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The following is my response to questions about iPhone in China posed by China’s Mobinode.tv …

I read Mobinode.tv regularly and I appreciate the opportunity to share my views about iPhone coming to China.

overview-hero-20090608I believe we are at the beginning stages of a mobile revolution. A new breed of smartphones is opening up an ocean of information, entertainment and communication to wireless consumers. The iPhone is at the forefront of this revolution and I’m optimistic that Apple’s smartphone, and devices to be unveiled later, will soon “officially” be launched in the People’s Republic of China (PRC).

Let me go right to your questions.

1) Can you give a brief introduction of yourself, your experience in mobile telecom industry and iPhoneAsia.com?

I am the Managing Editor of iPhonAsia – a website covering iPhone with particular emphasis in China, Japan and Korea. I live in the San Francisco Bay Area and enjoy business and leisure travels to the Far East.

Over the years I’ve held senior management positions in the financial services industry and was responsible for development of numerous Web 2.0 applications. My current focus is technology and telecom in the Pacific Rim. I’ve written several dozen articles on iPhone and mobile telecom and have developed friendships with journalists, telecom analysts and app developers across Asia. You can read my complete bio on iPhonAsia.

(2) Regarding Chinese market, according to your last post, the coming 3G iPhone seems to be without wifi function? If it is true, what’s your view on this?

wifi-music-store-headerThere have been several rumors about WiFi being disabled on a customized iPhone for China (model A1324) that is reportedly in production right now. This rumor is most likely true. The only way for Apple to meet China’s requirements would be to develop an iPhone that includes China’s proprietary WAPI (Wireless LAN Authentication and Privacy Infrastructure). China’s past policy has prohibited WiFi on handsets. However in May, China’s Ministry of Industry and Information Technology (MIIT) changed the rules and approved a WiFi capable handset by Motorola. There was just one “catch.” This handset had to include WAPI. It seems that going forward, China will allow a WAPI/WiFi combination but not WiFi alone. The inclusion of WAPI adds extra expense to the manufacturing process and will require royalty payments. There may also be some user privacy concerns.

For China’s most tech-savvy power-consumers, WiFi will be important. As a result, I suspect smuggling of WiFi-enabled iPhones will continue to be a profitable enterprise. Apple will be a prime beneficiary as grey-marketers will continue to acquire full-price WiFi enabled iPhones in Hong Kong. In fact, on July 10, the iPhone 3GS went on sale in Hong Kong. The iPhone 3GS was also available SIM-unlocked via Apple’s online store in Hong Kong. The SIM-unlocked models sold out in a matter of hours! But not to worry, Apple (Foxconn/Hon Hai) will soon make more.

To keep things on the “up and up” (legal requirements) many of these SIM-unlocked iPhones have to make a two-way swim across the channel. They are manufactured by Foxconn in Shenzen, then shipped to a Hong Kong address and later smuggled back to the People’s Republic of China (PRC) for sale on the grey-market.

The HK price for SIM unlocked iPhone 3GS:

  • 16GB HKD 5,388 ($695 US)
  • 32GB HKD 6,288 ($811 US)

HONG KONG-LIFESTYLE-ASIA-IT-APPLEWhile some consumers in China may prefer grey-market iPhones with WiFi, there are many millions that have never used WiFi on their phones and have only experienced 2G speeds. For this group, WiFi might be a less important feature. They may be more interested in iPhone’s enjoyable user-experience, entertainment value and status.

chinese-handwriting-recognition-iphoneI am certain that Apple and China Unicom have carefully considered the implications of selling a non-WiFi iPhone in the PRC. I suspect the official iPhone will come pre-loaded with many special “for China” apps, such as Youku and Hanwang’s HWPen (although nothing has been confirmed re the localization of iPhone for China). The official iPhone will also be less costly as no jail-breaking or hacking will be necessary to activate the iPhone or to load popular apps via Apple’s China App Store.

What are the keys to make the official iPhone for China a success?

  • iphone-china-unicom-112Price – The non-WiFi iPhone must be priced below the grey market (WiFi-enabled) iPhones. It is possible that, as part of their negotiations with Apple, China Unicom has agreed to subsidize the retail price of iPhone. This subsidy will allow the “official” iPhone to be priced below grey-market iPhones.
  • During launch promotions, China Unicom and Apple must emphasize the benefits of owning an official iPhone with a warranty. An official iPhone will not have the “bricking” concerns that accompany grey-market iPhones.
  • China Unicom and Apple should promote how the iPhone is not a prisoner to fixed buttons and is designed to evolve. I have loaded software updates to my own iPhone several times and I have been amazed how my iPhone improves with age. Apple’s iPhone software updates often add new features/functions and speed. My iPhone is more valuable to me today than the day I purchased it (June 29, 2007).

