Various issues expected to delay iPhone debut in China

[AppleInsider]

China Mobile chief executive Wang Jiangzhou said Tuesday his company is in talks to carry the iPhone, but telecom executives familiar with the discussions say a number of contingencies on Apple's part are likely to prolong the process.

Specifically, there's a precedent among Chinese telecom operators that they do not, under any circumstances, agree to share their revenues with outside parties, as Apple has requested of and achieved from all of its iPhone partners thus far.

"[O]ur business model does not entail sharing revenue with terminal producers -- we don't share revenue. That's a Chinese rule," one executive told Reuters on condition of anonymity. "All it is right now, on the iPhone and Apple, is that the firm welcomes their approach."

Secondly, and possibly more crucial, is the fact that iPhones might be incompatible with the Chinese market because of their "locked" SIM cards -- meaning the device would not be able to piggyback on another operator's network.

"You have to realize Chinese SIM cards are not locked up, as the iPhones' are," the executive said.

Still, word of the talks sent shares of China Mobile, which has 349.6 million subscribers, as well as smaller rival China Unicom, which caters to 156 million users, soaring on Tuesday. China Mobile shot up 9.23 percent to close at HK$140.80 ($18.08), while China Unicom Ltd. rose 6.19 percent to HK$15.44 ($1.98).

And while China Unicom said it it has no immediate plans to bring the iPhone to China, it remains open to the idea.

"Right now, we don't have any plans to introduce Apple's iPhones in China," Unicom Executive Director Li Zhengmao told reporters on Wednesday. "But of course, we're always willing to discuss a good business opportunity if it presents itself."

Zhengmao said he could not predict whether the iPhone would gain widespread adoption in China, but said it would need to support text messaging in Chinese language to be accepted.

At (US)$400, the Apple handset also currently costs more than the average monthly salary in China.

Apple has said it hopes to launch iPhone in parts of Asia in 2008.

[ View this article at AppleInsider.com ]

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[rawhead]

How can SIM lock be an issue, when everything points to the iPhone being released unlocked in France very soon?

[melgross]

Originally Posted by rawhead

How can SIM lock be an issue, when everything points to the iPhone being released unlocked in France very soon?

I know. If the rules are their, Apple must follow them. But if this isn't law, then it would be subject to negotiations.

I think the revenue sharing is the bigger issue.

I've been concerned that it will trip Apple up over the long term.

[g5man]

Originally Posted by melgross

I know. If the rules are their, Apple must follow them. But if this isn't law, then it would be subject to negotiations.

I think the revenue sharing is the bigger issue.

I've been concerned that it will trip Apple up over the long term.

I am not so sure. I imagine the iPHone can still sell well without China and Apple can grow in its Mac share without China. At least for the next 5 years.

The world market alone is much bigger then China. An agreement without revenue sharing will decrease apple's negotiating power in the rest of the world.

So the Chinese will have to just keep buying unlocked phones in the mean time.

[ak1808]

They are releasing these statements to puff up their "negotiation power". Makes total sense.
Three months ago "European network providers" called Apple "arrogant" and their demands "ridiculous" in the press.

And now? Everybody is happy.

I don't know whether Apple will make a step towards them or they towards Apple, but it is clearly all rhethoric at this point. Of course they will share the revenue, and sell locked SIMs, if the deal is sweet enough for them!

[OriginalMacRat]

Reportly hacked iPhones are already selling well in China.

Apple really needs to stop this locking BS.

[markb]

I cant imagine the iPhone will fare well against the knock offs that cost a third of the price or less.

I also love their "negotiating" position that their revenue is off the table. The attitude seems to beg to insert "lowly" between "sharing revenue with" and "terminal producers".

I think they could waste months and lotsa negative press fighting this one. i e. The scuffle they had getting the France deal done 10x.

[melgross]

Originally Posted by g5man

I am not so sure. I imagine the iPHone can still sell well without China and Apple can grow in its Mac share without China. At least for the next 5 years.

