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Posts Tagged ‘TD-SCDMA’

 

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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china-iphone-300x2081crystal-liu-pic-0014BusinessWeek has just posted a rather pessimistic article on iPhone’s prospects in China. If you’re an iPhone fan take a deep breath, exhale and relax. In iPhonAsia’s opinion, this article – Why China won’t fall for the iPhone – is nothing more than straw man hit piece. To win the debate using the straw man strategy, you simply define your opponent’s case using faulty suppositions. You then easily knock down your opponent’s argument like a flimsy straw scarecrow. 

Let’s examine BusinessWeek’s straw stuffing:

  • Straw One: “Nokia sold 71 million handsets in Greater China last year” 

BusinessWeek highlights these numbers apparently to show how weak Apple’s position is compared to Nokia, the dominant handset manufacturer in China. Thank you Captian Obvious. Nokia has been in China for years and Apple has not yet officially entered China. Although 1.5 million grey market iPhones in China is not a bad testimony to the potential demand.

China handset market Oct 2008

China handset market Oct 2008

What BusinessWeek fails to point out is that Nokia’s 1st Quarter 2009 “sales fell 27% from the year-earlier quarter, operating profit plunged 96%, and the average selling price for the company’s portfolio of mobile phones—a closely watched indicator of demand—fell to $86 from $94 at the end of 2008.” Don’t believe me? I just quoted from an April 16, 2009 BusinessWeek article that further notes the current Nokia handset margins average about 9%.  Here’s a news bulletin … iPhone Margins* in the US are well north of 50% when you include the carrier subsidy. If you totally eliminate the carrier subsidy (using the 16G model as an example) the margin remains at a stellar 18%.*

  • Straw Two: “iPhones are expensive.”

Peppered throughout the BusinessWeek article is the theme that the iPhone is just too expensive and therefore will not capture significant marketshare in China. What BusinessWeek fails to understand is that the iPhone will never be the “low price” leader and has no ambitions to undercut the price of basic cellphones or crippled iClones. Motorola tried the low price strategy and it has nearly driven them out of the China market

As Mark Sue of RBC Capital put it (January 18, 2007): “Motorola might want to reconsider its strategy of having yesterday’s hit phones becoming tomorrow’s free phones!”

Pssst BusinessWeek … It’s margins that matter. If you fail to pay attention to margins, you’re following the Peggy Bundy School of Economics. The majority of handset manufacturers in China need to sell 10, 20 or even 30 phones to capture the same bottom-line profit as one iPhone sale. To put it simply, iPhone does not need to capture an “elephant size” share in China to be a money-maker for Apple, China Unicom and thousands of app developers.

BusinessWeek goes on to suggest that China Unicom cannot afford to subsidize iPhone in China and they site the price for unlocked iPhones in Hong Kong at $800 per. The implication is that Apple will not be able to offer the new iPhone 3.0 in China at a price much below $800. All we can say is “stay tuned.” The new iPhone for China will retail for less than 5,465 Renminbi ($800 US).

iphone-china-unicom-11One interesting item is the rumor that China Unicom has successfully negotiated a 50% share of Apple’s China iPhone App Store revenues. The normal split has been 30/70 with the lion share percentage to developers. Under the China Unicom split, it might look something like 15/15/70. It has also been rumored that, in return for a share of the app store revenues, China Unicom will provide a “per unit” subsidy payment (amount unknown) to Apple. In the US it has been surmised that AT&T’s subsidy payment to Apple has been $300 per unit.*

  • Straw Three: “TD-SCDMA (China Mobile’s network) handsets are retailing for less than US$250”

China TelecommunicationsBusinessWeek feels that iPhone may have trouble competing with lower priced TD-SCDMA phones that will run on China Mobile’s new 3G network. This is an easy one. TD-SCDMA phones should be priced lower. In this case, the old truism applies “you get what you pay for.” The current crop of TD handsets are not smartphones and really don’t compare to iPhone. The handset competition may get better when (don’t hold your breath) ZTE, LG,  Levono, HTC, and Nokia finally introduce their TD smartphones … For now, these “coming soon” phones remain on the drawing board. They will also be dependent on OPhone, China Mobile’s new mobile operating system (MOS). OPhone has received much press but it has yet to launch. Consider also that China Mobile is taking the highly unusual step of providing R&D funding (RMB 600 million – $87.77 million US) to 12 TD-SCDMA phone and chip manufacturers. 