(3) It has been said the App Store for China is under development. Can you share more details/opinions with us how the Apple store and iTunes would run in China?

Picture 3Apple has now opened their App Store in many countries including Hong Kong and the PRC. Apple’s China App Store has been live for several months now. Many Chinese Netizens are unaware of the store as it is currently limited to iPod Touch owners only. I’m optimistic that Apple will be allowed to open their China App Store to iPhones. But this won’t happen until a deal is made official and China’s MIIT issues a network access license to iPhone.

Picture 4I know that Apple has been working hard behind the scenes to further localize iTunes and their China App Store. I also believe that we will soon see many more apps, games and music for Chinese consumers.

There is some sensitivity around the inclusion of “games” on mobile devices (on Apple’s China App Store all games called “apps”). Right now the Nintendo DS is the only mobile gaming device that China has authorized. The iPod Touch and iPhone were not originally conceived as gaming platforms; yet, it’s hard not to notice how compelling the gaming experience can be on Apple’s mobile devices. I do not believe China’s MIIT will attempt to classify iPhone or iPods as gaming devices. The “genie is out of the bottle” (meaning that it is nearly impossible to go backward) and virtually every manufacturer’s handset could be classified as a gaming device. As a sidebar, I believe that Apple will launch an iTablet device (9.7 inch screen) within the next 12 months. This will be a powerful computer/e-book reader/gaming/music/entertainment/communications device.

As the saying goes – “imitation is the sincerest form of flattery.” I believe the success of Apple’s iPhone china-unicom-to-offer-iphone-and-g1-in-chinaplatform is a key reason China’s carriers have moved aggressively to develop their own:

  • App store,
  • Android-based mobile operating systems designed to promote the carriers’ own wireless value-added services (WVAS),
  • Customized Android-based handsets designed to promote the carriers’ WVAS

China Unicom clearly has plans for their own mobile music services and app store. There is a possibility that Apple would be required to make use of China Unicom’s platform to deliver apps and music downloads. I’m sure this was batted back and forth during several rounds of negotiations. Yet I remain optimistic that China’s iPhone owners will be authorized to use Apple’s iTunes/App Store and that Apple won’t have to take on the extra expenses of integrating China Unicom’s nascent platform into the China iPhone’s OS.

In the final analysis, Apple and China Unicom will need to strike a balance between competition and cooperation when it comes to their respective platforms.

(4) In your opinion, what kind of pricing system would be attractive to Chinese users?

I will have to defer to those more knowledgeable on handset/services pricing in China. One thing I do expect is a modest subsidy for iPhone that will reduce the cost to consumers. This is not unprecedented in China. China Mobile is presently subsidizing all TD-SCDMA handsets.

Picture 5Picture 6One clue to possible pricing in PRC is the iPhone prices/plans now posted in Hong Kong. You can do some comparison-shopping here:

There are several attractive plans via Hutchison “3” in Hong Kong. You can buy the 16GB iPhone 3GS for HKD 4,080 ($526 USD) with a monthly tariff of HKD 138 ($17.80 USD). There is also one plan where the 16GB iPhone 3GS is “free” if you pay a monthly tariff of HKD 398 ($51.35 USD) for two years.

One thing I would like to see from China Unicom is an unlimited data-plan for iPhone. Virtually all carrier plans in China now charge users by the amount of data they consume (e.g. time spent visiting websites, downloading, etc.) and I’m sure iPhone owners would be interested in an unlimited data-plan option. This would also be important if the iPhone does not include WiFi.

One sidebar item: On July 8, an MIIT Vice Minister pronounced that mobile plans in China are “too high” and need to be reduced. China Unicom publically acknowledged the MIIT’s point and they have pledged to reduce plan costs. Update: (July 17) 3G power users can breath a sigh of relief. China Unicom announced a new price cap on data. No matter what kind of 3G packages users have chosen, their monthly mobile phone Internet fees will be capped at CNY500

(5) From your observation, what’s the key opportunity/challenges for iPhone in Chinese market?

Key opportunities for Apple in China:

There are over 700 million wireless consumers in China. The majority are youthful, status conscious, and they want to own cool smartphones loaded with the latest apps/games and mobile technologies that allow them to interact with one another.

