China Unicom gains 5,000 iPhone subscribers from launch

[AppleInsider]

China Unicom announced Tuesday that its brand new 3G network had already signed up more than a million subscribers, but only 5,000 iPhone customers since the device launched last week.

China's second-largest wireless operator said that it is satisfied with iPhone sales thus far. Unicom Chairman Chang Xiaobing said his company expects to add a million new 3G subscribers each month, and that the iPhone will boost its fourth-quarter revenues, though further details were not provided, according to Reuters.

Chinese investment group CLSA Ltd. has estimated that Apple could sell 460,000 iPhones through China Unicom each year, according to Bloomberg. But that number, if accurate, would be less than the number sold on nation's gray market.

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 on the gray market in Hong Kong for about $800.

Following the launch, reports suggested the level of enthusiasm for the iPhone launch was muted. High prices and a lack of sellouts at local stores gave the first indications that the launch may not have been a huge success.

In August, China Unicom and Apple reached a three-year non-exclusive agreement to sell the iPhone. Apple has since turned its attention to China Mobile, the nation's largest wireless carrier, which plans to launch its own 3G network this year.

A sticking point for some potential iPhone buyers has been the handset's lack of Wi-Fi. The capability was left out because the Chinese government temporarily banned it in favor of a rival native offering. The ban, however, was relaxed in May, after manufacturing of the new phone began, and China Unicom hopes to have Wi-Fi in the next line of phones released before the end of the year.

[Rot'nApple]

Guess they didn't give what the people wanted!

Or should I say...

I guess they didn't give the people's what they wanted!
(a take from the name The People's Republic of China)

[Roos24]

I've always wondered about this.
They (the Cinese) make the iPhone for less than $300, and Apple tries to sell it to them again for more than $1,000? That's how many months of salary for the average Chinese? Hmm...

[drdb]

Originally Posted by Roos24

I've always wondered about this.
They (the Cinese) make the iPhone for less than $300, and Apple tries to sell it to them again for more than $1,000? That's how many months of salary for the average Chinese? Hmm...

Well that's an age old calculation, how many Model Ts did a Ford worker have to make before they could afford to buy one? It's not the average Chinese worker who's going to be buying these, it's the rich folks.

[bloggerblog]

Is that really a surprise? A thousand dollars for an iPhone?! and without WiFi?! People could easily buy an iPhone from eBay or any gray market for a lot less.

Besides, the enthusiasm has already subsided, it's been over two years.

[sheff]

Originally Posted by bloggerblog

Is that really a surprise? A thousand dollars for an iPhone?! and without WiFi?! People could easily buy an iPhone from eBay or any gray market for a lot less.

Besides, the enthusiasm has already subsided, it's been over two years.

Totally agree with you here, we have all seen the really good knock offs coming out of china, granted they were not iPhone, but for someone who had to wait for two years, gets no wifi, and has to pay 2 or three times more, the knockoffs start to look pretty good. Besides if they have any of the android devices there it would be good enough for most at this time. Iphone's success here was mostly due to higher spending power (we can say for only $100 more I could get this) and the device being revolutionary at the time of launch.

[cwingrav]

Originally Posted by drdb

Well that's an age old calculation, how many Model Ts did a Ford worker have to make before they could afford to buy one? It's not the average Chinese worker who's going to be buying these, it's the rich folks.

Just to be picky: Ford paid his employees about twice the standard wage at the time and the model-T was made to be affordable. So, while I agree with your above statement, the analogy does not hold. Cheers.

[drdb]

Originally Posted by cwingrav

Just to be picky: Ford paid his employees about twice the standard wage at the time and the model-T was made to be affordable. So, while I agree with your above statement, the analogy does not hold. Cheers.

I probably mixed 2 points up a bit there. A Ford worker could afford a car, but would have to work 4 months to buy one, making many more cars in this time. The number of iPhones a factory worker would have to make to afford one is a lot more (an impossibly big number probably) than 4 months worth.

[reinharden]

Let's not forget that Chinese consumers have been "importing" factory unlocked iPhones *with* WiFi enabled from Hong Kong's Apple Store for over a year.