Why is this subsidy necessary? iPhonAsia believes the money is being fronted because handset manufacturers are unwilling to risk (spend) their own capital to develop new TD smartphones (with OPhone OS) that must be integrated with China Mobile’s value-added services platform. This process may be more technically challenging and less profitable than China Mobile’s well-paid consultants first promised.

one-billion-appsWill third-party developers abandon China Unicom and the Apple iPhone App Store (70% payout to developers) in favor of unknown opportunities via China Mobile’s new app store – a.k.a. Mobile Market? Not likely. Where would you invest your time and money? We have heard virtually nothing of the OPhone SDK and we have yet to hear how China Mobile will share their Mobile Market revenues with developers (Update: China Mobile will share only 50% of Mobile Market revenues with developers – ouch!). And then there’s the question of when Mobile Market launches in China? Thus far China Mobile has only stated by “year end.” It’s a fair bet that Apple and China Unicom will have iPhone apps “officially available” in China before Mobile Market is open for business.

  • Straw Four: The App Store is not localized for China

BusinessWeek explains that AppStore has already launched in China for Apple’s iPod Touch, but it is in English and many of the applications are international. 

I guess BusinessWeek does not believe that Apple will take steps to further localize the App Store for China. BusinessWeek is simply mistaken. Soon after the iPhone is formally launched in China, look for many new “for China” apps that have been fully localized for the China Market.

  • Straw Five: China’s mobile app companies and developer community prefer to develop in Java or Nokia’s symbian.

BusinessWeek also adds “The selection of unauthorized Chinese applications for ‘jailbroken’ phones is better …  Most won’t bother to rewrite applications for a niche phone, especially given Apple’s conrol-freakery concerning what applications it permits in its store.”

If you think that Apple might be finicky about the nature and “tastefulness” of apps in its store, then let me introduce you to the official censors in China. They invented the term “control-freakery.” If there’s money to be made, the apps will be modified, if necessary, and submitted to the China App Store.

200902041829020540776As for the contention that “China’s developers prefer Java and Symbian and won’t rewrite apps for a niche phone”… BusinessWeek is in for a surprise. iPhonAsia has consulted with many iPhone developers who are hard at work on “for China” apps. iPhonAsia recently had lunch with the CEO of Extend Logic, an IT development company based in Santa Clara and Xi’an China. Extend Logic and their China-based subsidiary Knowledge Surf, have been directly involved in training new iPhone and Android developers in both the US and China. Extend logic is one of many companies training tens of thousands of developers.

The iPhone momentum is growing, and it’s not just for fun and games … Enterprise is rapidly coming aboard the iPhone train. Thousands of corporations are now somewhere along the iPhone app development path. If you check any job board, you will find that iPhone developers are very much in demand.

Okay, so it's about 200K students**

Okay, so it's downloads, not students**

Want more evidence? The Stanford University iPhone Application Programming CS193P class is now the most popular iTunes U course with over one million (1,000,000) downloads.** How many of those downloads are from developers in China? Who knows? But it is surely in the tens of thousands.

The images below show the most popular iPod Touch apps on the iTunes App Store in China. My guess is that one or two of these apps will be available for the “niche” iPhone. 

Picture 1Picture 2

Third-generation (3G) networks are new to China and so too are app stores and proprietary mobile operating systems. There are many moving parts in China carriers’ battle for smartphone consumers. The fact is that it’s too early to pick the China’s smartphone winners and losers. But I would not count out iPhone … the pathway is littered with the corpses of pundits and paid consultants who bet against Apple’s iPhone.末端

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* Regarding iPhone margins … here are iPhonAsia’s unscientific (“back of the napkin”) calculations using iSuppli numbers for cost of goods (COG) …
iPhone 3G 8 gig model COG tallies up $174.33 (give or take) + about $50 in royalties = $224.33 in costs.
iPhone 3G 16 gig model COG is about $20 more than the 8 gig model or $244.33