While incomes are lower in China compared to western markets, China still has tremendous consuming power. There are an estimated 340,000 millionaires in China and there is also a growing middle-class. An estimated 290 million Chinese households can be classified as middle-class with monthly incomes ranging from 5,000 CNY to 15,000 CNY ($732 to $2,196 USD). Chinese tend to save a relatively high share of their monthly take home pay. Rainy day savings can sometimes be spent on more expensive items, particularly if the product has status and is used every day … think iPhone.

iPhone_3G_RedAll of this adds up to a tremendous potential market for Apple’s iPhone. Using conservative estimates*, I believe Apple can capture a full 2% share of the wireless market in China within the first 12 months of an official iPhone launch. That’s 14 million iPhones and perhaps another 2 million or so coming via grey-market iPhone sales.

There has been some speculation that Apple may introduce a new low-price iPhone model sometime in 2010. This model might be an unlocked “2G only” iPhone designed for prepaid markets, where the majority of wireless consumers prefer to “pay-as-you-go” (not on contract). A low-priced iPhone could double or triple my iPhone sales projections. If a low-price iPhone model is introduced in the first half of 2010, I would project that Apple can capture 4 to 6% of China’s handset market by the end of 2011. That’s 28 to 42 million iPhones.

*I should emphasize that there are many unknown variables at present that can affect iPhone sales prospects. We will know much more once the official “iPhone in China” details are revealed.

Key challenges for Apple in China:

First and foremost is Apple (iPhone) obtaining a network access license (NAL) from China’s MIIT. The NAL is currently gating a formal iPhone deal announcement and an official iPhone launch. If recent rumors are true, the NAL may be issued before the end of summer.

3g_china-1One challenge for both China Unicom and Apple will be to ensure that the WCDMA 3G network coverage is fully deployed. On May 17 China Unicom rolled out the first 55 cities on their new WCDMA 3G network. On June 30, China Unicom announced the secondary rollout to 44 additional cities. By year-end 2009 there should be 284 cities in China with WCDMA 3G coverage.

apple-store-beijing-sanlitun-villageBuilding regional infrastructure (staff and facilities) and an iPhone sales network in China is an important task for Apple. Apple has store locations in Beijing at Sanlitun and soon at Qianmen Street, but the scarcity of Apple stores make this an impractical way to sell iPhones in the PRC.

250px-bestbuysh-711725iPhones will most likely be distributed through China Unicom’s vsnes.com division and may require partnerships with Wal-Mart and Best Buy (Five Star Appliance). There was also a media report that Foxconn’s Cybermart would sell iPhones in China, although both Apple and Foxconn denied this rumor

It will also be important for Apple to work with Chinese authorities to protect Apple’s intellectual property. Shanzhai ji counterfeit phones (“Shanzhai” culture is a rebellion against the monopoly sectors) are everywhere and many of these cheap knock-offs cross the boundary of imitation and into the realm of outright rip-off. While there are many Shanzhai ji iClones (iPhone look-alikes), no major manufacturer is immune to the bandit phones phenomena.

As a side point of interest, the Shanzhai (“bandit phones”) market in China has grown exponentially in the last few years. Virtually all brand name phones have a Shanzhai ji look-alike. Government authorities will admit that approximately 25% of all phones sold are Shanzhai ji knock-offs, but the real numbers may be closer to 50%. The Shanzhai ji economics are compelling. A bandit phone entrepreneur can drive his Ferrari over to Hong Kong and acquire chipsets and components from MediaTek and other suppliers and quickly set up an assembly line. These backroom operations often sprout up and disappear in a matter of months. It only takes a small team of engineers a few weeks time to prototype their next bandit phone. A Shanzhai entrepreneur might knock out a phone for about 300 CNY ($44 USD) and sell it for 600 CNY ($88 USD) with no pesky government taxes or licensing fees to cut into the fat profit margin. If the entrepreneur sells 23,000 units, he is now a millionaire. The bandit production operation will then shutdown only to appear again in another obscure warehouse. Rinse and repeat.

1290857877_fae1496688Of course you get what you pay for. I had an iPhonAsia reader write to me recently to complain about the “iPhone” she purchased while on holiday in Shanghai. It had poor audio quality, a screen pixilation problem, and after six weeks of use, it no longer worked. When I wrote her back inquiring about how/where she came to buy this phone, she confessed that it “really looked like an iPhone” but when she took it to the Apple store, the Genius instantly recognized she had purchased a counterfeit iClone. “Ah, that explains why it was so inexpensive.” Yep, there’s one born every minute.

picture-16Another matter for Apple’s legal team is the iPhone trademark. The iPhone name in China is partially owned Hanwang Corporation. I believe this naming rights issue will be resolved amicably. Apple and Hanwang have played nice together before. Apple bought the rights to Hanwang’s specialized iPhone character recognition app in 2008 and demoed the technology during the 2009 WWDC Keynote.