The number of people willing to pay $1000+ for a more limited version of the iPhone is probably pretty limited. Especially when China Unicom is publicly saying that they hope to offer a version *with* WiFi in a few months.

If you have to have an iPhone today, you get it via Hong Kong. If you're willing to wait another few months, you can get it direct from China Unicom fully featured.


If Apple and China Unicom had said that a software update would enable WiFi in a few months, that might have helped a little. But I'm not sure whether Apple removed the hardware or simply disabled it...

reinharden

[smkinchina]

After being here for 5 years, Apple has truly misunderstood the potential of just selling the phone. Yesterday, my friend went and got an 8Gig Apple 3G jailbroken to V3.0. Works fine with China Mobile or Unicom. Cost $353 USD includes lots of Apps from "Icy" and to jailbreak.

Why would anybody go to Unicom here and get locked in for three years at crazy costs? As an Apple stockholder, I'm concerned they've missed the boat and losing potential customers everyday like my friend. Just sell the phone and drop the contracts then let the phone sell the Apps as Unicom has a weak story to market here as long as the gray market dominates everyday life.

SMKinChina

PS My 3G 16G V3.0.1 jailbroken phone from the UK works fine here.

[womble2k2]

Fighting a well developed grey market is near impossible. Apple and the carriers would need to seriously reduce their profit targets to get a sensible price that would lure people away from the grey market, and they need to include all features.

It is the same as software piracy in many Asian regions. Software is priced at levels which no person would consider buying it given the easy access to pirated copies on the grey market.

At the end of the day, Apple will not be too concerned. They still make profit on the grey imports from HK, so don't have much to gain.

Finally, you'd think that as the devices are made in China, that there would be substantially less costs as non shipping is required. Why not use these savings to bring the price down in that region?

[teckstud]

Originally Posted by Rot'nApple

Guess they didn't give what the people wanted!

Or should I say...

I guess they didn't give the people's what they wanted!
(a take from the name The People's Republic of China)

Do we know how many Mandarin apps there are? Maybe that's the problem.

[teckstud]

Originally Posted by womble2k2

Finally, you'd think that as the devices are made in China, that there would be substantially less costs as non shipping is required. Why not use these savings to bring the price down in that region?

And compromise profits? Apple?

[Anawrahta]

They (the Cinese) make the iPhone for less than $300, and Apple tries to sell it to them again for more than $1,000? That's how many months of salary for the average Chinese? Hmm...

After being here for 5 years, Apple has truly misunderstood the potential of just selling the phone. Yesterday, my friend went and got an 8Gig Apple 3G jailbroken to V3.0. Works fine with China Mobile or Unicom. Cost $353 USD includes lots of Apps from "Icy" and to jailbreak.

I have no idea why Apple totally screws over Chinese consumers. It isn't just the iPhone either, all Apple products in China are 50-100% more expensive than in the USA even though they're all MADE in China. I know the sales taxes are high and that plays some role, but after you subtract that, there's still a big gap that doesn't make sense.

The Apple authorized dealer network there is a complete joke. Most of the retailers are con artists who pass off refurbished stuff as new. Don't bother going to them for warranty or repair work, very few outside of Beijing or Shanghai will have technicians or people who even use/own the computers they sell.

The big question is....how many of these nerfed iPhones did Apple already manufacture before of the government gave it's seal of approval on regular WiFi?

[ivan.rnn01]

[markb]

They (the Cinese) make the iPhone for less than $300, and Apple tries to sell it to them again for more than $1,000?

Its not Apple that is chargin $1024. They only want $600 for it. They didnt want to neuter the wifi out of it...This is all Unicoms crap. They will have to drop the price and add wifi if they want to make a success out of it.

I can see why the negotiations took as long as they did. Unicom are a buncha idiots. The iPhone is a proven winner, and they still managed to screw it up. They could have had this done over a year ago, gone with a somewhat standard pricing model and been riding the wave of profits, now they got probably 12 months of inventory on their hands and Apple will not likely sell more than is in the channel there unless prices and policies change rapidly.l

[Quadra 610]

Originally Posted by markb

Its not Apple that is chargin $1024. They only want $600 for it. They didnt want to neuter the wifi out of it...This is all Unicoms crap. They will have to drop the price and add wifi if they want to make a success out of it.

