Apple's iPhone sees tepid sales debut in China

[AppleInsider]

Hundreds of people showed up for the iPhone launch party in Beijing last week, but the handset failed to sell out in many Chinese stores.

Compared to iPhone debuts in the U.S. and Japan, the Chinese launch was "subdued," The Wall Street Journal reported. While the reaction was not necessarily indicative of sales, it is likely due to the fact that gray market phones have been available for import in China for years, and at competitive prices.

Still, many attended to official China Unicom launch party Friday night. Around the nation, though, reports of sales did not indicate significant demand. Apple and China Unicom did not announce any launch sales figures for the 2,000 locations where the iPhone was available.

"At the Apple store in Beijing, the company's only location in China, the crowd seemed less enthusiastic," the report said. "Employees cheered anyone who came in with chants of 'iPhone! iPhone!' But there were no lines for the stacks of new iPhones."

On Friday, the iPhone debuted with a relatively high price of 6,999 yuan, or $1,024, for the high-end iPhone 3GS without a service contract. The same handset can be purchased in Hong Kong for about $800.

Some potential buyers have been turned off by the lack of Wi-Fi in the handset. The feature was left out because the Chinese government temporarily banned the wireless standard in favor of a rival Chinese offering. But that ban was relaxed in May, after manufacturing of the new iPhone model began. China Unicom has said it hopes to have Wi-Fi in the next batch of iPhones intended for release by the end of the year.

Apple and China Unicom announced their three-year deal for the iPhone in August. The non-exclusive agreement has left the door open for a potential deal with China Mobile, the world's largest wireless carrier.

[ View this article at AppleInsider.com ]

[Quadra 610]

The iPod doesn't do well in China, either. By the end of 2007 Apple had only 7.5% of the digital music player market in China. Macs do much worse in China. Apple typically doesn't break 80,000 Mac sales a year in China. But none of these patterns really affected Apple's bottom line. Despite weakness in China, the iPod, for example, still dominates overall.

[anantksundaram]

Wow. This could be a disaster unless there is an embedded wifi chip that can be turned on. Hope Apple got paid upfront for the handsets, and does not have to take a write-off.

With no wifi + $1000 + the next one with wifi coming soon, one could this coming from a mile away.

[SpamSandwich]

As I mentioned before, Apple's sales will find a level of equilibrium at some point. Just give it time.

[bdkennedy1]

They're probably so used to buying knockoffs, they don't give the actual original product a chance.

[ivan.rnn01]

Oh, you will have known all that long before, if you read AI.

1. ---->
2. ---->
3. ---->

[gordy]

That price is crazy. Features are crippled. Who is surprised?

[solipsism]

The gray market has cheaper phones with WiFi, no wonder the lines are short.

Originally Posted by anantksundaram

Wow. This could be a disaster unless there is an embedded wifi chip that can be turned on. Hope Apple got paid upfront for the handsets, and does not have to take a write-off.

With no wifi + $1000 + the next one with wifi coming soon, one could this coming from a mile away.

iFixit has no plans to get one of these phones to break open, but if I had to wager a guess I’d say that the driver and UI elements have been removed but the chip is the same. I say this because the no-WiFi law will be raised shortly and the WiFi chip is also tied to the Bluetooth chip so the easiest solution is to keep the chip in place.

[teckstud]

Originally Posted by gordy

That price is crazy. Features are crippled. Who is surprised?

Can they get the profit margin any higher? Shouldn't it cost less there as it's made over there so no fuel costs for transportation?
Apple will release a wacko vesion of the iPhone like this yet won't release an AppleTaxed Netbook in US for $700? Go figure.

[melgross]

Originally Posted by gordy

That price is crazy. Features are crippled. Who is surprised?

China Unicom is charging so much for the phone, it's not surprising that sales are slow.

However, the lack of WiFi will supposedly be corrected with the next batch of phones.

From what I've read, when Apple was manufacturing these phones, the Chinese government was still not allowing WiFi. They later changed their minds and now allow it. But the first batch of phones had already been manufactured and warehoused.

I wonder what will happen to these early phones when the new ones are available?