Another challenge for Apple is to get China’s telecom industry to understand that Apple’s platform is not a threat to carriers’ own services. If anything, iPhone has spurred a tremendous acceleration in carriers’ plans to build out their own eco-systems. You can read more on this topic on iPhonAsia.

In the end, I expect that iPhone’s official introduction in China will benefit both Apple and their carrier partner(s) in China. Perhaps the biggest beneficiary will be China’s wireless consumers.

(6) Regarding ecosystem for iPhone, can you talk about the difference you have observed between Asia and western market?

Apple’s iPhone platform or “ecosystem” consists of several important value-added services, including:

  • iTunes (music, videos, podcasts, e-books & courses via iTunesU)
  • App Store (apps and games)
  • MobileMe (cloud storage and file sharing)

Chinese consumers often find pirated MP3 music and cracked apps/games on torrent sites. Consequently there are far fewer paid downloads in China than in western markets. Despite this problem, when content delivery is tightly controlled (e.g. ringtones) it can be very profitable for carriers and other value-added services providers.

Another major difference between China and the west is the method of paying for goods and services. Transactions in China are primarily “cash and carry.” The vast majority in China do not own a major bank credit card. Consequently, Apple may need to craft some creative ways (e.g. some type of prepaid iTunes plan) for consumers to pay for music and app downloads. If Apple can make it convenient for those without credit cards to pay for content, this might stop some of the download piracy.

china-internet-cafeGiven the major youth demographic in Asia (majority of the population is under age 30), a large share of disposable income is spent on mobile phones when compared to western markets. One reason that phones are so popular in China and many markets in Asia, is the simple fact that many do not own desktop or laptop computers. Cyber cafes can be expensive and mobile handsets are often the only way to connect to the world. As a side note: Since computer ownership is rare in China, Apple and China Unicom may need to provide in-store kiosks or other means for iPhone owners (who don’t own a computer) to easily complete their own software updates or app downloads.

Young people love to chat on the phone, connect on the Net, play games, listen to music, and send instant messages. While IMs are popular in all global markets, Asian youth are in the lead when it comes to the sheer number of text messages they send. The average urban mobile user in China sends 4 text messages per day. During the Chinese New Year there were over 1 billion text messages sent in China!

Mobile gaming is also extremely popular throughout Asia. Social gaming in particular is a fast-growing segment. So too are social network sites where youth can interact. It is interesting how China’s one child policy may have affected the popularity of social gaming. Without siblings to play with, many children turn to mobile games to interact with peers.

(7) Is there big difference between Asian countries? We know iPhone in Japan is going very well, how about Korea and other areas?

3G networks are very mature in both Japan and South Korea. As a result, mobile TV, wave-to-pay (phone as a payment card) and other advanced 3G services are widely in use in both countries. There are also many advanced 3G handsets in Japan and Korea, but they seem to suffer from a fatal flaw. The user interface and software are not always intuitive, and many get lost attempting to use handset features. In contrast, the iPhone is highly intuitive. Most new iPhone owners never bother to consult the instruction manual. No need. It just works, and in such a logical and clever fashion.

o0750050010202769903iPhone received a modest but positive reception Japan. It has been estimated that iPhone 3G sold about 800,000 iPhones in Japan since the 2008 launch. The recent (June 26) iPhone 3GS launch in Japan was a major success. The launch day lines were long and many stores rapidly sold out of their initial supply. The enhanced camera and video capability on iPhone 3GS appear to be very popular with Japanese consumers.

iphone-south-koreaApple has not yet reached an iPhone accord in South Korea. The deal is still being negotiated, but there have been some encouraging developments. iPhone has now completed extensive radio research laboratory testing, and in May, the Korea Communications Commission (KCC) formally approved the iPhone 3G. More recently (July 12) the KCC also approved the new iPhone 3GS. Both iPhone models include WiFi.

Korea Telecom has been the most aggressive in pursuing a deal with Apple, but SK Telecom may also be in the running. I suspect there will be a race between China and South Korea to see which country is the first to officially launch iPhone. The smart bet might be on South Korea. It’s going to be a close race!

(8) What are the most impressive achievements in your mind for iPhone in Asia? How would you foresee the trends of iPhone application in the coming years?

iPhone is too new in Asia to count off a list of impressive accomplishments. I guess you could count as “impressive” the approximate 1.3 million real albeit “jail-broken” iPhones now in use in China. The average selling price of these grey-market handsets has ranged from 3,075 to 6,150 CNY ($450 to $900 USD) and despite the grey-market mark-up, the demand has been quite strong.

