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Posts Tagged ‘Ophone’

2046528Apple’s iPhone managed to land in Hong Kong last year, but the drive across the Kowloon Toll Road to China is taking a bit longer. Antsy youngsters (media, investors and analysts) in the back seat want to know one thing… “Are we there yet Uncle Tim (Cook)?” …

Apple COO Tim Cook: “Um, not quite yet. The view is a bit hazy, but that sorta looks like Beijing. (Pointing East) See over there … It’s just over the horizon.”

Picture 2Okay, I took some poetic license. Tim Cook chooses his words carefully. During Apple’s (AAPL) recent Q3’09 earnings call, Broadpoint.Amtech analyst Brian Marshall asked: “Tim, any update on the iPhone in China?”

Cook’s response: “Nothing to add to date specifically, other than it continues to be a priority project and we hope to be there within a year.” (i.e. it could be tomorrow … or it could be 12 months from now)

Okay… Before a tantrum breaks out in the back-seat, let’s get back to the kids’ most urgent question… When?

Picture 1Just my super wild-ass guess, but I’m now looking for a deal announcement sometime in late Summer ’09 and an iPhone launch in the Fall of ‘09. What’s the basis for this SWAG?  Mostly a game of clue by the bumbling Inspector Clouseau (that would be Moi’ who previously predicted we’d be launched by now):

apple_unicomClue 1: Multiple different reports and sources lead me to believe that Apple’s negotiations with China Unicom were successfully concluded in late Spring 2009. You can chalk up the delay in a formal deal announcement to logistics (e.g. testing, licensing process, WCDMA network rollout and new model iPhone build) and perhaps some China telecom industry politics.

Clue 2: Press reports along with some documentary evidence, suggests that a new model iPhone was submitted to China’s authorities for mandatory “testing” sometime in late Spring. The MIIT’s testing process can take several months to complete. Foot-dragging by the MIIT might help China’s carriers to deploy their own Android-based phones + new WVAS + new mobile operating systems before iPhone is launched.

18276781

crystal-liu-pic-0014Clue 3: Multiple reports that Foxconn (Hon Hai Precision) will soon begin full production of a custom iPhone for China. This model will not have WiFi (due to WAPI/WiFi issues) but will likely come preloaded with several “for China” apps. Foxconn has given this iPhone a code name – “Model 90.” There is a very high probability that Model 90 is the same “yet to be unveiled” iPhone model (A1324) that China granted (in early June) a Radio Transmission Equipment Type Approval Certificate (RTETAC). This new iPhone is still pending the mission-critical Network Access License (NAL).

Clue 4: Initial production of Model 90 was confirmed in a tragic and highly unusual fashion – the July 16 suicide of a Foxconn worker charged with the responsibility of shipping 16 “Model 90” prototypes to Apple. One of the “Model 90” prototypes went missing (circa July 10) and this led to a very unfortunate chain of events that ended quite tragically. Many other bloggers and journalists have weighed in on this story, so I won’t delve into it any further here.

3609103536_3e314978d8Clue 5: Another reason why an iPhone launch might need to be pushed to Fall of ’09 is “manufacturing constraints.” That’s analyst speak for they can’t build ‘em fast enough to meet robust demand. Apple’s manufacturing partner, Foxconn (Hon Hai Precision) is now committing substantial resources to build iPhone 3GS, and this may take priority over production lines for the new model for China.

Clue 6: While China Unicom’s WCDMA 3G network was successfully launched on May 17, it will take several months before service is fully deployed. China Unicom rolled out the first 55 cities on May 17. On June 30, China Unicom announced the rollout to an additional 44 cities. All major cities should be lit-up by September/October with blanket WCDMA 3G coverage by year-end (284 cities).