[melgross]

Originally Posted by teckstud

Can they get the profit margin any higher? Shouldn't it cost less there as it's made over there so no fuel costs for transportation?
Apple will release a wacko vesion of the iPhone like this yet won't release an AppleTaxed Netbook in US for $700? Go figure.

It's China Unicom that is setting the prices. Talk to them.

[teckstud]

Originally Posted by melgross

It's China Unicom that is setting the prices. Talk to them.

As soon as I install my Chinese translator app.

[aplnub]

Originally Posted by vbeeno

I love my Iphone 3G but Im guessing the Chinese probably have something that kicks Iphone to the Curb. The US has always been WAY behind as far as technology goes. Anyone whos ever been to Hong Kong knows this.

Jess

Always behind may be a little strong.

[Gazoobee]

Originally Posted by vbeeno

I love my Iphone 3G but Im guessing the Chinese probably have something that kicks Iphone to the Curb. The US has always been WAY behind as far as technology goes. Anyone whos ever been to Hong Kong knows this. ...

This entire post is complete BS.

You don't have to reach for conspiracy theories when the actual cause is right in front of your face and mentioned in every article on the topic. The sales are poor because of the corruption, the grey market, and the interference of the current quasi-fascist government. It's very similar to what happened in Russia except Russia is much higher on the "corruption/grey market" side and has practically zero government interference.

All that being said, this is not bad news at all. The whole game in China is just to get your foot in the door. Apple is winning so far.

The Wi-Fi restriction probably will be lifted soon, and the next iPhone will sell much better because the grey-market versions won't be so available then as they are now. The Chinese citizens that can afford it will be lining up at their own Apple stores for the new handsets within a version or two and Apple knows it.

PS - keep the spam links out of your signature please. Very bad form.

[mark2005]

Well, if tepid means anything other than US-sized sales of a 1/4m in 3 days, then tepid is correct. But then again, iPhone really hasn't had anything other than tepid sales anywhere other than the US, and it's still selling 7m a quarter.

The iPhone is already on sale at 30 provinces and over 1000 distribution points in China. Some stores have had over 1000 people on line. If each distribution point averaged sales of 10 a day, that's almost a million for the quarter. Not bad, since Apple is not selling more than 1m a quarter in any country other than the US.

And the Beijing Times reported that China Unicom had 140,000 pre-orders prior to sale. See iphonasia.com for better reporting on what's happening over there.

That said, I don't know whether any of this is true. Beijing Times could be a propaganda rag. Thousands of people could've been on that line to also get free tickets to a concert. See US Microsoft store.

[anantksundaram]

Originally Posted by solipsism

..... if I had to wager a guess I’d say that the driver and UI elements have been removed but the chip is the same. I say this because the no-WiFi law will be raised shortly and the WiFi chip is also tied to the Bluetooth chip so the easiest solution is to keep the chip in place.

Ah, and Apple will charge them ~13 yuan ($2) for the software update to turn it on!

[solipsism]

Originally Posted by anantksundaram

Ah, and Apple will charge them ~13 yuan ($2) for the software update to turn it on!

The original price for that driver was $5 USD. 30 yuan?

[isaidso]

China Unicom Chairman stated that the next version will have WiFi.

On an unrelated issue: I was surprised last week, when I walked into Apple Store SoHo and saw a line, 10 deep, of people waiting to activate their iPhones (I think there were 3 activation stations?)
Just seemed strange that their is still an actual "line" of people.

[cycomiko]

Sure CU set the final price, but the price from Apple certainly has a direct role on the final price. Apple tends to take the lions share of margin, leaving the retailer to pick up the scraps.

[Quadra 610]

China aint the only game in town . . .

http://brainstormtech.blogs.fortune....-suit-and-tie/

Lots of other opportunities.

[anakin1992]

Originally Posted by isaidso

China Unicom Chairman stated that the next version will have WiFi.

On an unrelated issue: I was surprised last week, when I walked into Apple Store SoHo and saw a line, 10 deep, of people waiting to activate their iPhones (I think there were 3 activation stations?)
Just seemed strange that their is still an actual "line" of people.

holidays are coming. the sale will pick up.

isaidso, do you the details on service plan?