It was also impressive to see the positive reception that iPhone 3GS has experienced in Japan and in Singapore. For a better appreciation of numbers in line for iPhone in Singapore, have a look at the video made on a new iPhone 3GS by Satya, who was 10th in line for the July 10 launch.

sans_titre_1_copieRegarding trends in applications? … Games and massively multi-player online games (MMOGs), such as World of Warcraft, are hot and I expect that new MMOGs will be introduced in China with versions for iPhone. The iPhone 3.0 software allows for “in app” purchases and new revenue opportunities (e.g. virtual goods) for gaming companies. Many who would not initially pay to download the game, are eventually drawn into the game and find that they are willing to buy virtual goods. For example, gamers can use virtual currency to buy a prettier dress for their dance character or a more intimidating weapon for their warrior. Many gamers in China have even traded virtual currencies and exchanged them for real goods. Last year, nearly $2 billion in virtual currency was traded in China. This has caught the attention of authorities and China is moving to regulate virtual currency.

picture-4I am also looking forward to mobile payments and wave-to-pay apps on iPhone. Wave-to-pay would be convenient for those who buy lattes at Starbucks or fast-food at KFC. Wave-to-pay on handsets might also replace public transportation IC cards for regular commuters. I expect that in the future it will be possible to swipe your iPhone across a scanner to pay for almost any item.

route-apps-20090608There is literally no end to the possible directions and numbers of games and applications that might be developed for iPhone, iPod Touch and future Apple devices. Just think about the astounding growth we’ve seen in just one year. The Apple App Store turned 1 year-old on July 10 and there are now over 100,000 registered developers who have created 65,000 iPhone apps. Most impressively, the App Store has now surpassed 1.5 billion downloads!

The future possibilities are as wide and deep as the Pacific Ocean.

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article-1190367-052F9C0A000005DC-131_468x306Two suitcases run through the x-ray machines at the Dalian, China Airport looked a bit suspicious to alert customs officials. The snugly packed bags contained eighty-two (82) new iPhone 3GS. The passenger belonging to the bags was detained by Chinese authorities. It was determined that the 82 iPhones in his possession were beyond the bounds of reasonable personal use, and no surprise, the passenger had not declared his bountiful Apple cargo to customs. Full story > HERE (in Mandarin)

001372a9ae2709d26d2202246812456501Picture 1

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The iPhone: maker (and breaker) of new business in China

by Bo Wang, Bokan Technologies

BEIJING – May 21, 2009: With over 18 million iPhones sold in more than 80 countries worldwide, the iPhone has yet to be formally released in mainland China. Despite this, the iPhone is a highly sought after and prized commodity in the Middle Kingdom, with a million iPhones in circulation and thousands more introduced into the domestic market on a weekly basis. 

HONG KONG-LIFESTYLE-ASIA-IT-APPLEApple’s tight control over international distribution channels and corresponding scarcity of the iPhone in markets where it has not been formally released has somewhat ironically been the main driving force behind its popularity in China. This scarcity, combined with the iPhone status symbol appeal in China has resulted in consumers being willing to spend a much larger proportion of their income on purchasing the iPhone. The iPhone has commanded up to 5000RMB, or $730US on the black market in Beijing. Taking GDP per capita into consideration, this would be the equivalent of paying $5700US for an iPhone in the United States.

Zhongguancun Plaza

Zhongguancun Plaza

In Zhongguancun, often referred to as the Silicon Valley of Beijing, the iPhone has spawned countless fledgling businesses and enterprises geared solely towards satisfying the insatiable demand of the urban populace for the iPhone. Local iPhone suppliers have had to be creative and fleet of foot in order to stay afloat with windows of opportunities for channels of supply usually being very short lived.

Since its release in mid 2007, the iPhone has been smuggled into China and Hong Kong through mail order from the United States using US residential addresses, or direct from New Zealand, where for a limited time iPhones were available in unlimited quantities (subject to availability).

HK shopkeeper selling iPhone 3G

HK shop selling iPhone 3G

As these channels have been exploited and supplies have run out or curtailed by Apple, businesses would often collapse only to rise from the ashes upon the discovery of fresh, untapped (and uncontrolled) sources.