Clue 7: China Mobile and China Unicom will launch their first proprietary Android-based phones (OPhones/UPhones respectively) + their new mobile OS and enhanced wireless value-added services (WVAS) circa August/September ‘09. China’s carriers may want to have their own “answer to iPhone” ready by the time the MIIT grants iPhone its NAL. In case you’re wondering … yes, China Unicom will be in “coop-it-ition” (cooperation + competition) with Apple. They want iPhone to “go huge” to bring in new subscribers, but they also desire new product/service offerings of their own.

To sum up… logistics and politics may push the iPhone deal announcement out to late Summer with a launch in China coming sometime in the Fall. But it will happen this year! So says Inspector Clouseau.

jingjing10“Are we there yet?” …

“Almost … watch another Olympics video on your iPhone and before you know it we’ll be there.”

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iPhone in China deal FUD 

NOTE: Lead buried at post’s end – Beijing Apple iPhone job posting

iphone-china-unicom-111I’ve been picking up some rather annoying buzz about a story on China’s NBD.com (use Google translate). The NBD.com post states that Apple and China Unicom “are not making progress in negotiations” and iPhone is “now less important in China Unicom’s strategy.”  This story and several other regurgitated articles — Marbridge Consulting, Trading Markets, etc. — are being read by institutions and hedge funds that trade in Apple (AAPL) shares. These institutions are being spoon-fed pure FUD (Fear, Uncertainty and Doubt).

My research suggests that the deal is still a “go” and will be announced before end of July. The official launch of iPhone in China will likely be later this summer. wifi-music-store-headerThe only wildcard that could delay launch is Apple’s possible inclusion of China’s WAPI encryption layered over WiFi. There has been no good visibility on Apple’s WAPI plans, so my guess is as good as the flip of a coin – WAPI/WiFi yes or no?  WAPI/WiFi would require a special production run* of iPhone for China.

I believe the current “deal stalled” stories are coming as a result of China Unicom’s recently announced plans to develop UniPlus, their own mobile operating system (an Android recode) and UPhone, a customized Android-based handset. I first wrote about this in April and more recently here > China Unicom and China Mobile unveil operating systems.

China Unicom’s UniPlus/UPhone have been in the works for many months. This move mirrors and matches China Mobile’s Android OPhones and their proprietary OPhone mobile operating system (MOS) which is still under intense development. China Unicom had to respond in kind. In late March, I engaged in a lengthy public debate with Dr. Cheng Dejie, a senior telecom analyst in China, about the carriers’ move to develop their own MOS and proprietary handsets > read Apple’s iPhone in China Negotiations

china-unicom-to-offer-iphone-and-g1-in-chinaThe recent media reports seem to infer that UniPlus/UPhone will leave no shelf-space for iPhone as China’s carriers are now attempting to Appleize** their own wireless platforms. In the case of China Mobile, that may well be true (at least in 2009). In the case of China Unicom? Well, yes, they’re also Appleizing** but they are smart enough to know that “me too” UPhones may not be compelling enough to grab market share away from China Mobile. Hence, they will partner with Apple to offer an official iPhone in China. UPhones and iPhones can exist side-by-side in China Unicom’s Vsens.com inventory. The Chinese consumer will ultimately pick the winners.

iphone-south-koreaNow that I’ve buried the lead, hear it is … Today’s (June 10, 2009) Apple Job Posting – Program Manager, Beijing China. Duties: Responsible for supporting and managing iPhone Training Program across Asia. Responsibilities will include working with all carrier partners that sell iPhone to implement and design training programs. Individual will work with the Apple Sales Teams on planning and training retail channel partner personnel on selling iPhone.

Still believe the iPhone in China deal is in jeopardy? Smart money says it’s coming soon!

2545_hwr* iPhonAsia has long theorized that China would have a special production run of iPhone that might include several pre-loaded apps for China (e.g. Youku vs Youtube). The new model iPhone 3GS unveiled at WWDC already supports (w touch of globe icon) 30 different languages, including both simplified and traditional Chinese. Apple’s iPhone in China will also support Chinese character recognition whereby users draw Chinese characters with predictive capability.               