[LE Studios]

Originally Posted by melgross

China Unicom is charging so much for the phone, it's not surprising that sales are slow.

However, the lack of WiFi will supposedly be corrected with the next batch of phones.

From what I've read, when Apple was manufacturing these phones, the Chinese government was still not allowing WiFi. They later changed their minds and now allow it. But the first batch of phones had already been manufactured and warehoused.

I wonder what will happen to these early phones when the new ones are available?

My answer is probably will be China Unicom's First Ever Buy 1 get 1 Free Sale!

[AjitMD]

Nobody Chinese in the right mind would pay nearly $1000 for a phone with restrictions and no WiFi. Even if they want the real deal, they would prefer a gray market Hong Kong phone is unlocked and can use any GSM/3G card.

As somebody mentioned, I hope China Unicom has paid for the crippled phones without WiFi. They can unload them at a promo price.

This almost as bad as the spyware that the Chinese government wanted everybody to have.

[teckstud]

Originally Posted by anakin1992

holidays are coming. the sale will pick up.

Do Buddhists celebrate Christmas? Or Hannukah? I forgot.
Must be Kwanza.

[aaarrrgggh]

Originally Posted by teckstud

Can they get the profit margin any higher? Shouldn't it cost less there as it's made over there so no fuel costs for transportation?
Apple will release a wacko vesion of the iPhone like this yet won't release an AppleTaxed Netbook in US for $700? Go figure.

Early rumors were that Apple was selling them to China Unicom for $450, significantly less than their $600 ASP in ROW. I think it has much more to do with the local market and local provider that sales are "tepid."

Also worth noting, the AI story is lifted from WSJ, which has the most biased take on the story.

While I don't understand the local market well, the fact that you can get the phone for free by pre-paying service for 10 months makes it sound fairly reasonable relative to the black-market options. Of course only a moron (or someone wanting a warranty) would buy the non-contract version from China Unicom when they can get it cheaper elsewhere.

[teckstud]

Originally Posted by aaarrrgggh

Early rumors were that Apple was selling them to China Unicom for $450, significantly less than their $600 ASP in ROW. I think it has much more to do with the local market and local provider that sales are "tepid."

Also worth noting, the AI story is lifted from WSJ, which has the most biased take on the story.

While I don't understand the local market well, the fact that you can get the phone for free by pre-paying service for 10 months makes it sound fairly reasonable relative to the black-market options. Of course only a moron (or someone wanting a warranty) would buy the non-contract version from China Unicom when they can get it cheaper elsewhere.

Not to mention that somehow I don't see the Chinese going all gaga over anything with a frenzy like we do in the West and that includes Japan.

[samab]

Originally Posted by mark2005

And the Beijing Times reported that China Unicom had 140,000 pre-orders prior to sale. See iphonasia.com for better reporting on what's happening over there.

I read the original news report in Chinese. I don't trust the numbers because all those pre-order "reservations" came before the carrier announced any pricing. And it's not isolated to just Chinese communist propaganda --- all the iphone pre-order "reservation" numbers across the globe are like that.

[MiamiJAG]

very simple, everybody already owns the iPhone. I travel often to China and everybody has the 3G-3GS jail broken. With business associates in Beijing, Shanghai and Shenzhen but don't forget HK as well, the phone that everybody is using is the iPhone. Not to mention the countless imitations including the MINI iPhone, that as the salesman told me, not even Apple has it yet!!!
If you asked how the Windows 7 launch went in China you would get the same answer, "tepid".
All software programs are available in markets and they run from $1 USd to $5USD so, unless the world really enforces intellectual laws, the Chinese can get anything they want at a fraction of the cost without paying any royalty or anything. Surprised???

[MiamiJAG]

Originally Posted by anakin1992

holidays are coming. the sale will pick up.

isaidso, do you the details on service plan?

What holidays??? the Chinese do not celebrate Christmas, is New Year at the end of January.

[solipsism]

Originally Posted by MiamiJAG

What holidays??? the Chinese do not celebrate Christmas, is New Year at the end of January.

As I recall, the gov’t is officially atheist. There is about 15% Christian population which may celebrate Christmas privately. The mainland doesn’t do decorations publicly but you may find them in Hong Kong and Macau. I think HK and Macau actually do observe the holiday, but don’t quote me on that.

