Posts Tagged ‘Blackmarket’

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)

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Chinese aren’t waiting for “official” iPhone in PRC 

The irony is the object they desire is made in China and the US company responsible for the scarcity is proud of its free-thinking image — Apple Computers.

“The iPhone has brought back the planned-economy era,” said James Lei, director of the consumer electronics division at market research firm In-Stat China.

More than a year after its debut, analysts say plans to introduce the smart phone are conspicuously more advanced in West Africa than in China, the world’s largest mobile phone market, with more than 600 million cellphone users.

Apple chief Steve Jobs said in June he expected to reach a deal in China this year and that the obstacles Apple had to overcome had to do with “regulatory bodies”.

Chinese media reported on Tuesday that China Mobile, the country’s largest handset operator, was in the final stages of talks with Apple to launch the iPhone in China. But neither company would confirm it.

In the meantime, Chinese consumers are not waiting for Jobs. The country is widely considered the world’s biggest market for smuggled, “unlocked” and counterfeited iPhones.

More than 500,000 first-edition iPhones made their way to China, or nearly a tenth of the phone’s global shipments of 5.2 million from June 2007 through March 2008, according to estimates from In-Stat.

Some estimates indicate 40 percent of all “unlocked” iPhones are in China, according to telecoms consultancy BDA.

Guo Yu, a 26-year-old computer programmer, asked a friend who was travelling to the US on a business trip in April to buy him an iPhone. The friend had iPhone orders from two other people as well.

A three-step tutorial found on the Internet showed him how to unlock his phone so he could use it on his Chinese network.

“It’s so easy,” Guo said, and added: “I don’t care when the iPhone goes on sale in China.”

He paid 3,000 yuan (435 dollars) for an eight-gigabyte iPhone that sells for 399 dollars in the US.

Sellers on Taobao.com, China’s answer to eBay, are offering the eight-gigabyte model of the new 3G iPhone for 4,900 yuan, 3.5 times the 199-dollar US price tag.

“Limited units available for each buyer,” wrote one Taobao seller, whose ad featured long lines outside a US Apple store. He claimed to ship the Chinese-made phones from San Francisco by courier.

Even when Apple does officially start selling the iPhone in China, the black market alternative might be more attractive.

The Ministry of Industry and Information Technology has asked Apple to de-activate the wireless Internet function on all handsets it sells in China, BDA said.

Another contentious point is China Mobile’s commitment to building a third-generation, or 3G, high-speed network using the homegrown TD-SCDMA standard, incompatible with the WCDMA standard the latest iPhone is based on.

The longer the delays, the more the black market eats away at the high-end customers Apple needs.

The iPhone’s price puts it out of reach for most Chinese consumers, but Apple would be targeting a profitable smart phone niche market that is expected to expand at a compounded annual growth rate of 26 percent to reach over 180 million units by 2010, BDA said in a report.

Apple also has to fend off Chinese iPhone clones, such as Meizu Technology Co’s M8 MiniOne device. The Guangdong-based company exhibited the 200 dollar iPhone look-alike at Germany’s CeBit fair in Hanover — until it was confiscated.

How to tell iPhones from copycats is one of the hottest topics on the Chinese fan siteiPhone.com.cn.

The site is an indicator of China’s growing iPhone fever with 300,000 registered users and thousands more joining weekly, according to the site’s editor Zhang Xing.

But it’s not a question of demand stalling Apple’s official Chinese launch of the iPhone, analysts said, but how much the company is willing to adapt its US-centric strategy to deal with China Mobile or one of its other state-owned competitors.

In the meantime, Chinese consumers are not waiting.

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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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Wall Street Journal, April 5, 2008 – Page B16

WSJ: When iPhones Go Missing

Are Tourists Snapping Up Devices and Selling Them For Use on Other Networks?

Full Wall Street Journal article > HERE

Where are all the iPhones? Apple sold 3.7 million of its hit mobile phones last year, but its official partners only registered 2.3 million new customers. Meanwhile, many of its U.S. retail stores are selling out of the handsets. Apple is tight-lipped, but the two stories could be related.



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MacDailyNews Full article > HERE

China Mobile: 400,000 unlocked Apple iPhones on our network at end of 2007

Friday, February 15, 2008 – 03:28 PM EST

“The shock wave caused by the Apple iPhone has been spreading from the US to China at an unbelievable rate. Savvy entrepreneurs have been purchasing hundreds of thousands of iPhones in the US and Europe, then “cracking” the operating system to allow the device to be used on any GSM network. According to China Mobile, the biggest wireless carrier in China, there were about 400,000 cracked iPhones using its cellular network service at the end of 2007, representing one out of every 10 iPhone shipments announced officially by Apple. The figure surprised us as it is fourfold of that we estimated before,” Anty Zheng reports for In-Stat China.

MacDailyNews Take: There’s nothing like granting Steve Jobs massive bargaining power and carte blanche to negotiate from a position of strength.

