early 2009.
· One safety valve for a TD iPhone would be to ensure backward compatibility to China Mobile’s existing EDGE 2.5 G network. By doing this, users can run on 3G for special data services and CCTV, and then switch to EDGE for calls should problems with TD persist.
· China Ministries have privately accepted that TD-SCDMA will not be a viable 3G network over the long-term (transitioning to TD LTE 4G within 2 years) and the current PRC Ministries’ push to TD is primarily to save face and put on a good show during the Olympics.
· Apple will not incur risks, nor spend the money, to set up a special production run for a TD iPhone on a network that may be euthanized within a matter of months following the Olympics. Why build a phone for a network that may never be accepted by the public?
· Both the gen one and the new iPhone 3G will work very well on China Mobile’s existing EDGE 2.5 G network. From Apple’s point of view, there may be no need to build a TD iPhone 3G if the TD-SCDMA network simply cannot deliver a positive and stable user experience. The wait for W-CDMA in China may also be a hope and prayer that will never materialize … So EDGE it is in PRC (excluding Hong Kong and Macau) … for now at least.