The Chinese New Year is at the end of the Lunar cycle, hence it’s varying date. I think last year it was in early February, but usually it falls in late January.

[MacTripper]

Originally Posted by MiamiJAG

very simple, everybody already owns the iPhone. I travel often to China and everybody has the 3G-3GS jail broken. With business associates in Beijing, Shanghai and Shenzhen but don't forget HK as well, the phone that everybody is using is the iPhone. Not to mention the countless imitations including the MINI iPhone, that as the salesman told me, not even Apple has it yet!!!
If you asked how the Windows 7 launch went in China you would get the same answer, "tepid".
All software programs are available in markets and they run from $1 USd to $5USD so, unless the world really enforces intellectual laws, the Chinese can get anything they want at a fraction of the cost without paying any royalty or anything. Surprised???

I think because of the huge volume of people in China that it makes enforcing anything very difficult and why the Chinese government is rather heavy handed.

Given their history, I don't know if I would want them to be able to enforce anything either.

Next they will make Apple turn over all the customers of "illegal" iPhones to support sales of the wifi-less state controlled one.

I bet a lot of Chinese use VOIP, if iPod Touch sales are off the chart, that would explain the issue why the wifi-less iPhone is a flop.

Very complicated game going on, at least Apple can now advertise the iPhone, which should make grey market sales explode even further.

[MacTripper]

Originally Posted by solipsism

As I recall, the gov’t is officially atheist. There is about 15% Christian population which may celebrate Christmas privately. The mainland doesn’t do decorations publicly but you may find them in Hong Kong and Macau. I think HK and Macau actually do observe the holiday, but don’t quote me on that...

Did you know the Chinese government lowered their prime lending rate once to 6.66%?

The US usually it's adjusted a half or a quarter percent at a time, but 6.66%? In thirds? Very odd as quarters give more control than thirds.

Some think it was a dig at Christianity and the US, since they never used thirds before.

(666 is the number of the beast in Revelations)

[BMWintoxication]

street price.. 5200RMB... unlocked 3GS at any multi-brand carrying cell phone shops.. free matte film for the glossy screen haters.

I need to find out how China unicom's 3G network is like.. I'm still debating if an iPod touch is just as good if the network isn't on par with iphone's capability. And.. i'm NOT changing my number from China mobile to unicom..

and YES. every other person has an iPhone here.

[BMWintoxication]

btw. Christmas is not a celebration (religious) here, but it's commercialized, and advertised as a time to purchase goods, heavily.

[mstone]

Originally Posted by teckstud

Do Buddhists celebrate Christmas? Or Hannukah? I forgot.
Must be Kwanza.

There are no official religious holidays in China. The next holiday is the Chinese New Year. They do celebrate January 1st as well but it is not a significant holiday. Some people get the day off from work.

There are not any gift giving holidays there either. During CNY the older generation gives money to the younger generation and a company will give annual bonuses to the long time employees.

Gifts are really tricky in China and expensive gifts are not that common except for maybe birthdays.

Giving someone a gift that comes with a monthly fee is kind of iffy in any culture unless the giver is going to pay that cost as well.

[MiamiJAG]

Originally Posted by MacTripper

I think because of the huge volume of people in China that it makes enforcing anything very difficult and why the Chinese government is rather heavy handed.

Given their history, I don't know if I would want them to be able to enforce anything either.

Next they will make Apple turn over all the customers of "illegal" iPhones to support sales of the wifi-less state controlled one.

I bet a lot of Chinese use VOIP, if iPod Touch sales are off the chart, that would explain the issue why the wifi-less iPhone is a flop.

Very complicated game going on, at least Apple can now advertise the iPhone, which should make grey market sales explode even further.

China does not enforces Intellectual Copyrights to stimulate the economy and is a cheap way of technology transfer, you have endless factories of illegal Polo shirts, Nike shoes or Soni, Armany, etc, selling them at 2-4 dollars, also is a way for Chinese people to think they are buying legit things (although they, deep down, know is not).
So why enforce a law that will send out billions of dollars out of China and make products more expensive in their local market??
They are not stupid, they know they are ripping it off in front of everybody and laughing all the way to the bank (their banks).