I can see why the negotiations took as long as they did. Unicom are a buncha idiots. The iPhone is a proven winner, and they still managed to screw it up. They could have had this done over a year ago, gone with a somewhat standard pricing model and been riding the wave of profits, now they got probably 12 months of inventory on their hands and Apple will not likely sell more than is in the channel there unless prices and policies change rapidly.l

This. Well-stated.

[delreyjones]

Originally Posted by womble2k2

Fighting a well developed grey market is near impossible. Apple and the carriers would need to seriously reduce their profit targets to get a sensible price that would lure people away from the grey market, and they need to include all features.

It is the same as software piracy in many Asian regions. Software is priced at levels which no person would consider buying it given the easy access to pirated copies on the grey market.

At the end of the day, Apple will not be too concerned. They still make profit on the grey imports from HK, so don't have much to gain.

Finally, you'd think that as the devices are made in China, that there would be substantially less costs as non shipping is required. Why not use these savings to bring the price down in that region?

Does Apple have to fight the grey market? If the grey market is what it is, then that covers the middle and low end in China for Apple. Now, they're also addressing the high-end with the officially sanctioned release. So what's not to like? Apple makes money in both markets.

[teckstud]

Originally Posted by markb

Its not Apple that is chargin $1024. They only want $600 for it. They didnt want to neuter the wifi out of it...This is all Unicoms crap. They will have to drop the price and add wifi if they want to make a success out of it.
.l

Why is Apple allowing Unicom to make an additional $424 off the iPhone (71% more?)? Apple surely has some say as to what they allow them to charge- it's not exactly as if this is poor Apple- their hands are tied.

[Mazda 3s]

Originally Posted by markb

Its not Apple that is chargin $1024. They only want $600 for it. They didnt want to neuter the wifi out of it...This is all Unicoms crap. They will have to drop the price and add wifi if they want to make a success out of it.

I can see why the negotiations took as long as they did. Unicom are a buncha idiots. The iPhone is a proven winner, and they still managed to screw it up. They could have had this done over a year ago, gone with a somewhat standard pricing model and been riding the wave of profits, now they got probably 12 months of inventory on their hands and Apple will not likely sell more than is in the channel there unless prices and policies change rapidly.l

Then Apple should have never agreed to deal with them. I blame Apple just as much as I do China Unicom. In an effort to grab more marketshare and $$$, they've sold out their principals and their position as being FIRMLY in the driver's seat when it comes to matters with the iPhone and its other products.

You sleep with dogs, you wake up with fleas

[John.B]

Originally Posted by sheff

Totally agree with you here, we have all seen the really good knock offs coming out of china, granted they were not iPhone, but for someone who had to wait for two years, gets no wifi, and has to pay 2 or three times more, the knockoffs start to look pretty good. Besides if they have any of the android devices there it would be good enough for most at this time. Iphone's success here was mostly due to higher spending power (we can say for only $100 more I could get this) and the device being revolutionary at the time of launch.

What do the Android smartphones cost in China?

[John.B]

Originally Posted by teckstud

Why is Apple allowing Unicom to make an additional $424 off the iPhone (71% more?)? Apple surely has some say as to what they allow them to charge- it's not exactly as if this is poor Apple- their hands are tied.

As I understand it, Unicom bought a fixed number of iPhones from Apple to resell to their customers. Unicom is free to charge whatever the market will bear for them, including taking a loss. This is actually capitalism at work.

Makes you wonder what Mao would've thought...

[teckstud]

Originally Posted by John.B

As I understand it, Unicom bought a fixed number of iPhones from Apple to resell to their customers. Unicom is free to charge whatever the market will bear for them, including taking a loss. This is actually capitalism at work.

Makes you wonder what Mao would've thought...