The world market alone is much bigger then China. An agreement without revenue sharing will decrease apple's negotiating power in the rest of the world.

So the Chinese will have to just keep buying unlocked phones in the mean time.

Wow! That's a very narrow understanding of the world economic situation. I guess that's why you still call yourself "g5man".

[melgross]

Originally Posted by markb

I cant imagine the iPhone will fare well against the knock offs that cost a third of the price or less.

I also love their "negotiating" position that their revenue is off the table. The attitude seems to beg to insert "lowly" between "sharing revenue with" and "terminal producers".

I think they could waste months and lotsa negative press fighting this one. i e. The scuffle they had getting the France deal done 10x.

The knockoffs look somewhat like the iPhone, but can't use the OS, or anything else Apple has in the phone. Some people will always buy these. But, once the real product appears, their use will decline, or at least be confined to those who wouldn't have bought the phone anyway. The others will switch over to the real device. After all, the only reason why most of them buy the fakes is for prestige. But they won't have that anymore once the iPhone is delivered, because unlike fake Rolex's and Gucci bags, which look exactly like the original from the outside, the iPhone will look different as soon as it's turned on.

Also, if Apple brings these in with the Chinese companies themselves, the government, which doesn't care about knockoffs as long as they are manufactured inside China, will care because Chinese companies are involved. Two of the biggest, and most influential. The knockoffs will disappear if the Chinese telecoms demand it, which they will if they're selling the iPhone.

[aegisdesign]

Originally Posted by ak1808

They are releasing these statements to puff up their "negotiation power". Makes total sense.
Three months ago "European network providers" called Apple "arrogant" and their demands "ridiculous" in the press.

And now? Everybody is happy.

Oh that's hilarious.

[SpamSandwich]

Originally Posted by melgross

The knockoffs look somewhat like the iPhone, but can't use the OS, or anything else Apple has in the phone. Some people will always buy these. But, once the real product appears, their use will decline, or at least be confined to those who wouldn't have bought the phone anyway. The others will switch over to the real device. After all, the only reason why most of them buy the fakes is for prestige. But they won't have that anymore once the iPhone is delivered, because unlike fake Rolex's and Gucci bags, which look exactly like the original from the outside, the iPhone will look different as soon as it's turned on.

Believe it or not, but in the world headquarters for knock-offs (China) consumers actually insist on the 'real thing' instead of knock-offs now that they can afford them. I just read an article on designer fashions that are in extremely high demand (in the WSJ?) in China despite the availability of nearly perfect copies.

[cameronj]

Originally Posted by SpamSandwich

Believe it or not, but in the world headquarters for knock-offs (China) consumers actually insist on the 'real thing' instead of knock-offs now that they can afford them. I just read an article on designer fashions that are in extremely high demand (in the WSJ?) in China despite the availability of nearly perfect copies.

You left out a very important word there: "some"

[SpamSandwich]

Originally Posted by cameronj

You left out a very important word there: "some"

Aww... "some".

[ak1808]

Originally Posted by aegisdesign

Oh that's hilarious.

You see, even you are happy!

[elroth]

"[O]ur business model does not entail sharing revenue with terminal producers -- we don't share revenue. That's a Chinese rule."

AT&T would have said the same thing a year ago.

[tonton]

Well I don't really agree with the revenue sharing thing, but people in the US simply don't understand the thing about phone locking enough.

The fact is that there is no such thing as a locked phone in China (and Hong Kong). There are no locked phones. Every phone you get from any provider can be used with another provider's sim card on the day you buy it.

[NOFEER]

the question is who is number 2 or 3 that want to become a quick number 1, competition will draw others.
take at&t vs verizon....look at the stock jump (that's money in their pocket without doing a thing,) also how much does it cost to swith a customer from a major carrier AND keep them. telecom is a commodity of sorts, what differentiates them from one another really....but their phones--in my opinion. that kind arrogance plays to apple and looking for another telecom to offer the IT phone.