[hillstones]

The Chinese and Japanse are not interested in the iPhone. They have their own cool set of electronic devices. XBox doesn't do well either since they would rather support their own, Nintendo and Sony.

The iPhone is probably too big too, they probalby want a smaller phone. Just look at the Japanese's strong desire for modding the hell out of a Color Classic, which was incredibly popular there. So popular they even got the much improved Color Classic II, and the US did not. They probably laugh at the iPhone saying, Look how big that phone is. Add that to the grey market, and Apple won't be selling out there.

[solipsism]

Originally Posted by hillstones

The Chinese and Japanse are not interested in the iPhone. They have their own cool set of electronic devices. XBox doesn't do well either since they would rather support their own, Nintendo and Sony.

The iPhone is probably too big too, they probalby want a smaller phone. Just look at the Japanese's strong desire for modding the hell out of a Color Classic, which was incredibly popular there. So popular they even got the much improved Color Classic II, and the US did not. They probably laugh at the iPhone saying, Look how big that phone is. Add that to the grey market, and Apple won't be selling out there.

If that were the case, then the iPhone wouldn’t be sold in those countries, nor would the gray market sales for the iPhone in China been reported to be in the millions. How many other cellphones are selling in Japan that are from outside the country? I know Nokia left not to long ago. There are reports that the super featured phones are not used by most people because they too esoteric and/or complex to be useful. The only think missing from the Japanese iPhone to make it really compete is the TV, but I recall reading that it was the number one selling smartphone in Japan for some month after the 3GS launched, but don’t quote me on that.

[MiamiJAG]

Originally Posted by hillstones

The Chinese and Japanse are not interested in the iPhone. They have their own cool set of electronic devices. XBox doesn't do well either since they would rather support their own, Nintendo and Sony.

The iPhone is probably too big too, they probalby want a smaller phone. Just look at the Japanese's strong desire for modding the hell out of a Color Classic, which was incredibly popular there. So popular they even got the much improved Color Classic II, and the US did not. They probably laugh at the iPhone saying, Look how big that phone is. Add that to the grey market, and Apple won't be selling out there.

??? Apple does very well in Japan and in China they just opened a store in Beijing. Every time I take my MacBook Air out in a meeting, all droll or on my next trip they show me their new Apple(s). In Japan I do not know about the iPhone but guess that NoCoMo or whatever it is called has the market cornered with its proprietary tech but in China the Toy du Jour is the iPhone or, just check out any restaurant or lounge and you'll see iPhone in hand as the essential accessory. I was surprised when the 3G came to market to see people with it just days after the official lunch. They use texting and phone mainly so, screw the apps.

[FireEmblemPride]

Originally Posted by solipsism

If that were the case, then the iPhone wouldn’t be sold in those countries, nor would the gray market sales for the iPhone in China been reported to be in the millions. How many other cellphones are selling in Japan that are from outside the country? I know Nokia left not to long ago. There are reports that the super featured phones are not used by most people because they too esoteric and/or complex to be useful. The only think missing from the Japanese iPhone to make it really compete is the TV, but I recall reading that it was the number one selling smartphone in Japan for some month after the 3GS launched, but don’t quote me on that.

The phone certainly sells in Japan and you will see it around more and more as time passes by. I don't believe "popular" is the word for it yet for a few reasons and it certainly is not ubiquitous like it is in the US. First, the cheapest version of the phone (which is the 8GB 3G) is free and the 3GS models are thus discounted for a vast majority of buyers.

It's also easy for the iPhone to rank high on sales charts literally because there are so many varied models of what amounts to the same phone, thus filling up the top charts with multiple versions of the same phone, iPhone included. But what people seem to miss when analyzing Japanese iPhone sales is that the iPhone is up against the Japanese cellphone standard, not against any particular model. Even if the iPhone is the number one selling model, if it only comprises of a very small percentage of sales, then it's actually making very small inroads into the market overall. It's still good for Apple's bottom line, but many analysts miss the big picture when it comes to evaluating the Japanese iPhone.