So Apple got their money, made their profit, and looks the other way? Sounds like international electronic prostitution smuggling-Apple pimps out the iPhone?

[NormM]

Originally Posted by smkinchina

After being here for 5 years, Apple has truly misunderstood the potential of just selling the phone. Yesterday, my friend went and got an 8Gig Apple 3G jailbroken to V3.0. Works fine with China Mobile or Unicom. Cost $353 USD includes lots of Apps from "Icy" and to jailbreak.

Why would anybody go to Unicom here and get locked in for three years at crazy costs? As an Apple stockholder, I'm concerned they've missed the boat and losing potential customers everyday like my friend. Just sell the phone and drop the contracts then let the phone sell the Apps as Unicom has a weak story to market here as long as the gray market dominates everyday life.

SMKinChina

PS My 3G 16G V3.0.1 jailbroken phone from the UK works fine here.

Apple is the source for the phones that come from Hong Kong, and so they don't care if Unicom doesn't get the sales -- Apple still does. And I don't see that it's a problem for Apple if people buy jailbroken iPhones either. As long as the original hardware comes from Apple, they're making their money. It's the developers who are getting screwed by the jailbreakers: Apple probably makes much more in extra hardware sales than the dollars they lose from their share of app sales. Remember that, for Apple, apps are mainly a value-added to help them sell more hardware.

[solipsism]

Originally Posted by Roos24

I've always wondered about this.
They (the Cinese) make the iPhone for less than $300, and Apple tries to sell it to them again for more than $1,000? That's how many months of salary for the average Chinese? Hmm...

The cost of the parts and labour will never be the same as the retail price. Even the wholesale price has to be higher than the parts and labour for a company to even break even. There is R&D, testing, marketing, various fees, taxes, transportation costs, and even litigation fees to consider.

Originally Posted by Anawrahta

I have no idea why Apple totally screws over Chinese consumers. It isn't just the iPhone either, all Apple products in China are 50-100% more expensive than in the USA even though they're all MADE in China.

How do you know Apple is making more profit per phone in China? Have you considered that China, with its large population and rapidly growing middle class knows that it’s a desirable marker for Western companies? HAve you considered that the difficulty of Western companies to get into China legally is also met with higher than average import tariffs? Have you considered what CU’s role is with the pricing?

The big question is....how many of these nerfed iPhones did Apple already manufacture before of the government gave it's seal of approval on regular WiFi?

Considering that Apple would have known about this change prior to shipping and we have no information that Apple was required to remove the WiFI chip from the device, it’s possible that the iPhone merely has had the driver and UI elements removed.

If they have removed the chip, then they would have also had to replace it with a new Bluetooth module as the standard iPhone has the combo WiFi+BT+EDS+FM chip.This would account for some of the price change to have to reengineer and retest a new logic board. Of course, we still don’t know if they had to do that. I am leaning toward just a SW disabling.

Originally Posted by markb

Its not Apple that is chargin $1024. They only want $600 for it.

We can’t be certain of that yet. From what I’ve read, there are taxes and fees that are pretty outrageous if you want to do business in China.


Of the million that have signed up for 3G they currently have 1.2% of CU’s 3G market segment, but what does Apple have when you consider the gray market iPhones for all of China?

[AjitMD]

Apple could increased the supply of low end unlocked 8GB iPhones that are sold in Hong Kong... even offer warranty and support via the internet. Last I read, these phones were sold by ATT for $150. Without the subsidy the price could in the $400 range. Include WiFi.

[randythot]

Originally Posted by smkinchina

After being here for 5 years, Apple has truly misunderstood the potential of just selling the phone. Yesterday, my friend went and got an 8Gig Apple 3G jailbroken to V3.0. Works fine with China Mobile or Unicom. Cost $353 USD includes lots of Apps from "Icy" and to jailbreak.

Why would anybody go to Unicom here and get locked in for three years at crazy costs? As an Apple stockholder, I'm concerned they've missed the boat and losing potential customers everyday like my friend. Just sell the phone and drop the contracts then let the phone sell the Apps as Unicom has a weak story to market here as long as the gray market dominates everyday life.