[Jules]

Originally Posted by melgross

The knockoffs look somewhat like the iPhone, but can't use the OS, or anything else Apple has in the phone. Some people will always buy these. But, once the real product appears, their use will decline, or at least be confined to those who wouldn't have bought the phone anyway. The others will switch over to the real device. After all, the only reason why most of them buy the fakes is for prestige. But they won't have that anymore once the iPhone is delivered, because unlike fake Rolex's and Gucci bags, which look exactly like the original from the outside, the iPhone will look different as soon as it's turned on.

Also, if Apple brings these in with the Chinese companies themselves, the government, which doesn't care about knockoffs as long as they are manufactured inside China, will care because Chinese companies are involved. Two of the biggest, and most influential. The knockoffs will disappear if the Chinese telecoms demand it, which they will if they're selling the iPhone.

This is China you are talking about... you may recall a couple of years ago when the LG chocolate came out. The chinese had it reverse engineered a month or so before the real phone was released. When the real one was launched they all thought it was a fake. The longer Apple waits to penetrate that market, the more time it gives the cloners to establish themselves. These cloners dont just roll over when the real thing comes along... and the clones are good, and getting better.

And on your second point, thats a very simplistic view of how the Chinese economy operates. Graft is endemic, local government is in cahoots with most of the fraudulent businesses and it is simply not in their interest to shut down counterfeiters while government is being paid off. Companies like China Unicom couldn't give 2 shits if there are counterfiet iPhones being produced, in fact they are probably for it because the Apple business model is perceived as greedy and they dont have a whole lot of interest in seeing it succeed.

This not America and these guys are as crooked at the 10c watches they produce.

[melgross]

Originally Posted by Jules

This is China you are talking about... you may recall a couple of years ago when the LG chocolate came out. The chinese had it reverse engineered a month or so before the real phone was released. When the real one was launched they all thought it was a fake. The longer Apple waits to penetrate that market, the more time it gives the cloners to establish themselves. These cloners dont just roll over when the real thing comes along... and the clones are good, and getting better.

And on your second point, thats a very simplistic view of how the Chinese economy operates. Graft is endemic, local government is in cahoots with most of the fraudulent businesses and it is simply not in their interest to shut down counterfeiters while government is being paid off. Companies like China Unicom couldn't give 2 shits if there are counterfiet iPhones being produced, in fact they are probably for it because the Apple business model is perceived as greedy and they dont have a whole lot of interest in seeing it succeed.

This not America and these guys are as crooked at the 10c watches they produce.

I know all about Chinese corruption. That's nothing new. It doesn't mean that they will try to get away with using Apple's OS in a phone. Some things are too blatant even for the Chinese government to allow.

[Jules]

Originally Posted by SpamSandwich

Believe it or not, but in the world headquarters for knock-offs (China) consumers actually insist on the 'real thing' instead of knock-offs now that they can afford them. I just read an article on designer fashions that are in extremely high demand (in the WSJ?) in China despite the availability of nearly perfect copies.

This is bullshit. Sure, among the million or so rich people there that can afford it there is a certain snob value in owning the real thing. Ferrari is doing a roaring trade there too. Last time I lived in Hangzhou there were a few driving around. There are 1300 million people in China however and it simply isn't true that everyone wants the real thing. They cannot afford it.

Chinese middle class is the equivalent of our working class. Then there is the peasant class who use the same table and chairs their parents used 100 years ago.

Please dont look to the WSJ for a accurate picture of what life is like for the average chinese.

[Jules]

Originally Posted by melgross

I know all about Chinese corruption. That's nothing new. It doesn't mean that they will try to get away with using Apple's OS in a phone. Some things are too blatant even for the Chinese government to allow.

Not so. If they could do a perfect copy they would try. Thing is they see some shortcomings in the Apple design (yes you can put 2 sims cards in their clones) and they make it for a quarter the price. Just look at the market they are selling into.