Apple is selling the iPhone to carriers for about $500 to $550. The retail price is $199 or $299 (knock off a couple of bucks if sold through BB or WalMart).
That makes for healthy margins…
8 gig iPhone
Revenue = $499 ($199 + $300 carrier subsidy)
COG = $224.33 (materials + royalties)
Gross = $274.67
$275/$499 = 55% margin

16 gig iPhone
Revenue = $599 ($299 + $300 carrier subsidy)
COG = $244.33 (materials + royalties)
Gross = $354.67
$355/$599 = 59% margin

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**As Apple 2.0 points out …”although the total is more than a million downloads — 1.2 million to be precise — that’s the sum of all the course videos (15 so far). A far smaller number of people, 186,500, downloaded the introductory lecture. More recent lectures, representing the meat of the semester, have a sustained download rate of more than 200,000 per class.”

 

 

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花花公子 it’s a Dell TD Phone!

 

dell-dude-tbi-085x0851iPhonAsia comment: According to a report on Sina.com.cn, Dell is planning to build two new TD-SCDMA smartphones for China Mobile. Like several new customized TD smartphones (Levono, HTC, Nokia) being developed for China Mobile, the Dell phone mobile operating system (MOS) will be Android-based and specially coded to exclusively support China Mobile services. In other words, the operating system will be “proprietary” to China Mobile and it will be branded as “oPhone.” Good luck with that Dell … All new China Mobile 3G handsets will suffer under TD-SCDMA usability issues and China Mobile’s myopic focus on driving their own WVAS. Pre-loaded services on TD handsets will likely include China Mobile’s:
picture-3See 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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Dell Phone Launching In China? (DELL, CHL)

If true, probably a good move: China Mobile is a massive carrier with almost half a billion subscribers, and Dell’s U.S. rivals like Apple and RIM don’t have much of a foothold in China.

  Read » 

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Update – April 13, 2009: iPhonAsia reply to MacRumors post re new iPhone Models

Think BRIC countries

“According to its insider news, Apple has already ordered 4 million units of new iPhones and expected to receive the shipment by end of this quarter. These iPhones might be a combination of 3 new models, with one only supports EDGE wireless data connection, another one for 3G wireless data connection and one model made for China market (for China’s TD-SCDMA network?). There will not be iPhone Nano and the new iPhone 2009 will be similar to the current iPhone 3G, according to the report.”  

An unlocked EDGE only iPhone makes perfect sense … Think BRIC countries where lower incomes and pre-paid (not “on contract”) wireless accounts are the norm. A low cost iPhone will be very appealing in Brazil, Russia, India and China. Toss in Indonesia and several other major “pre-paid” markets.

China Mobile runs a very robust EDGE 2.5 G network across China (290 million of China Mobile’s 461 million subscribers are pre-paid). Many wireless users have reported a very good EDGE connection in China. I wouldn’t dismiss the Nano iPhone. It’s possible that the unlocked EDGE iPhone will be the Nano iPhone. It is also very possible that the Nano form factor was a design experiment that will remain under “lock-in-key” somewhere in the vaults in Cupertino. Mobile gaming (wildly popular in China) is really becoming a major focus for Apple and carriers since the App Store has taken off and a full screen is important to the gaming experience.

As for the special “for China” iPhone … It will NOT support TD-SCDMA (China Mobile’s 3G network). Rather it will be W-CDMA 3G (China Unicom’s network). All signs point to Apple and China Unicom having concluded (past tense) a “3G” exclusive. The special iPhone 3G for China will likely come pre-loaded with several “for China” apps (e.g. Youku or Tudou vs. Youtube) and may not have WiFi. China’s Ministry of Industry and Information Technology (MIIT) currently prohibits 3G handsets from including WiFi (although this policy is now under review). More here > https://idannyb.wordpress.com/2009/04…-to-be-lifted/

 

 

 