SMKinChina

PS My 3G 16G V3.0.1 jailbroken phone from the UK works fine here.

The only way I can see Apple gaining ground is by continuing to add value not in the hardware side, but the software side, and even then, more through the added benefit of being able to connect to other iPhones as a community in a way that jailbroken phones will struggle. Not really sure how to do this, but just thinking.

[Kolchak]

Originally Posted by Mazda 3s

Then Apple should have never agreed to deal with them. I blame Apple just as much as I do China Unicom. In an effort to grab more marketshare and $$$, they've sold out their principals and their position as being FIRMLY in the driver's seat when it comes to matters with the iPhone and its other products.

You sleep with dogs, you wake up with fleas

Or maybe this is part of a plan to put pressure on China Mobile. Give it to Unicom first, which may give Apple a better bargaining position when it comes to negotiations with CM. That would explain why the Unicom deal is not exclusive.

[donlphi]

Originally Posted by Roos24

I've always wondered about this.
They (the Cinese) make the iPhone for less than $300, and Apple tries to sell it to them again for more than $1,000? That's how many months of salary for the average Chinese? Hmm...

Contrary to belief, everybody from China is not poor. They have lower, middle, and upper class, just like the U.S. They just have a higher population. When you consider how much people in China were paying to buy hacked iPhones, this will seem reasonable.

[SpamSandwich]

Clearly, Apple needs to get in on that whole "grey market". I hear business is booming!

[solipsism]

Originally Posted by SpamSandwich

Clearly, Apple needs to get in on that whole "grey market". I hear business is booming!

Old people don’t even use computers.

[solipsism]

Originally Posted by Kolchak

Or maybe this is part of a plan to put pressure on China Mobile. Give it to Unicom first, which may give Apple a better bargaining position when it comes to negotiations with CM. That would explain why the Unicom deal is not exclusive.

I wonder if the others aren’t even a threat at this point since Apple would have to make a different device with different radios. Don’t get me wrong, CM has more than enough to warrant the expense of a TD-SCDMA iPhone, but will they even bother considering that they are growing nicely as it is and even having trouble with production as it is. Hell, even the US has enough CDMA users to warrant the expense, though that is an entirely different situation.

[extremeskater]

Originally Posted by solipsism

Old people don’t even use computers.

They should run this as an iPhone ad in China. I saw this today its pretty damn cool.

http://www.youtube.com/watch?v=x9Xo8AD6jis

[MacTripper]

China Unicom gains 5,000 iPhone subscribers from launch

In a country of 1.3 billion people, shouldn't there be a "only" in this topic heading?

Lets face it, the iPhone was killed by the Chinese government by their delaying tactics and wifi hobbling.

Of course they benefited by having nearly all of Apple's manufacturing in their country so they can learn how to do things for themselves and once they learn, they are done with Apple.

There isn't enough resources in the world for the 1.3 billion Chinese to have the same standard of living as we enjoyed in the US.

It's not too late to bring Apple's manufacturing back to the US, if they wait too long the skills will be lost due to unemployment and aging.

Quit chasing the Chinese dragon there Apple.

[anantksundaram]

Originally Posted by Mazda 3s

You sleep with dogs, you wake up with fleas

I love that Ben Franklin quote!

[anakin1992]

Originally Posted by reinharden

Let's not forget that Chinese consumers have been "importing" factory unlocked iPhones *with* WiFi enabled from Hong Kong's Apple Store for over a year.

The number of people willing to pay $1000+ for a more limited version of the iPhone is probably pretty limited. Especially when China Unicom is publicly saying that they hope to offer a version *with* WiFi in a few months.

If you have to have an iPhone today, you get it via Hong Kong. If you're willing to wait another few months, you can get it direct from China Unicom fully featured.