Successfully sourcing and “importing” the iPhone into China is however only the first hurdle aspiring business owners hoping to jump on the iPhone bandwagon have had to surpass. iPhones sourced internationally more often than not need to be unlocked in order to be used on the local networks.

iphone_unlocked_2-thumb-1Chinese resourcefulness has really come into its own in this regard with specifically designed SIM card “jackets” that enable the iPhone to be used in China. Far from perfect, these one-stop solutions are often flawed causing the iPhone to freeze or stop functioning as it should. New releases of the iPhone with improved security controls have required further creativity and development on this front.

iphone-china-unicom-11Apple is said to be in negotiations with  China Unicom and China Mobile for distribution deals, with a formal release date anticipated before the end of the year. China Unicom appears to be the leading contender as its WCDMA network would require minimal modification to the iPhone. With less than half the number of subscribers compared to China Mobile, it is unlikely that China Unicom will be able to successfully negotiate a sole distribution arrangement.

Li Yizhong - MIIT VM

Li Yizhong - MIIT VM

Authorities have turned a blind eye to the local iPhone business to date, however it is likely that a formalized agreement between Apple and a large established Chinese company would have significant legal implications for local suppliers choosing to continue in this business.

Regardless of the details of the inevitable distribution deal, the iPhone will be a huge success for Apple in China. The booming black-market trade that has been built up around the iPhone will likely collapse as widespread availability would remove the scarcity factor, forcing local sellers to start looking for opportunities elsewhere. 末端

This  guest post was written by Bo Wang, CEO of Bokan Technologies. Bokan iPhone apps

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@MJ @Stephan and @ all others looking to buy iPhones through this site… thanks for reading iPhonAsia, but we can’t help you with an iPhone purchase. iPhonAsia is a non-commercial site. Any ads you see here are placed by WordPress for WordPress … the price we way pay for having a “free” blog. 

iphone_world-dominationJudging by the volume of direct e-mails and comments received, it’s quite evident that grey-market demand for iPhone remains strong. iPhonAsia has received regular inquiries from all over the world asking how to get iPhones. One guy wanted to know how to buy iPhones direct from Foxconn (Hon Hai Precision) or through other “factory backdoor” sources. Ha! 🙂 I’m not such an ambitious or clever entrepreneur. Another greymarketeer was ready to buy (or so he claimed) ten-thousand iPhones for shipment to India, then to be exported to “non-authorized” resellers all over the world. These buyers are apparently reselling iPhones throughout Asia, Europe and BRIC (Brazil, Russia, India and China) countries.

The number of “how to buy iPhones in volume” questions picked up after introduction of iPhone 2.0. This may have something to do with the new policy requiring “immediate activation to a carrier” at the point of purchase. This made it more expensive for the cadre of shill buyers employed by greymarketeers to obtain iPhones in large quantities, as they would have to pay a contract breakage fee.

If any readers would like to share more about the methods employed by greymarketeers to obtain iPhones, we’d be interested to know more about how they operate. You can add a comment to this post or, if you prefer, send us a direct e-mail. Your name and contact info will be kept confidential. 

For those that want to buy iPhones in volume “above board,” Apple or authorized carriers would be delighted to hear from you. Here are the official Apple contacts for iPhone sales -
Apple Enterprise Sales (877) 412-7753
http://www.apple.com/iphone/findastore/picture-12

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China’s blind eye to counterfeit goods

Via domain-b.com

January 27, 2009

picture-118China claimed a moral victory as it almost managed to wriggle out of World Trade Organization piracy ruling, bought against it by the US. Welcoming the verdict regarding its dispute on the severity of  “threshold” for criminal prosecution, China regretted the WTO’s decision to rule against the country two other cases involving copyright protection and auctioning of counterfeit goods.

The WTO panel of judges gave a fovurable judgment to the US in two of the three cases bought by the US in 2007, while deciding in China’s favour regarding changing its laws that lets off counterfeiters from criminal prosecution.

The mixed ruling brings the US close to obtaining billions of dollars as compensation from China on the money it lost through piracy every year although China and the US can still appeal the rulings that went aginst them.

The WTO ruled in favour of the US on patent and copyright protections after movie makers, music and software companies complained that they lost nearly $2 billion in 2006 as their products were being pirated by the Chinese and the government was turning a blind eye to these activities.

Lobby groups representing Microsoft, Walt Disney, and Vivendi said that the movie, music and software companies in the US lost more than $3 billion in sales in 2007. 
The US argued that China was clearly breaching WTO guidelines regarding protecting intellectual property rights because the thresholds in China for successful criminal prosecution of people who pirate copyrighted products is very high that the companies have no choice but to allow sales of these products in the market.

The WTO ruled that China, which allowed the reintroduction of seized counterfeit goods in the market by merely removing the label and trademark, must now destroy all counterfeit software and movies and give legal protection to foreign goods.

But the US lawyers failed to convince the panel of judges on the main sticking point on the thresholds for criminal prosecution of counterfeiters who counterfeit copyrighted goods in China, which has been the main agenda of the complaint during the past four years.