Update – April 8, 2009: Kaufman Brothers telecom analyst Shaw Wu issued a note today speculating on new iPhone models. He suggests that Apple may have developed three (3) new iPhones, but based on clues that developers have uncovered in the beta iPhone 3.0 software, Shaw Wu now believes “only two will see the light of day” – An iPhone Sr. and iPhone Jr. Wu hears that the “Senior” model will have longer battery life and a more powerful processor capable of running more complex apps. The Junior model (iPhone Nano?) other would be less-powerful. No word on whether the Junior model would be 3G. Much more detail via Apple 2.0 > HERE

Update – March 31, 2009: Daniel Amir, a Lazard Capital Markets analyst issued a report yesterday noting that Lazard’s channel checks confirm two (2) versions of iPhones will be announced in June; a low-end (iPhone Nano?) and a high-end version. The low-end version is expected to run on a 3G network, rather than WiFi, while the high-end version is anticipated to double its storage capacity from 16GB to 32G and feature improvements to its camera.

Lazard believes it is possible that the two phones will be aimed at different regions; high-end version is expected in North America and Europe, and the low-end version may be for the BRIC countries (Brazil, Russia. India and China) or China only (i.e. the same conclusion iPhonAsia reached months ago). Lazard’s checks suggest that March iPhone shipments have been much stronger than previously expected and may reach 1.5 mln units, which is the highest level over the past five months. 
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iPhonAsia comment: Caution, this Lazard report should be filed under “speculation.” 
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Update – March 15, 2009: RUMOR According to iDeals site. the iPhone Nano will launch through China Mobile late Spring or early Summer.

iPhonAsia comment: If there is a formal iPhone deal with China Mobile, it has been well masked by rumors (now at least partially debunked) of a total “break down” in talks … If an iPhone “3G” deal evaporated it could have been due to TD-SCDMA network reliability issues and a power struggle over who controls the value added services platform (Apple or China Mobile?).  Yet China Mobile CEO, Wang Jianzhou has consistently said he would be interested in cooperating with Apple to release iPhone in China. Moreover, Wang Jianzhou recently (in Feb and March) repeated that Apple and China Mobile remain “in cooperation talks” under an NDA, and on March 5, 2009 Wang said; Apple has demonstrated its will.” What does that mean? Who Knows? Something big, something small, or nothing at all.

China Mobile gets iPhone Nano and China Unicom gets iPhone 3G?

IF (big “IF” = probably wrong) there is to be an iPhone Nano “deal with China Mobile, it most likely will not be for a “3G” model (iPhone Nano probably won’t support China Mobile’s TD-SCDMA 3G, however it would likely support their EDGE 2.5 G network).  When the new iPhone 3G model launches in China, it will mostly likely be a “3G exclusive” (W-CDMA) with China Unicom. Best guess for a 3G deal announcement is May 17th 2009 for launch in Summer 2009. By the way, there have been several reports that a China Unicom executive team was in Cupertino the week of March 8th to finalize an iPhone deal. Hope it has now been signed, sealed and delivered.

Here is the latest comment from iDeals…

“The launch of iPod Shuffle is Apple’s opening act for iPhone Nano. All of the news in China is that we will see it very soon. We were told about a new iPod Shuffle at the same time we got the iPhone Nano news. The problem is that iPod Shuffle is not a big event for China accessory suppliers, the money is made on iPhone. In the meantime China accessory companies are busy making accessories for Blackberry Bold, Storm and their new Curve which is ringing in big sales. There is a lot of speculation that Apple will make iPhone Nano available when iPhone is offically released to China Mobile which is sometime late spring or early summer.”

Update – February 24, 2009: According to iDeals site“An insider informed us that April is the launch date for iPhone Nano.” iPhonAsia comment: Be very skeptical … Unless Apple plans to distribute a non-3G iPhone Nano in partnership with Hon Hai (<details) and other non-carrier China distributors, then Apple will likely wait until May or June to make any iPhone in China announcements … most likely for a Summer launch in partnership with China Unicom. In other related news … Polite Apple/China Mobile “cooperation conversations” (<details) continue  … so confirmed by China Mobile CEO Wang Jianzhou.

Update – February 13, 2009: Kaufman Brothers’ analyst Shaw Wu believes that Apple may keep the rumored iPhone Nano parked in the engineering vaults in Cupertino. In a February ’09 research brief he noted that he is “hearing” Apple is in “fairly advanced development” on three new iPhone models, but Wu is doubtful they will all be commercialized.