If Apple and China Unicom had said that a software update would enable WiFi in a few months, that might have helped a little. But I'm not sure whether Apple removed the hardware or simply disabled it...

reinharden

take an example of a 16G 3GS model, for 24 month lease period, customer has to pay

(1) 4000RMB(~$600) at front
(2) he also has to deposit 3000RMB(~$450). this 3000RMB will be return to customer each month if he could not use up his minutes/data in his plan.
(3) the monthly fee for this package is 126RMB(~$20).

so the total cost to own an iphone of 16G 3GS in china after 2 years of contract with china's unicom is about

(option 1) 4000RMB + 126RMB x 24 = 7024RMB(~$1100) over 2 years.
(option 2) if that 3000RMB is all used up, the total cost for a chinese iphone unicom customer is 10024RMB(~$1500).

( currency conversion rate:$1 = 6.7-6.8RMB ).

i have a 8G 3G model by $200. ATT charges me at $80 for monthly fee. over the 2 years, i have to pay the service total in 80 x 24 = $1920. so the total ownership of my 8G 3G iphone is about $2100.

well, unless i misunderstood chinese package, i would think chinese customer is enjoying a very good deal compared with us. i don't think grey market can compete with unicom's offer. normally grey market costs about 1000RMB($147) less. then unless grey market iphone can get a cheaper 3G service deal, it will be more expensive.

even though iphone is made in china, it is for export. for import, there is 17% tariff regardless. in my impression, china does not have consumer tax, but i could be wrong. so my calculation does not include any tax, both US and china.

let me know if my estimate is flawed.

[anakin1992]

Originally Posted by smkinchina

After being here for 5 years, Apple has truly misunderstood the potential of just selling the phone. Yesterday, my friend went and got an 8Gig Apple 3G jailbroken to V3.0. Works fine with China Mobile or Unicom. Cost $353 USD includes lots of Apps from "Icy" and to jailbreak.

Why would anybody go to Unicom here and get locked in for three years at crazy costs? As an Apple stockholder, I'm concerned they've missed the boat and losing potential customers everyday like my friend. Just sell the phone and drop the contracts then let the phone sell the Apps as Unicom has a weak story to market here as long as the gray market dominates everyday life.

SMKinChina

PS My 3G 16G V3.0.1 jailbroken phone from the UK works fine here.

SMKinChina,

how much do you pay for you iphone _3G_ service in china? monthly/yearly?

[mdriftmeyer]

Originally Posted by Roos24

I've always wondered about this.
They (the Cinese) make the iPhone for less than $300, and Apple tries to sell it to them again for more than $1,000? That's how many months of salary for the average Chinese? Hmm...

How dense is everyone in this forum, regarding China and the iPhone license?

The Peoples Republic of China has a national Phone player in the smart phone market and raised the bar for cost through a carrier to give it's preferred solution a more affordable status.

[samab]

Originally Posted by markb

Its not Apple that is chargin $1024. They only want $600 for it. They didnt want to neuter the wifi out of it...This is all Unicoms crap. They will have to drop the price and add wifi if they want to make a success out of it.

I can see why the negotiations took as long as they did. Unicom are a buncha idiots. The iPhone is a proven winner, and they still managed to screw it up. They could have had this done over a year ago, gone with a somewhat standard pricing model and been riding the wave of profits, now they got probably 12 months of inventory on their hands and Apple will not likely sell more than is in the channel there unless prices and policies change rapidly.l

For all the apple fans in these forums who steadfastly believes that market share doesn't matter, Apple survives as a lot volume high margin business. Now these people are suddenly saying the reverse.

That is the standard pricing model for much of the developing world --- the iphone has been priced like that in Russia, in India and in China.

[solipsism]

Originally Posted by samab

For all the apple fans in these forums who steadfastly believes that market share doesn't matter.

No one here as ever said that. We’ve said that marketshare is not more important that profits to a company. Marketshare increases are great if you are maintaining your net profits, if not, selling double the units with less than half the profits is not a net win for any company.

On top of that, there is also brand weakening to be concerned about. For instance, if Apple were to compete with HP and Dell by selling $400 Macs the Mac brand and even the Apple name could be hurt. Japanese automakers figured out a long time ago that selling a luxury car under the cheap brand was not working, despite the value of the purchase compared to the US automakers of the time. This is important for longterm growth.