Archive for August 4th, 2009

iphonechinaThe following is my reply to Artman’s post (quote below) on the terrific AAPL Sanity message board. Artman is referencing Tim Cook’s careful choice of words when asked when iPhone might be launched in China. Twice now Tim Cook has stated that Apple’s objective is to have iPhone officially in China “within a year.” (i.e. could be tomorrow… or 12 months from now)*******************

Picture 2Atman: << THE QUOTE I remember – Tim Cook: “Within A year” >>*********************

And that’s a wise quote to keep in mind Artman … As Yogi Berra often admonished “nothing is done till it’s done!”(a bit of a paraphrase)
In my last post I listed a few of the issues that could still be on the Apple/China Unicom negotiation table (won’t repeat here).
lebronblockmingWhen I think about the China iPhone negotiations, I think about how much is controlled by the the “powers” looking to protect “greater interests” in China. I’m reminded of my pick-up basketball games down at the local gym. The same guys show up every Saturday … Teams get picked and the competition is fierce. It’s human nature to want your team to win, and you’ll fight like crazy to score big and shut down your opponent. But when the game is over, everyone, no matter the team they were on, is still good friends. Next game, the guy you battled and elbowed may be your own teammate. And when a stranger shows up at the gym and “has game,” you want that guy (Apple) on your team. But no matter how well the stranger can play, he won’t supplant the relationships with the guys you’ve known for years.
In China’s telecom industry, the wireless carriers compete like crazy, but everyone knows each other very well and they are always very mindful that the telecom industry comes first … and if necessary State authorities will remind carriers that China’s telecom industry comes before any one company’s immediate self-interest.
So you can draft a great “outside player” (Apple) to help you win the game … but if authorities perceive that the industry might suffer or lose face (outside player commands too much attention and boosts pay for players vs team owners), then the game can and will be rigged.
Long way around to my point … which is that China is not making things easy for Apple, an outside player that has “serious game.” China’s ministries want to bring their own carriers’ “game” (value-added services platforms) up to Apple’s level and/or otherwise constrain Apple’s game. No WiFi for you Apple! Only China’s WAPI standard. Want to offer wireless value-added services on your own iTunes/App Store platform?  Might take awhile to approve that.
All that said … there are multiple parties in China who have serious economic interests in a prompt and successful launch of iPhone, including:
  • Apple China
  • China Unicom/vsnes.com
  • Foxconn (Hon Hai Precision)
  • Best Buy China – probable iPhone distributor
  • Wal-Mart China – possible iPhone distributor
Plenty of money will be spent on an iPhone launch … “Net net” iPhone in China will be good for China’s economy

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Greg Joswiak

Greg Joswiak

Sina.com is reporting this morning that Greg Joswiak, Apple VP for iPhone Product Marketing, will lead a team from Apple on an iPhone mission to China. Touch down in Beijing is rumored to be later this week. Sina.com suggest this trip will be a restart of iPhone negotiations. The literary will include meetings with China Unicom and discussions with China’s telecom authorities.

iPhonAsia wonders whether this is less a “restart of talks” and more a finalization of key marketing and distribution plans? There has been growing evidence of progress along the iPhone to China path including possible production of a new iPhone model (A1324) for China.

apple-girlThis will not be the first team from Cupertino to trek to China on an iPhone mission. In April ’09, I believe that senior Apple execs flew to Beijing to visit with China Unicom. This reciprocated China Unicom’s ten-day (March 8th – 18th) meetings with Apple in Cupertino.

What loose ends need to be tied up before the ink goes on the iPhone in China contracts?

  • Discussion re marketing plans with China Unicom.
  • iPhone distribution plans in China – via Best Buy?, Wal-Mart?, Vsnes.com?, Apple Stores and authorized resellers, Foxconn’s Cybermart?
  • Conversations with MIIT over WiFi on iPhone. Will a launch delay to year-end enable Apple to submit a WAPI/WiFi iPhone for fast-track testing/approval? Or will Apple go with (as rumored) a special customized for China iPhone without WiFi?
  • Delivery of wireless value-added services – Apple’s platform or China Unicom’s?
  • New mobile WVAS (e.g. apps and music) payment system for the vast majority in China who don’t own credit cards.
  • Discussion and analysis of China Unicom’s WCDMA 3G network readiness.*
  • Obtaining the all important network access license (NAL) from China’s Ministry of Industry and Information Technology (MIIT).

05-china-unicom-3gThere has been some recent buzz (previous Sina.com article) over the possibility that Apple may be ceding delivery of apps and music to China Unicom’s “Wo” (3G services brand name) platform. Translation from Sina.com post:

It is worth noting that it did not configure the Apple iPhone’s WiFi global functions, the process of random incidental nor with iTunes Music Store, as well as store applications (App Store).”

iphone-china-unicom-112Why might Apple cede delivery of wireless (apps and music) services to China Unicom?

  • China’s telecom industry, supported by their regulatory authorities, may have demanded this concession to protect “carriers’ interests.”
  • Paying for music in China is a novelty (free downloads are the rule). Very few in China have credit cards and payment for value-added services may need to be integrated with China Unicom payment systems.
  • China Unicom is rumored to be providing generous subsidy plans for iPhone (selling iPhone below the price they pay to Apple per unit). This suggests that they will need to make up revenues from higher plan rates and/or value-added services fees.

Why Apple may have drawn the line in the proverbial sand and insisted that Apple retain control over their China App Store and iTunes**:

  • iPhone’s reputation is a reflection of its entire ecosystem, which includes Apple’s wireless valued-added services (WVAS) such as the App Store and iTunes. China Unicom has a long way to go in building out their own WVAS platform. Integration between iPhone and its WVAS platform needs to be seamless not kluge.

I’m cautiously optimistic that an iPhone deal will be concluded soon and I view Apple’s latest trip to China as a positive sign. My guess for a China iPhone “deal signed” announcement date is late Summer with a launch in the Fall of 2009.


* China Unicom will have solid WCDMA 3G coverage in all major cities by Fall. They are spending big to accomplish this mission. China Unicom plans to have 125,000 base stations up by year-end. That’s more 3G base stations than all the operators in Western Europe have rolled out in the 9 years since the 3G wireless standard has been in existence.

** There is a chance that Apple might create a clone of their iTunes and China App Store and simply re-brand it for China Unicom. This will allow China Unicom to save face and still allow for a seamless integration between iPhone and its platform.

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