The WTO panel’s report said “the US has not established that the criminal thresholds are inconsistent with China’s obligations under the first sentence of Article 61 of the TRIPS Agreement.”

One commentator said that the Chinese laws on counterfeiting are so lax that if Beijing cannot solve the problem of pirating in its own domestic industries, how one can expect it to solve on foreign products.

China’s Ministry of Commerce said in a statement that it ”welcomed” the WTO ruling on the threshold for criminal prosecution, while it ”regretted” the decision to rule against the country on the issues relating to copyright protection and auctioning of counterfeit goods.

Analyst feel that for the US, this issue has become more important than the currency issue and has the potential of becoming a major irritant in the US-China relations, who is seeking protection of patents for its home company products like auto parts, handbags, which are copied by the millions and pharmaceuticals.

The Chinese ministry of commerce also said that the Chinese authorities always gave great importance to protecting intellectual property rights and in the past 30 years had made great changes in IPR laws, enforcement, education and international cooperation.

But if one takes a round to Shenzhen, in the Guangdong province, foreign visitors will be shocked to see fake copies of Apple’s iPhone and mobile phones having logos of Nokia spelt as ‘Nokla’ and ‘Suny’ products of Sony displayed in shops and

Qilai Shen/Bloomberg

A counterfeit iPhone which was bought at a market in Shanghai, China. An unlocked iPhone is priced at 3,000 yuan (€277) in Shanghai, while a Chinese counterfeit model costs just 1,000 yuan. Photograph: Qilai Shen/Bloomberg

sold for one-fifth the price of the original branded product.

The counterfeit products is known as ‘Shanshai’ originally referred to the mountain fortresses of bandits, who disregarded the numerous Chinese dynasties and nowadays a lot of Chinese view these counterfeit products as a symbol of anti-establishment and give their whole hearted support to these goods.

These counterfeit goods churned out by the millions in the factories of Guangdong province have similar functions as the original and is bought out one or two months after the release of these products in the West.

According to Yazhou Zhoukan, a Hong Kong magazine, more than 100 million shanzhai goods are produced annually in the Guangdong province and it is not that the Chinese authorities are not aware of these counterfeit products but has done little to stop it even though it loses money in value-added-tax

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Interested in doing a bit of comparison shopping for iPhone in a nation that has yet to officially launch Apple’s revolutionary device?  Dan Frommer at Silicon Alley Insider has compiled an “unofficial” international unlocked iPhone buyer’s guide > Unlocked iPhone Shopping Guide: World Tour Edition (AAPL)

Where to buy an iPhone, and what it will cost, from Argentina to Turkey. Read >

 

 

 

 

Unlocking: iPhone unlocking is a fact of life and a thriving enterprise.  Yet the editor of iPhone in Asia discourages unlocking iPhone. Wait for an official iPhone launch in your country. Buying an iPhone from an authorized carrier/distributor will allow the owner to easily upgrade as new features are released.  

If you want to unlock to use iPhone with your “preferred” carrier … you might be in luck.  The editor of iPhone is Asia is predicting that forthcoming iPhone launches (in select nations), will follow a dual strategy – a locked-to-carrier and unlocked iPhone distribution plan.  See post > Apple is open to new business models

 

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20,000 iPhones per week tucked into luggage

 

Comments to Dan Frommer article by dragan_co – Wednesday April 02, 2008 12:10PM EDT

 

iPhone in Asia Preamble: IMHO dragan_co is largely on target with their “demand side” thesis.  Many pundits and analysts have suggested that the iPhone shortage is evidence of Apple’s “clearing inventory” to make way for a 3G iPhone. The editor of iPhone in Asia believes that both theories have merit, yet not enough attention has been given to the surge in demand for iPhone due to many of the reasons dragan_co lists below. NOTE: dragan_co’s original comment (re-posted below) was included with the replies to Dan Frommer’s article – here > Apple iPhone Shortage Not Related to 3G Introduction

 

See also > The Secret Underground iPhone World in Russia

comment below by dragan_co

 

“Wall Street analysts like Gene Munster and Toni Sacconaghi continuously discount the role of international demand in iPhone sales. They do this primarily because they have a very America-centric view of the world in which this 5% tail wags the dog. Not in cell phones.

 

This is the issue. The customer-satisfaction numbers you see for iPhone in the US are no different internationally, in some cases they are much higher because the price ($399 and $499 is seen as perfectly reasonable, particularly in emerging markets used to paying higher premiums on US prices for Blackberry and high-end Nokia phones).