Read > Apple buys rights to HWPen from Hanwang************

 

**Appleizing = Carriers attempt to offer cool customized smartphones with a proprietary mobile operating system (MOS) designed to promote their own wireless value added services – WVAS.

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china-unicomUpdate – June 10, 2009: Interesting factoid from Ultimi Barbarorum… China Unicom will be building 125,000 base stations in the first 12 months of their W-CDMA 3G network rollout. 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.

Update – June 6, 2009: According to a June 5 report in 163.com, China Unicom is preparing to release “UPhone” handsets based on its “UniPlus” operating system (OS). UPhones will be “customized” handsets with the UniPlus OS (modified Android code) designed to support China Unicom’s wireless value-added services (WVAS). This strategy by China Unicom will mirror and match the path that China Mobile is taking with their OPhones – also “customized” handsets using a modified Android OS to support the carrier’s own wireless services (music, e-mail, chat/messaging, mobile apps, cloud storage, etc.).

Both China Mobile and China Unicom have seen how Apple’s iPhone has driven mobile data usage through its seamless OSX software integration with Apple’s compelling services platform (iTunes, App Store, etc.). With more competition on standard cellular rate plans, carriers are looking to “Appleize” (offer cool customized smartphones with a proprietary mobile OS designed to promote their own WVAS) to increase average revenues per user (ARPU). “Appleization” is much tougher and more expensive than it looks.

China Unicom is smart enough to know that UPhones and UniPlus (MOS) are a gamble, and hence they will soon announce a deal with Apple to offer an official iPhone in China. Yes, UPhones and iPhones can exist side-by-side in China Unicom’s inventory. The Chinese consumer will ultimately pick the winners. 

April 30, 2009

JLM Pacific Epoch is out with a report today on a new mobile handset operating system (MOS) developed by China Unicom. This MOS will be branded as “UniPlus.” According to the report, new UniPlus-enabled handsets with several “simple functions” could be released as early as May 2009. UniPlus will help China Unicom to encourage consumer use of China Unicom developed wireless value-added services (WVAS).

iphone-china-unicom-112Apple has demonstrated how subscribers will respond by consuming massive amounts of mobile data and services when a peerless smartphone (iPhone) and software are seamlessly integrated into a powerful platform (iTunes, App Store, MobileMe, SDK, 3.0 OS and soon to be integrated with Snow Leopard OS). China Unicom will likely follow a similar roadmap to Apple in building out their MOS and services platform. Yet China Unicom recognizes that they will not arrive at their destination overnight. Consequently they will not be competing against Apple and the iPhone anytime soon. In fact, China Unicom will be an important partner with Apple in China. Stay tuned for iPhone in China announcements in May/June.

china_mobile_logoChina Mobile, on the other hand, will be taking a far more aggressive approach in ramping up their own mobile platform. China Mobile is building their own mobile operating system and plans to release a customized smartphone (oPhone) in May in partnership with Levono. There were also rumors last week that China Mobile was in talks with Dell build a customized TD-SCDMA 3G smartphone. Dell!? gfxlovers.com/smilies

Levono oPhone customized for China Mobile

Levono oPhone customized for China Mobile

The China Mobile mobile operating system (MOS), will be Android-based and coded to support China Mobile’sproprietarywireless value-added services:

See video interview with China Mobile CEO Wang Jianzhou discussing China Mobile’s new MOS. Wang Jianzhou also mentions iPhone > HERE

More on China Mobile’s new app engine > HERE

 

 

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Keep your eye on Android

Keep your eye on Android

In the last quarter of 2008, China Mobile announced plans to develop OPhone, their own Android-based operating system in partnership with select handset manufacturers such as Levono, HTC and Nokia. “OPhone” is a codename for phones that will be based on China Mobile’s OMS (Open Mobile System) which is essentially re-coded Android + TD-SCDMA (China’s home-grown 3G standard). Google’s Android software can be re-configured to support any carriers’ proprietary wireless value-added services platform – WVAS (e.g. music, messaging, apps, etc.). 

