Report: 'Crippled' iPhone coming to China in September
China Unicom and Apple (AAPL) have reportedly signed an agreement to launch a specially-built version of the iPhone in China, perhaps as early as September.
The report, published Friday by China Business Network, credits Hon Hai — the world's largest manufacturer of electronics components and Apple's long-time partner — with helping broker the deal.
Under its terms, Hon Hai — using its tradename Foxconn — will build a special version of the iPhone for the Chinese market with Wi-Fi disabled, allowing Apple to get around Beijing's restrictions on handsets with high-speed Internet capability.
"I believe we are at the beginning stages of a mobile revolution," says iPhonAsia editor Dan Butterfield, who explored the implications of the deal Friday in a long Q&A with China's Mobinode.tv (see below).
There were several independent reports last week that Hon Hai is already manufacturing the crippled iPhones — code named "model 90" — and that the China Telecommunication Technology Labs have begun mandatory testing.
Such tests are required by the Ministry of Industry and Information Technology and usually take at least a month, which is why the phone is not expected to reach Chinese consumers much before September.
In his Mobinode Q&A, Butterfield draws a picture the size and nature of the potential market:
"There are over 700 million wireless consumers in China. The majority are youthful, status conscious, and they want to own cool smartphones loaded with the latest apps/games and mobile technologies that allow them to interact with one another.
"While incomes are lower in China compared to western markets, China still has tremendous consuming power. There are an estimated 340,000 millionaires in China and there is also a growing middle-class. An estimated 290 million Chinese households can be classified as middle-class with monthly incomes ranging from 5,000 CNY to 15,000 CNY ($732 to $2,196 USD). Chinese tend to save a relatively high share of their monthly take home pay. Rainy day savings can sometimes be spent on more expensive items, particularly if the product has status and is used every day … think iPhone.
"All of this adds up to a tremendous potential market for Apple’s iPhone. Using conservative estimates, I believe Apple can capture a full 2% share of the wireless market in China within the first 12 months of an official iPhone launch. That’s 14 million iPhones and perhaps another 2 million or so coming via grey-market iPhone sales."
For the rest of Butterfield's Mobinode interview, see here.
Photoshop credit: iPhonAsia.
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What Apple needs to do is to disable the WiFi of the China phones via software that is easily hacked to turn it on. Alternately, if hardware has to be turned off, make it easy to be reconnected to WiFi.
I can understand why Apple wants to cut a deal with the China Unicom… they need the subsidy that essentially fuel the sales and profits for Apple.
At the same time, Apple needs to sell an unlocked phone in Hong-Kong at the carrier price without the subsidy. Something around $300 for the very low end. Many customers would prefer to have such phones where they can buy their own SIM card… even anonymously and surf the Internet.
These regimes, like Iran, China need to be undermined via the internet and TV including satellite TV. I can not believe we continues playing with kid gloves with these brutal murderous regimes. Look what they did to the Uigurs, Tibet, or even at Tianamen Square.
Damon, He is referring to the Chinese standard of living calculations, not American income levels. Obviously in the US if you make 700 a month you are not quite considered middle class. But with the cost of living and price levels for consumer products much lower in China, 700 is actually a very reasonable income. It may not be the best way to spend a modest income, but there in an entire generation of tech-savvy Chinese who are willing to spend large amounts of money for American consumer goods. It is very similar to the desire for middle class americans to go out and buy a Mercedes because it is a luxury good. Food, clothing, and for the most part shelter are very inexpensive in China so it is incorrect to compare the American middle class to the Chinese.