And phones like the Meizu MiniOne aren't half bad either. (tho I dont know whether it is out yet)

As for the government not allowing it - what planet are you from? 1. the Chinese government doesn't give a shit, they are actively promoting the theft of honourable mr white mans ideas, look that one up on the internet. 2. The government exerts no direct control over these groups. And if they did they would move to another country instead where they weren't policed, like say Vietnam or maybe now North Korea as it is starting to introduce reforms to promote investment (from China only), and it is very agressive in persuing every crooked scheme it can (Google Superdollar, North Korean drug production etc) anything that brings hard currency into the country.

One other thing to remember is that some counterfeiting operations (not usually the electronics ones) use the same exact plant the real operations use - just use it in the off hours) I will try and dig you up a link on that one. That kinda shocked me.

Dont be in any doubt about what these guys get up to.

[melgross]

Originally Posted by Jules

This is bullshit. Sure, among the million or so rich people there that can afford it there is a certain snob value in owning the real thing. Ferrari is doing a roaring trade there too. Last time I lived in Hangzhou there were a few driving around. There are 1300 million people in China however and it simply isn't true that everyone wants the real thing. They cannot afford it.

Chinese middle class is the equivalent of our working class. Then there is the peasant class who use the same table and chairs their parents used 100 years ago.

Please dont look to the WSJ for a accurate picture of what life is like for the average chinese.

You know less than you think you do. While I've never been to China, I've got friends who have been doing business there for years, one for decades, who bought a house there twenty years ago. From what they say, the reports out of China are pretty much correct. iPods are doing well, with no known copies, and there are at least 400,ooo iPhones around, from reports in China itself.

While the Chinese middle class is about the equiv. of our working class, I must remind you that our working class makes up the majority of our middle class, as it does everywhere. The estimate of that middle class in China is about 300 million, and rising.

[melgross]

Originally Posted by Jules

Not so. If they could do a perfect copy they would try. Thing is they see some shortcomings in the Apple design (yes you can put 2 sims cards in their clones) and they make it for a quarter the price. Just look at the market they are selling into.

And phones like the Meizu MiniOne aren't half bad either. (tho I dont know whether it is out yet)

As for the government not allowing it - what planet are you from? 1. the Chinese government doesn't give a shit, they are actively promoting the theft of honourable mr white mans ideas, look that one up on the internet. 2. The government exerts no direct control over these groups. And if they did they would move to another country instead where they weren't policed, like say Vietnam or maybe now North Korea as it is starting to introduce reforms to promote investment (from China only), and it is very agressive in persuing every crooked scheme it can (Google Superdollar, North Korean drug production etc) anything that brings hard currency into the country.

One other thing to remember is that some counterfeiting operations (not usually the electronics ones) use the same exact plant the real operations use - just use it in the off hours) I will try and dig you up a link on that one. That kinda shocked me.

Dont be in any doubt about what these guys get up to.

I know what they can do, but they're not doing it.

The Chinese allows, and even promotes, counterfeiting when it suites them, and they prevent it for the same reasons.

[sapporobaby]

The funny thing about this entire debate is that the Apple/iPhone faithful simply think that the world is in need of Apple products. China or China Mobile does not need the iPhone to make money and prosper. There are many other products currently and new ones on the way (Nokia will launch a TS "real" phone soon) that will compete against the iPhone. While I have multiple Apple products, I have removed the rose colored glasses and see Apple as nothing more than any other corporation that is out to get my money. By approaching the market this way, I get products that suit me rather than being on a fan-person "sheeple" who sees Apple as doing no wrong.

[melgross]

Originally Posted by sapporobaby

The funny thing about this entire debate is that the Apple/iPhone faithful simply think that the world is in need of Apple products. China or China Mobile does not need the iPhone to make money and prosper. There are many other products currently and new ones on the way (Nokia will launch a TS "real" phone soon) that will compete against the iPhone. While I have multiple Apple products, I have removed the rose colored glasses and see Apple as nothing more than any other corporation that is out to get my money. By approaching the market this way, I get products that suit me rather than being on a fan-person "sheeple" who sees Apple does no wrong.

That's basically correct.

Apple just happens to have a better feel for what people want these days.