We’ve seen a beta demo of Levono’s OPhone on Sina.com, but the first OPhone models that are designed to support TD-SCDMA have yet to hit the market. In fact, China Mobile is providing millions in R&D funding (RMB 600 million – $87.77 million US) to assist 12 TD-SCDMA phone and chip manufacturers with the development of their “on the drawing board” TD-SCDMA 3G phones. International handset manufacturers have heretofore been reluctant to build TD-SCDMA phones as the new “China built” network standard has yet to gain wide user acceptance, and is limited (for now) to China. 

HTC Magic

HTC Magic

But that is not going to stop China Mobile from hitting the market with EDGE (2G) smartphones that are Android-based. HTC announced today that next month they will unveil a version of HTC’s “Magic” model for China Mobile. The new smartphone is Android-based and will be re-coded to support China Mobile’s WVAS. China Mobile’s (HTC’s) customized Magic won’t be cheap. It is expected to retail for about 5,000 yuan, or about $730 US … albeit the price has yet to be finalized. The new China Mobile Magic won’t be 3G, but rather will use China Mobile’s “EDGE” (2G) network. Meanwhile, China Mobile and HTC will continue with plans to develop another new Android-based OPhone model using TD-SCDMA 3G … although there has been no date set for HTC’s 3G OPhone launch.

For more background, read today’s Wall Street Journal article on the new HTC phone. For a good chuckle, see the Windows Mobile > OPhone spoof

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apple_unicom2Update: China Mobile’s CEO spoke to a reporter on Saturday, March 21. According to Wang Jianzhou, China Mobile’s talks with Apple have stalled, albeit “the door remains open.” This is no surprise as Apple is moving forward with China Unicom. Details > HERE (in Mandarin)

iPhonAsia Comment: Here (below) is iPhonAsia’s response to Dr. Cheng Dejie’s March 20 article China Unicom’s Apple deal may leave a sour taste published via Interfax. Read > HERE

iPhonAsia Responds to Dr. Cheng Dejie (Interfax)

Dear Dr. Dejie:

Telecom Analyst Dr. Cheng Dejie

Telecom Analyst Dr. Cheng Dejie

Thank you for your interesting article. Your arguments are supported by facts, and I agree with many of the discussion points you’ve presented. Yet there is a general theme in your article that I do take issue with. That is the idea that China Unicom may regret any agreement they make with Apple that compromises their ability to control wireless value added services (WVAS).

The title of your article “China Unicom’s Apple deal may leave a sour taste” clearly implies that a deal with Apple might not be mutually beneficial. I would disagree. China Unicom has had ample opportunity to conduct their due diligence and analyze the market opportunities that iPhone presents. To conclude that China Unicom may be taking steps that will not be in their long-term best interest is, in my opinion, an underestimation of China Unicom executive management’s business savvy. I would agree with your point that any successful negotiation with Apple would require that the iPhone (Apple) retain control over many core wireless value added services (WVAS), such as iTunes and the Apple App Store. However, I think you will be surprised to find how ready, willing, and able Apple is to make strategic compromises to better serve Chinese wireless consumers.

iphone-china-unicom-11I believe in the long run, focusing on what’s best for the Chinese consumer, will prove to be the winning strategy for China’s wireless telecom companies. In the past, many carriers imposed their will on handset manufacturers. Many phones were customized to suit the carriers’ branding and proprietary services. Industry insiders often referred to these customized handsets as “crippled phones” due to their ability to serve only one master … the carrier.

steve_jobs_iphoneThat was then, this is now. On January 9, 2007, during the MacWorld Keynote, Steve Jobs unveiled the iPhone, the first truly “smart” mobile device to converge cellular service with music (iTunes) and the real Internet (not a WAP). Millions of consumers were immediately smitten. Of course iPhone did not receive uniform praise. The loudest “boos” came from competing manufacturers/carriers and their paid “media savvy” consultants. But the consumer wasn’t listening to pundits and critics. All they had to do was pick up an iPhone with its vibrant screen, Safari browser to the real Internet, highly intelligent and intuitive user-interface (no manual necessary), and they were convinced. It was a “must have.” What’s more, the iPhone is not a prisoner to fix buttons. It is designed to evolve. Evolution is part of Apple’s promise to buyers; a promise that Apple has delivered on again and again. My own 1st generation iPhone has now been (easily and at no cost) upgraded multiple times and I’ve downloaded dozens of cool and fun applications.