Shaw Wu

Shaw Wu

picture-19Shaw Wu believes that one of new “under lock-n-key” iPhone models, has a smaller 2.8 inch screen versus the current model 3.5-inch screen. Wu feels that this so called iPhone Nano is “less likely to see the light of day in the near term as it appears that software and thus feature sets will be the key differentiator” …  Read more details via > Fortune Apple 2.0 

Update – February 10, 2009: AppleInsider | Firm reiterates claims of entrylevel iPhone this 

February 10, 2009 Latest via iDeals site “We have inside information that an established premium case company, XSKN.com, has not dropped iPhone Nano for their web site and in fact XSKN continues to manufacture 2 styles of iPhone Nano cases. They must have information which makes them believe that Apple will launch iPhone Nano in the near future and is preparing a stock to take as much iPhone Nano case business as they can by offering immediate delivery. XSKN.com was the first company to release iPhone 3G cases months before iPhone 3G was known to exist.”  

Update – January 16, 2009: Rumor: China Unicom to start selling the iPhone Nano??? … The story > HERE should be filed under apple_unicom“rumor” with a capital “R” … but it is interesting nonetheless. Regardless of whether Apple and China Mobile failed to come to terms (perhaps a dispute over too much “demanded” customization for China Mobile and their value-added services?), iPhonAsia has always felt that China Unicom would be a prime candidate for iPhone.  The combined China Unicom/Netcom has 139 million subscribers and they are anxious to make a serious dent in China Mobile’s 485 million subscribers. It is interesting to note that over 290 million of China Mobile’s subscribers are pre-paid (no contract) and hence free to move to another carrier. China Unicom has been granted a license for W-CDMA 3G and the current “standard model” iPhone 3G already supports W-CMDA 3G. The rumored Nano iPhone may or may not be 3G.   

 

Update – January 15, 2009: via iDeals site: We just got this letter from XSKN:
 “Thank you iDealsChina for telling your members about XSKN’s iPhone Nano case… Read HERE

Update – January 14, 2009: from iDeals site: “A new rumor has surfaced – A number of Foxconn employees will not be going home for Chinese New Year. The rumor is that they will be working on a secret Apple product. The Chinese New Year is the most important Chinese holiday, workers normally go home for 15 days and China shuts down. Fifteen days production could mean 1.2 million iPhone Nanos.”

Update – January 13, 2009: DigiTimes highlights a report from Taiwan’s Economic Daily News stating that two chip manufacturers, Taiwan Semiconductor Manufacturing Company and United Microelectronics Corporation, are expected to receive chip orders for Apple’s rumored iPhone nano. The report states that orders would likely come in March, leading to a June release of the iPhone nano at the earliest. More > HERE

Update – January 12, 2009: from iDeals site: “Today we got some information that a few more cases companies are making iPhone Nano cases. Investment in iPhone Nano accessories has not stopped which indicates that more companies have new information or they believe enough in the existing information to continue to invest.” 

Update – January 7, 2009: from  iDeals site: “We feel that iPhone Nano is in production and if our production information is correct then they are making about 2.5 million iPhone Nanos a month, as of Dec 20th. If they need 10 million before they hit the market then don’t expect it until the end of March.”

Update – January 5, 2009: –  iDeals site in China is now reporting that accessory manufacturer  XSKN.com is moving forward with their iPhone Nano case production and “they feel confident the iPhone Nano will happen.”

Update – January 1st 2009: –  iDeals site in China… the prime mover of the original iPhone Nano rumor… says they may be wrong about iPhone Nano January 1, 2009 LATEST “We Just got word that a major company stopped production on all iPhone Nano accessories. They believe the information they got is not real and want to cut their loses (sic). This is the first negative information we got that might mean that there will be no iPhone Nano. If so a number of accessory and clone companies will lose a lot of money.” http://www.idealschina.com/Insider/N…x?ArticleID=32