Forget all the talk about breaking into the massive potential of the Chinese market. Forget all the talk about the "crippled" iPhone the Chinese will have to suffer through and the "greedy" Apple caving into get in good standing with the Chinese government. The most troubling piece of this article was a very small line included towards the end of things. When discussing the "middle class" of China, the author of this piece claims that making (at the bottom end) $732 equals middle class status. Last time I checked, someone with an annual income of less than $9,000 isn't exactly "middle class" and probably needs to worry about food, clothing, and shelter before getting the latest iPhone.
http://dailyfits.com/2009/07/13/apple-netbook-rumor-gaining-legs/
Very interesting report out of China
I wish I'd known sooner!!! After downloading the new 3.0 software for the iPhone, I wound up with a crippled iPhone – as have many of my friends!!!In fact, I had to go through two iPhone replacements – the first one was also crippled upon loading 3.0 software as well. And we've all read about the overheating of many new 3GS iPhones as well. Perhaps I'm actually living in China!
Well what would you do Richard? Isolate China? We tried that with Russia and it did not work very well did it? It's a very slow process towards democracy. Maybe 100 years or a generation if you will. Look at what is happening inside Iran. Maybe not in our lifetimes but eventually the tide will turn.
Real iPhones are already everywhere in China. In Shanghai, Beijing and Shenzhen, they are easy to buy. I know at least 10 people who own them, and bought the phone in mainland China. You see them everywhere here. These are not the fakes, these are real iPhones.
Selling an officially sanctioned iPhone changes nothing. Plus, the official China iPhone will be more expensive ( due to taxes and retail stores looking for large margins ), and have less functionality. It is easier and cheaper to buy from the mom and pop stores selling the gray market phones. The "official" sales numbers for China are going to be low.
To put things in perspective, in Shanghai ( within 15km of the city center ), I bet you never more than 10-15 minutes walking distance from a store with real iPhones.
Finally, China has massive underground markets. I bought a Nokia N97 ( version:RM-505 ) last week for 4000RMB ( ~588USD ). The "official" China N97 ( RM-506 ) is 6400RMB, lacks WIFI and several international frequencies. The phone I bought had been smuggled in from Vietnam. The internal product code was assigned Vietnam ( 0586296 ). The Chinese are much better at getting around their government controls than Americans are at evading the American government.
Another slimy U.S. company caves in to Chinese censorship for money. Just like Yahoo and Google who actually helped China put dissidents in jail. And no comment in the article about the morality of this. Figures.
You know what's interesting Phil? There is now a very wide disconnect from most of the tech focused people who respond/comment to these type of articles than the general consumer who shops in a mall, walks into a store and buys the new shiny object. They are not fanboys, fangirls or technophiles. They are just consumers of product. It's all changed seemingly overnight. and sometimes I get the feeling the mostly male technophiles/Star trek convention folks don't like it too much? They seem unable to grasp that the consumer does not care about their concerns? It's just not 1985 anymore. Tech is everywhere now…
ex ped: True. But sometimes I think there's even more disconnect WITHIN the tech-focused people who comment here.
The word 'crippled' makes it sound like the phone's essential functions are lessened. Yes, WiFi is a useful function, but it's not essential to the phone function. Plus, if no phone in China can have WiFi, aren't all phones sold in China 'crippled'?
And a word about knockoffs….sure, there are some people who would buy the knockoff, but it's not as simple as knocking off purse or a pair of shoes. It has to work properly, and it's next to impossible that those knockoffs would even be modestly usable.
Apple will sell 10 million or more iPhones in China when it's introduced. Just wait for the lines into the thousands in dozens of Chinese cities.
who would pay for a crippled iphone from apple when there is already fake iphones sold locally in half price with extra feature like watching tv?
ex ped: Butterfield addresses that issue in detail in his Q&A.
Damon…. your ignorance is deffintely allowing you to speak too quickly. Nathan is correct about not being able to directly compare the monthly income of Americans and Chinese without factoring in the cost of living. And as far as the Chinese "suffering" with the altered iPhone… these are thier restriction placed by the Chinese them selves, which I'm fairly positive you have no idea why they exsist… and Apple is not being "greedy", they are just merly adapting to thier rules and regulations so that there product can be sold legaly in China. Just as Wal-Mart adapts thier store inventory to meet the needs of certain parts of the country…and McDonalds the same. Too many lazy Americans confuse greed with success.