800 million downloads!

800 million downloads!

I am not alone in enjoying the iPhone evolution/revolution. Over 17 million iPhones have now been sold and as of March 17, 2009, after only 8 months of operation, an astounding 800 million applications have been downloaded from the Apple App Store hosting over 25,000 applications. And now the 3.0 OS upgrade will take iPhone to a whole new level. The game changed forever on January 9, 2007. A paradigm shift is underway and mobile communications will never be the same.

Back to the key question you raised in your article… “Who can or should control the WVAS?” Right now everyone (carriers and OEMs) is charging full-speed ahead to build their own app store and proprietary value-added services. Some may succeed, and others will no doubt waste 10s of millions in a vain effort to create a winning platform. I believe carriers that elect to build their own WVAS and also embrace smart phone manufacturers’ WVAS will wind up the winners. This openness will also make for happier wireless consumers.

I am not privy to any of the plans or strategies that may have come from current Apple and China Unicom negotiations. One might imagine that China Unicom will pursue their own WVAS while at the same time allowing iPhone subscribers to enjoy many of the current Apple services. Apple and China Unicom can learn from one another and forge a successful partnership. This partnership can be financially rewarding for both Apple and China Unicom. Most importantly, Chinese wireless consumers will be the biggest beneficiaries of this partnership.

Consider that Apple has gone to great lengths and expense to make the App Store a true e-commerce vehicle for developers who receive a 70% share of all application revenues. There is no question in my mind that

iPhone integrated with peripheral

iPhone integrated with peripheral

Apple would work closely with China Unicom to ensure that there are a wealth of “for China” applications on Apple’s China App Store. I suspect that several new iPhone applications will be developed directly by China Unicom, who’ll receive at least 70% of the revenue. One or two of these applications may even be preloaded on an iPhone for China Unicom. After the iPhone 3.0 OS release, applications can be developed with “in app” purchase options (e.g. online magazine subscriptions, city guides, etc.). There are also now many ways an iPhone can interact with peripheral devices. This presents additional opportunities for ongoing revenue for businesses and developers and greater “value-add” for Chinese iPhone users.

The bottom line… China Unicom’s Apple deal can be very sweet indeed.

More background on Apple and China Unicom iPhone negotiations …

NOTE: The following is based on my research together with a large measure of outright guesswork. In other words, my analysis should be filed under “rumor,” “speculation,” and “opinion.”

Gang Li

Gang Li

A China Unicom executive contingency, led by Executive Director of Mobile Communications Gang Li, arrived in Cupertino on Sunday, March 8th for meetings with Apple. The objective of this summit was to move iPhone negotiations to a serious level. The negotiation points likely included:

  • The issue of a subsidy payment from China Unicom to Apple for each “on contract” iPhone.
  • The issue of WiFi and China’s WAPI security standard. Apple may be required to disable WiFi on iPhone in China. This would not be unprecedented. Apple has already disabled WiFi for iPhone in Egypt.
  • The issue of exclusivity. Whether China Unicom will have exclusive carrier rights in PRC and whether any “exclusive” will be limited to “3G” or to all iPhone models and any other Apple 3G enabled mobile device (3G tablet).
  • Whether Apple will agree to pre-load iPhone with applications that are popular in China (e.g. Youku vs. Youtube).