iPhonAsia comment: This all begins to make more sense if you consider that the Nano iPhone might have been specially built for China Mobile. There are many reasons why a “Nano” iPhone does not make sense (e.g. screen too small, at least by Western Standards) … yet there are reasons why it might fly in the Far East . Consider that this could be a low price “customized” model designed in concert with China Mobile (see >”customization” for back story re Accenture’s involvement). This model would be EDGE 2.5G and TD-SCDMA 3G ready and would support Monternet – China Mobile’s VAS platform. No iTunes, no AppStore, no WiFi. China Mobile is building their own app store and they are subsidizing all “TD ready” handsets authorized in China. Of China Mobile’s 485 million users, approximately 290 million are pre-paid users (no contract). Many pre-paid users aspire to iPhone but cannot afford without a price incentive (China Mobile subsidy to go on contract).  This rumored deal to build a customized TD iPhone for China Mobile flies in the face of Apple’s model for doing business with all other world carriers. In many ways it’s hard to fathom and I wouldn’t blame anyone for saying “no way!” However, this customized model may be a pre-requisite for doing business in China’s highly controlled handset market. China Mobile’s parent company CMCC is majority state owned (by China) and they need to get the new TD-SCDMA network off to a fast start. It has been a struggle thus far and cool handsets are key to user adoption.  IMHO Apple will not do an exclusive deal with China Mobile. The next deal TBA will be with China Unicom , who will be launching their W-CDMA 3G network mid-May 2009. This will be a more standard model iPhone 3G, which already supports W-CDMA 3G. More > HERE HERE & HERE See also >

Update: 12/18/08 One more clue … type www.iphonenano.com into a browser window and see where it takes you. Caveat: Apple’s ownership of www.iphonenano.com does not necessarily mean will soon see a Nano iPhone. Apple owns many URLs that they may or may not use at some point in the future. 

Update: Dan Frommer over at Silicon Alley Insider is quite dubious over the idea of a Nano iPhone. See > HERE Gizmodo is also throwing a pail of cold water on the “Nano” (small) iPhone idea. See > HERE

Update: December 15, 2008 – More on Nano iPhone from iDeals site … link below to more images of size/shape of rumored Nano iPhone > http://www.idealschina.com/Insider/NewsDetail.aspx?ArticleID=32

iphone-9According to iDeals “once one company starts making a mold their information is passed onto other mold companies or accessory companies through a China underground network.” 

iPhonAsia comment: This post should clearly be labeled as “rumor.” 
iDeals (Shenzhen, China HQ) was one of the first sites to reveal the new iPod Nano 4th generation form factor. iDeals was also early (June 5, 2008) and correct with their dimensions for the new iPhone 3G which was announced on June 9th and launched in July 11th, 2008. See > HERE.
iDeals has received tips from sources inside accessory companies in Taiwan and China. These accessory companies in turn find ways (apparently) to get specs and/or dimensions of new products pre-release.  An early peek gives these companies an opportunity to have accessories (cases, etc.) ready early.
iDeals is now suggesting that Apple will produce two iPhones in China and one will be an iPhone Nano.
One interesting side note is iDeals statement that the iPhone Nano will not be 3G. If that turns out to be true (and that is a big “IF”), then this model would not support China Mobile’s TD-SCDMA 3G protocol.  There are many reasons why Apple might not include TD-SCDMA support in a nano iPhone:
1. Apple and China Mobile may have gone their separate ways … perhaps over China Mobile’s  insistence on too much customization and shutting off Apple’s value added services in favor of China Mobiles? Albeit iPhonAsia still believes there is a good change for a deal with both China Mobile and China Unicom. More > HERE
2. This nano model may be sold unlocked for use on any carrier. An unlocked low cost nano iPhone would be ideal for greater Asia’s gigantic pre-paid market (China, India, Indonesia, Thailand, Vietnam, et. al.).  
3. This nano model is for China Unicom and Apple does not want to wait for Unicom’s W-CDMA 3G licensure and network build-out which may not go live until late 2009. 