“We have never doubted that the iPhone will achieve greater success than iPod in China if Apple teams with China Mobile to launch its Chinese version. There are two reasons. Firstly, different from the US where the smartphone market is fairly limited, appealing primarily to business users, The smartphone market in China, though, is an entertainment-oriented individual consumer market. The main reasons that Chinese mobile users purchase smartphones include entertainment (such as music players, cameras and video) and to access mobile Internet applications (such as IM, e-book, and games). We believe the iPhone will be favored by these consumers as it can better meet such demand. Secondly, high-end handset buyers significantly outnumber high-end mp3 player buyers. We estimate that 20% of handsets sold in China in 2007 cost more than 4,000 RMB (US$533). In another words, there are an estimated 28 million potential users for the iPhone in China.,” Zheng reports.

“Further, the iPhone is not just a successful product. In-Stat feels that the iPhone is leading the way to a new generation of smartphones that are very different from their older counterparts. One important trend is that revolutionary UI and UE, enabled by touchscreens and 3D sensor technologies, will be widely used in the next generation of smartphones in China and around the world,” Zheng reports.

“Also, the trend toward the mobile Internet will drive handset makers to deliver more smartphone models. More Internet applications, such as social networking, maps, search, and e-mail, will be developed for smartphones, and these will make the iPhone and other smartphones more attractive to mobile users who like to use their handsets to pass the time. In turn, the mobile Internet will become a new selling point for smartphones, and drive up sales. Taking the long view, In-Stat believes that the smartphone is evolving into a increasingly wide range of mobile devices, where cellular voice communications are just one function of the converged appliance,” Zheng reports.

For more information about Chinese smartphone market, check out In-Stat’s recently published report titled “Mobile Internet and GPS Change the Future of Smartphones in China,” available online at: http://www.instat.com/Abstract.asp?ID=279&SKU=IN0703655CWW

[Thanks to MacDailyNews Reader “Mike in Helsinki” for the heads up.]

MacDailyNews Take: Well, now, there’s a rotating, mile-high by mile-wide, blinking neon billboard screaming “Apple’s iPhone will rule the world!” One question remains, of course, is that large and bright enough for Wall Street to finally be able to see it, read it, and understand what it means?


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China Mobile: 400,000 Unlocked iPhones On Our Network


by Dan Frommer – Silicon Alley Insider

EXCERPT: An eye-opening stat we hadn’t seen until today: China Mobile, the biggest wireless carrier in China, said there were 400,000 unlocked iPhones operating on its network at the end of 2007.images2.jpeg

If true, that represents more than 10% of the 3.7 million iPhones Apple (AAPL) sold last year. Market research firm In-Stat, which included the stat in an email newsletter today, said that total was four times what they had previously estimated. That helps explain where many of the “missing” iPhones have wound up.

Full article > HERE


The hunger for iPhone (Ai Feng) in China is so strong that unlockers are willing to:

·      Pay a premium (USD $250 to $500 above retail to own a hacked iPhone)

·      Own a non-warrantied iPhone

·      Forego visual voicemail

·      Forego regular software upgrades that would otherwise ‘brick’ a ‘jailbroken’ iPhone.

What this massive unlocking in China shows is that there is a very strong demand in China (Captain Obvious award).  And this demand will only accelerate once the new 3G iPhone is officially launched in China.


As one astute iPhone owner put it …

“Would you want a hacked, non-warrantied iPhone you couldn’t run a software update on?  If the choice was that, or wait a few months (when iPhone officially arrives in your market), I’d choose ‘wait’ easily. I think 97% of folks want to just walk in a store, buy an authorized iPhone and use it normally – warrantied with updates … even if it means switching carriers.

I think we are just getting a tiny percentage % of advance sales from tinkerers, hackers etc., and from the folks willing to pay a premium, take risks, and have bragging rights.  Guess what, this same demographic will all want the Apple 3G iPhone the second that it’s available as well.”

… “I can’t see this as anything but a good sign about insane demand, worldwide.”


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Update: February 12, 2008

Businessweek’s Peter Burrows has published a companion article – iPhone’s Reluctant Gray Marketer.  This article outlines the Czech startup Bladox and their role in iPhone unlocking. See full article HERE

Inside the iPhone Gray Market

A global network is thriving by selling up to 1 million iPhones that bypass Apple’s restrictions

by Peter Burrows

EXCERPT: Encamped along the aisles of the massive Zhongguancun Kemao Electronics Market in Beijing are many people like Li Zhongxin, of the Beijing Xinyu Lianhe Telecom Equipment Co. Li sits atop a plastic stool in front of his open-air stall on the third floor, scanning the throngs of shoppers for would-be customers. There’s no sign of Apple’s iPhone among the thicket of cell phones, handset covers, and other accessories hung on shelves and inside the waist-high glass display case, but he’ll be glad to show you one. In exchange for an up-front payment, “you can buy as many as you’d like,” Li says.

Full Article >HERE

For a gallery of iPhones sold in many “unofficial markets,” have a look at TUAW’s montage of > iPhones-around-the-world



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