A recent report via ccw.com.cn (传联通就引入iPhone达成协议) indicates that the China Unicom

iPhone 3.0 OS

iPhone 3.0 OS

delegation remained in discussions for a full two weeks and did not return to Beijing until the evening of March 18. It is therefore quite possible that the China Unicom team was in town for the Apple 3.0 presentation (< watch) delivered at Apple’s HQ in Cupertino on St Patrick’s Day (March 17). My guess is that the China Unicom executives were sequestered in the upstairs conference room (above Apple’s Town Hall facility) where they could watch the iPhone 3.0 event by closed-circuit television. This extra discretion would be important as the national media was invited to the 3.0 event and a group of well-dressed Chinese gentleman would raise journalists’ curiosity, and might cause the press to connect the dots to China Unicom. Apple and China Unicom would prefer that any “deal” remain a secret until all formal agreements and China Ministry (e.g. MIIT) approvals are signed sealed and delivered.

What are the final steps? The deal may be concluded after the Ministry of Industry and Information Technology (MIIT) gives iPhone its official approval (soon). There have been reports that Apple provided China Unicom with a non-WiFi iPhone for final MIIT tests. Another key step might be an Apple visit to

China Unicom Chairman Chang Xiaobing

China Unicom Chairman Chang Xiaobing

China. My guess is that a group of senior Apple executives will travel to Beijing to meet with China Unicom CEO Chang Xiaobing and other executives. This would be a professional courtesy and show of respect for the China Unicom delegation that recently visited Cupertino. It would also be an opportunity for Apple to meet with Lou Qinjian, Vice Minister of China’s MIIT. There is also the possibility of a side trip to meet with China Mobile CEO Wang Jianzhou and continue those “cooperation talks” that we’ve heard so much (or so little) about. Spring is a nice time of year to visit China. There are sites to see after all.

May 17 for an announcement with a launch this summer?

There have been several reports suggesting that an official iPhone agreement between Apple and China Unicom could be announced on May 17. This is the same day that China Unicom will be launching, on a trial basis, the new W-CDMA 3G network in 55 major Chinese cities. The full network (283 cities) rollout will not happen until the end of 2009. May 17 appears to be about the right timeframe to make an official “iPhone in China” announcement; however, an iPhone launch may need to wait until the summer months. Apple’s Worldwide Developer Conference is often scheduled for mid-summer and that might be the right forum to unveil new iPhone models. I would not expect a China launch until Apple has formally unveiled their “gen 3” mobile devices. It should be a busy summer in Cupertino and in Beijing.

What’s going on between Apple and China Mobile?

china-mobile-iphone-3g11As for the prospects of an iPhone deal with China Mobile … A “3G” deal looks doubtful, a “2G” deal is possible, and a “4G” deal will likely remain an open topic of discussion.

I agree with part of the statement you made in your article; “Apple clearly stated that it will not include TD-SCDMA functions in its handsets, which totally ended negotiations.”

I know that Apple has not commented on TD-SCDMA and I doubt that China Mobile would ever publicly admit that TD-SCDMA 3G is a “deal breaking issue.”  However, I absolutely do believe that TD-SCDMA network concerns have been a major factor in Apple’s decision tree. More on TD-SCDMA issues later…

The public reasons (leaked to Chinese media) given for Apple and China Mobile’s failure to come to terms have been over control of the App Store and WVAS. It appears that China Mobile pushed hard in an effort convince Apple to remove services from the iPhone (no WiFi, no App Store, no iTunes, etc.) in favor of China Mobile’s own WVAS. If the press rumors are true, Apple said “No!” I don’t blame them. A “stripped down” iPhone morphs into something that Apple would not want to call “an iPhone.” It’s really that simple.

Apple cooperation talkscontinuing with China Mobile? …

China Mobile CEO, Wang Jianzhou

China Mobile CEO, Wang Jianzhou

Despite divergent views over who (Apple or China Mobile) should control WVAS on iPhone, and TD-SCDMA concerns, I am not sure that discussions have “totally ended.” According to China Mobile CEO Wang Jianzhou, Apple and China Mobile are (or were) “still talking” under a non-disclosure agreement (NDA). An interesting quote on March 5 from China Mobile CEO Wang Jianzhou: “We hope the iPhone can be used on China Mobile’s network, and Apple has demonstrated its will.”