From iDeals site in China Read > full post HERE

December 9th, 2008 picture-15No more speculating, the new iPhone is a NanoPhone! It is the same height as the just release Nano but wider and thicker and with the same iPhone 3G contours. It has 3 sensors, camera, mirror screen but no 3G. Production will start on the 20th with 60,000 to 80,000/day pieces coming off the assembly line. Steve Jobs will be announcing it during the January MacWorld Show and you will find it in the stores shortly afterwards. I am putting my money on this as the final new iPhone rumor. This phone is targeted at the people who couldn’t afford an iPhone. I am told it will low priced and sold in Walmart stores along with all of the current resellers. There is a rumor that there will be a new iPod Shuffle too. I expect you will see photos of the new NanoPhone on websites by the 20th and maybe of the new iPod Shuffle. Remember you read it here first and may see photos of it here first too.
 
iPhonAsia comment: Here is an Engadget post (July 2007) that discusses JP Morgan analyst Kevin Chang’s prediction that Apple would launch an iPhone Nano.  This “educated guess” conflicted with the view of a senior JP Morgan analyst and Chang’s report was officially retracted by the firm. See > HERE  Chang may have been right … but he was a bit early.                                                                           
iPhone Shuffle Concept (just a cool idea … not actual design)
istickconcept

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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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news1_0iPhonAsia comment: Why is the most dominant wireless carrier in the world (China Mobile with 463 million subscribers) dolling out R&D money to handset makers to build TD-SCDMA phones? Especially to the gargantuan Nokia who has dominant marketshare in China (40% of handset sales in China are Nokia) and has much (literally) invested in maintaining their 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 phone for China. But they’re not. Telling isn’t it?  

lteChina Mobile may have too clearly telegraphed their “as rapidly as possible” move to TD LTE 4G … which gives any spend on TD-SCDMA handsets a very limited life span on a nascent and bug plagued network. Much more via links below >

“China Mobile expresses strong dissatisfaction with the passive attitude of these international manufacturers”…

China Mobile to Invest RMB 600M in Nokia, Phone Makers 

picture-14China Mobile (NYSE:CHL, 941.HK) plans to invest a total of RMB 600 million in Nokia and other handset manufacturers to speed the research and development of TD-SCDMA phones, reports Ccidnet.com. China Mobile Chairman and CEO Wang Jianzhou told the Financial Times that China Mobile has been in talks with Nokia, Samsung, LG and Sony Ericsson regarding R&D funds, but that no agreements had been reached. China Mobile previously announced plans to build a fund to support handset distribution and marketing channels for the homegrown 3G network, said the Ccidnet report. 

wang_jianzhou_ceo_china_mobile

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iPhonAsia comment: Nokia holds a dominant yet tenuous 40% share of China’s wireless handset market. No doubt they are grateful

iPhone in Espoo Finland in front of Nokia HQ

iPhone in Espoo Finland spying on Nokia's HQ

to China Mobile. And Nokia thought with all of the talk about China Mobile’s TDD-LTE4G plans, they could just let their TD-SCDMA handset promise slip past China Mobile. “After all, no matter what happens with TD-SCDMA, we’re partners, right?” Think again! All of the golf outings and wining, dining and wenching lavished on China Mobile courtesy of Nokia aren’t going to be enough to placate the world’s largest wireless carrier. Nokia has been dragged kicking and screaming into supporting TD-SCDMA. First they insult China Mobile by failing to pour more money into Commit, the now insolvent TD-SCDMA chipmaker. And now today they belatedly recommit to building a TD-SCDMA handset, but only after China Mobile executives make plans to visit Espoo, Finland to personally share their disappointment with Nokia.

picture-37tdscdma-logo1via China Tech News “According to local Chinese media reports, the upper management of China’s leading telecommunications operator China Mobile will soon go to Finland to promote Nokia’s research and production of TD-SCDMA mobile phones…. China Mobile expresses strong dissatisfaction with the passive attitude of these international manufacturers. To deal with this situation, China Mobile has enlarged cooperation with domestic Chinese mobile phone manufacturers in its purchasing process while sending high level officers to communicate with these international brands’ overseas management.”

picture-26Shanghai. February 18. INTERFAX-CHINA – Nokia China’s plan to launch mobile phones that utilize China’s homegrown TD-SCDMA 3G standard before the end of 2009 will not be affected by a cost-saving program announced by Nokia’s headquarters, an employee from the company told Interfax on Feb. 18.

Full article available via Interfax subscription > HERE

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