 

Demand for iPhones outside the United States is out of control and has reached the point where it has started to impact Apple’s normalized supply chain projections. It’s okay to have a delta of, say, 100,000 units or so per year between actual and forecast. International demand is driving that delta upwards of 1 million. That’s a whole different ball game for component sourcing, quality control and production ramp-up and some things are starting to come unstuck, even for a finely managed company like Apple.

 

What’s driving this?

 

1. Free, out-of the box -ready, GUI-based network unlock solutions like Ziphone and iLiberty. Confidence in these unlock systems has grown significantly over time as technical expertise required to use them has fallen.

 

2. A large, very organized procurement mechanism for iPhones, particularly into Russia, Eastern Europe, India and China. There are people who go from store to store buying iPhones and aggregating them for export to “resellers” overseas.

 

3. Proliferation of Wi-Fi penetration and the recognition that in GSM countries, iPhone works simply and well enough. Wi-Fi hotspot usage is growing significantly around the world and the iPhone’s superior web browser is taking full advantage to maximize customer experience. It’s the right product at the right time for the macro-trend.

 

4. The iPhone is relatively cheap to emerging market customers used to paying $500 for a Blackberry and a cheap US Dollar makes it an even better deal. For example in Russia, at $499, a16GB iPhone translates to around 12,000 Rubles. An 8GB Nokia N95 costs $815 or 20,000 Rubles. The value-for-money perception with iPhone is absolutely huge.

 

5. Zero or minimal compatibility issues on GSM Networks. I have used my iPhone with SIM cards from 32 different networks in Europe and developing countries. It works seamlessly. The iPhone is a quad-band GSM phone, meaning that it supports all four major GSM frequency bands, 850 and 1900 MHz bands which are used in the Americas, and 900 / 1800 MHz bands used in most other parts of the world, making it compatible with all major GSM networks worldwide. 2 billion people around the world use GSM phones.

 

To give you an idea of international demand; There are Nigerians shipping more than 500 phones a week from New York to Lagos and Nigeria is a third world country. The EDGE Internet works perfectly, albeit just as slow, there and data is very, very cheap at $5 per 100 MB of usage.

 

“Data-driven” analysts like Munster and Sacconaghi get misled by the laziness of long-distance US-chauvinist analysis into making market projections based on perfunctory GDP per capita statistics and “population living on less than dollar per day” figures. They look at the wrong data because they think the world works in the same way everywhere. This weak analysis disregards latent middle and upper income demand in developing countries.

 

If you define a potential user as someone who can afford to pay twice as much for an iPhone and double what an AT&T subscriber pays per month, there are at least 7 million potential iPhone users in Nigeria, 9 Million in South Africa, 80 Million in India, 25 Million in Russia, 25 Million in Brazil, 8 Million in Indonesia and 100 Million in China. Not all of them will be users but just 5% of this number is way more than 10 million. Considering mobile phones are some of the most universally adopted products on the planet, a good GSM phone reaches Iran and Iraq much faster than people on Wall Street can ever imagine.

 

From research I’m conducting, we have conservative numbers of grey market as follows:

·      Russia 2000-4000 phones/week

·      China 4000-6000 phones/ week

·      Demand from Western Europe is slower but still significant, averaging anything from 2000-3000 units/week from New York and other big cities with international airports.

 

Now, not all the phones shipped from New York are bought in NYC but the export pattern is clear and very strong. I have completely ignored the cash-flush Middle East where Dubai has always been a world-leading port in grey market clearing and forwarding for consumer electronics.

 

Conservatively speaking, something is sucking 15,000-20,000 iPhones/week out of the United States. If this phenomenon is coinciding with steadily growing adoption among US customers, suddenly the slack Apple had is drying up.

 

Many of the millions of visitors coming to the United States every month are going back with a packed iPhone in their luggage. It’s one of the things people are expected to buy when they come. Foreign nationals are not very likely to buy iPhones at an AT&T store because the requirements are inconsistent (some stores were requiring SSNs, existing phone numbers and/ or activation), queues are long (non-starter for people with a limited window to get back to the airport), lack of other Apple products (iPods etc) and accessories and simply, AT&T stores are not landmarks.

 

Finally, the reason why used iPhones will begin to show up on eBay and other consumer-to-consumer sites in Europe is because individuals who speculatively buy an iPhone to resell are up against “organized unofficial” suppliers. You’re much more likely to buy a phone from an expert hacker if you worry about fixes and other things. And yes, the parallel market is showing budding signs of getting sophisticated at providing some of the support Apple wont provide.

 

Oh well, maybe it’s just version 2.0 coming out soon.

I think not 🙂 …”

 

~ dragan_co – April 2, 2008

 

See also > The Secret Underground Phone World in Russia

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