What might be going on in these reported “talks?” I honestly have no idea. It could be something big, something small, or nothing at all. Here are a few possibilities:

  • Apple and China Mobile could be discussing an EDGE 2.5 G iPhone Nano (iPhone Nano [if it exists] might be a 2.5G model, and this might not conflict with a negotiated “3G” exclusive for China Unicom)
  • China Mobile may be discussing a future TD-LTE Phone 4G (at least 18 months down the road)

China Mobile may also be considering ways to retain existing iPhone users. China Mobile has approximately 1,000,000 iPhones now running on their EDGE 2G network. At least ½ of those are the new iPhone 3G and many of these handset owners are not on contract (290 million of China Mobile’s 463 million users are pre-paid and can freely switch carriers). If China Unicom lands the iPhone, they will no doubt attempt to entice existing iPhone 3G owners to “upgrade” to 3G.

picture-121

China Mobile going for full control of WVAS…

logopicture-9China Mobile has made no secret of their intent to build their own app store (to be called “Mobile Market”) and promote their own WVAS platform – Monternet, including music services (www.12530.com) and a Web 2.0 platform (similar to Mobile Me). China Mobile made 27% of their revenue in 2008 through their WVAS and they don’t want any leakage to handset manufacturers.

As you noted, China Mobile has already launched R&D for its own Android powered mobile operating system, jointly with cell phone producer Lenovo. The new MOS has been dubbed Ophone. With its own operation system, China Mobile can install more services of its own. China Mobile has also paid Topssion and Accenture plenty of RMB to work

Levono Ophone

Levono Ophone

on customization plans for TD-SCDMA 3G handsets and perhaps to continue feed them ideas they want to hear … “you can build your own mobile OS and app store just like Apple … and here’s how can we help” (more Accenture projects and billable hours… yes, I’m a cynic).

Nokia’s concerns offer clues as to why Apple said “No” to a customized TD iPhone 3G…

news1_01This effort to integrate TD-SCDMA handsets with China Mobile’s own mobile operating system and WVAS is an expensive and risky proposition. Nokia has apparently balked at pouring their own money into this initiative. Consequently, earlier this month, China Mobile revealed that it would invest 600 million RBM with Nokia and other handset manufacturers on research and development on TD-SCDMA handsets. Why is the most dominant wireless carrier in the world (China Mobile with 463 million subscribers) dolling out R&D money to handset producers to build TD-SCDMA phones? Especially to Nokia who has dominant market-share in China (37% of handset sales in China are Nokia) and has invested heavily in maintaining good standing with China Mobile? Serious question. Why? You’d think Nokia would be falling all over themselves to rush deliver a new TD Nokia 3G phone for China.

TD-SCDMA Handsets

TD-SCDMA Handsets

A large part of that answer may rest in the fact that China Mobile has an obligation to China’s Ministries to rollout the “indigenously innovated” TD-SCDMA 3G network. And yet China Mobile is now rushing development of TD-LTE 4G as fast (and quietly) as they can. CMCC will no doubt spend whatever amount is necessary to stabilize TD-SCDMA, but its future is far from certain. The tenuous future of TD-SCDMA may be a primary reason why Nokia will not take on further TD-SCDMA handset development without a cash stipend. A secondary reason may be the substantial WVAS customization China Mobile is insisting upon, along with the integration of China Mobile’s new “on the drawing board” Ophone. This is a terribly expensive undertaking for Nokia with no assurance that the customized (“crippled”) TD handsets will sell.

Why Apple said “No” to TD-SCDMA…

In your article, you questioned why Apple balked at an agreement to build a TD-SCDMA handset. In my mind, this was a “no brainer” decision for Apple. It’s my belief that Apple went to great lengths to give the nascent TD-SCDMA 3G protocol a trial, including dedicating engineering resources and possibly some design/build efforts. But any special TD iPhone 3G model is likely to remain under “lock-in-key” in the engineering vaults in Cupertino.

cmcc-tdscdma-logoWhy would Apple say “No” to TD-SCDMA 3G? …

  • China Mobile’s “end run” rush to build TD LTE 4G is a statement that TD-SCDMA may have a very limited life span (2 years or so).
  • TD-SCDMA is based on now “dated” Nokia Siemens technology.
  • Network usability problems continue (dropped calls and interference near tall buildings).
  • TD-SCDMA 3G iPhones would not be usable outside of China, albeit they would likely be backward compatible to 2G EDGE networks.
  • China Mobile has blamed the current crop of TD-SCDMA handsets for network usability problems. Would China Mobile reverse this “blame the phone” tactic should Apple launch a TD iPhone 3G? Not likely.
  • Apple understands very well that network bugs can tarnish the reputation of handsets.
  • Apple does not want to have their debut in China spoiled due to network reliability issues.

Despite the possible conflicts over WVAS and TD-SCDMA, it is my hope that Apple and China Mobile can find common ground and a basis to work together. A large cross-section of China wireless consumers are using China Mobile’s network and services. Whether it be a 2G iPhone Nano, or a 4G TD LTE model, it would be great to see two of the world’s most respected companies (Apple and China mobile) working together.

Thank you again for your article. I enjoyed reading it and appreciate your point of view.

Respectfully,

~ Dan Butterfield, Editor, iPhonAsia 

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iPhonAsia comment: China Mobile has made no secret of their intent to build their own app store and promote their own value added services (VAS) platform (Monternet), their wireless music services platform (www.12530.com)  and their brand new Web 2.0 platform – similar to MobileMe.  China Mobile  made 27% of their revenue in 2008 through their VAS and they don’t want any leakage to Apple.

China Mobile CEO Wang Jianzhou

China Mobile CEO Wang Jianzhou

China Mobile has already launched R&D for its own Android powered mobile operating system, jointly with cell phone producer Lenovo. The new MOS has been dubbed Ophone. With its own operation system, China Mobile can install more services of its own.  

China Mobile has also paid Topssion and Accenture plenty of yuan to work on customization plans for TD-SCDMA handsets and perhaps to feed them news they want to hear … “you can build your own app store just like Apple … and here’s how can we help.”

It is quite possible that China Mobile pushed hard in an effort get Apple to strip down the iPhone (no WiFi, no App Store, no iTunes, etc.) in favor of China Mobile’s own VAS. It’s also possible that Apple said “No!” China Unicom also wants to push their own VAS but they are eager to steal away customers from the dominant China Mobile and may be open to “less” crippling. If China’s carriers insist on over customization of iPhone (dumbing down iPhone in favor of their own VAS), Apple may roll in China sans a formal carrier deal. 

Qiu Qiuliang GM Apple China

Qiu Qiuliang GM Apple China

June may be the timeframe for official announcements in China. Apple has a China roadmap. There’s ample evidence that Apple has a China distribution plan and recent China job postings suggest that plans are well along the path. 

picture-3421More on Apple and China Unicom rumors > HERE

       

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China Mobile Scoffs at Apple’s Desire to Sell iPhone Sans Operator

Read full post > HERE 

picture-13iPhone talks between China Mobile (NYSE:CHL, 941.HK) and Apple (Nasdaq:APPL) remain at a standstill after one-and-a-half years of negotiations, reports Sina quoting a China Mobile insider. The report says Apple currently hopes to sell the iPhone without any operator commitments, allowing users to purchase mobile software through Apple’s iTunes Store. China Mobile chairman and CEO Wang Jianzhou said that would be Apple’s loss since the Chinese are not accustomed to making purchases online via credit card. 

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