China: 100,000 iPhones in 40 days
The chairman of China Unicom finally has some sales figures to report
iPhone buyers in Guangzhou. Photo: iPhonAsia
The numbers coming out of China since Apple (AAPL) launched the iPhone in the world's largest cell phone market have been dismal.
China Unicom (CHU) said it signed up 5,000 iPhone subscribers in the first weekend — a number widely reported as total sales. This was followed by reports that only five iPhones had been sold through a new website dedicated to online sales. Then on Wednesday Marbridge Consulting reported that in 40 days, China Unicom had sold only 10,000 iPhones — a number, that if true, would be pretty unimpressive in a country that boasts more than 720 million mobile phones.
Happily for Apple, it wasn't true. iPhonAsia's Dan Butterfield did a follow-up and discovered that a digit had been dropped in translation. The correct figure, according to China Unicom chairman Chang Xiaobing, who spoke to the media in Hong Kong Tuesday, is 100,000 iPhones in 40 days.
iPhone hardball and soft sell in China
Apple airs its first Chinese-language ads as reports of retailer intimidation emerge
Supplementing print advertisements like the one at right, the first Apple-produced iPhone ads appeared on Chinese TV over the weekend.
They come on the heels of the device's somewhat sluggish start last month in the world's largest mobile phone market (more than 720 million subscribers).
Apple's (AAPL) local carrier, China Unicom (CHU), reported signing up only 5,000 new subscribers in the iPhone's first four days of sale, a result Western analysts viewed as disappointing.
In addition to the several reasons put forward — e.g., high prices, lack of Wi-Fi, a market saturated with knock-off and black-market phones — iPhonAsia's Dan Butterfield has added another: strong-arm tactics on the part of China Unicom's chief rival, China Mobile (CHL).
According to Butterfield, some of the country's most important mobile phone distributors are not yet selling the iPhone despite signed agreements with China Unicom. Reason: threatening letters from China Mobile warning them not to.
"The precise wording of these letters is unknown," writes Butterfield, "but this is more than just a suggestion." He then quotes — in translation — an article in sina.com:
"Many cell phone distributors received formal notification that 'Selling iPhones is not recommended,' or 'Selling iPhones is not allowed or China Mobile will fine you or stop cooperation with you.' "
Tactics like this, as 9to5Mac's Seth Weintraub puts it, "make Verizon and AT&T's little sissy war seem silly."
Below the fold: An iPhone ad with a Chinese accent and Chinese apps.
Chinese iPhones to start at $300, $18.45/mos. – update
[UPDATE: On Sept. 28, China Unicom announced an iPhone price point more than twice as high as the one in this press report. See here.]
iPhones in China will be relatively expensive, but monthly charges will be among the lowest in the world.
So says the Xinhua News Agency, the official press service of the Chinese Communist government, quoting an unnamed "insider" at China Unicom (CHU).
According the Xinhua report published early Friday, China's No. 2 carrier will roll out the iPhone shortly after the Oct. 1-8 National Day holiday in four models: 3G 8GB, 3G 16GB, 3GS 16GB, and 3GS 32GB.
The entry-level version, the 8GB iPhone 3G, will cost 2,075 yuan ($303) according to this report — more than three times its U.S. retail price ($99).
But the iPhones in China will be bundled with two-year service packages that are considerably cheaper than AT&T's (T). According to Xinhua, the lowest-price service package will cost 126 yuan per month, about $18.45. (AT&T charges its U.S. iPhone customers a minimum of $39.99/mos. for voice service plus a mandatory $30/mos. for data.)
Total cost for China Unicom customers over two years: $746. Total cost for AT&T customers: $1,779.
These prices are slightly different than those quoted by China Business Times earlier this week. According to that report, China Unicom had set an "internal launch date" of Oct. 15 for two models: an 8 GB iPhone 3G selling for 1,999 yuan ($293) and a 16 GB iPhone 3G for 2,999 yuan ($439). Both models were said to be offered with 2 year contracts starting at 186 yuan ($27) a month.
China Unicom announced late last month that it had struck a deal with Apple (AAPL) to carry the iPhone in China, beating out giant China Mobile (CHL). China Unicom has 140 million subscribers; China Mobile has nearly three times that many.
How many iPhones will Apple sell in China?
Graphic: iPhonAsia
It's tempting to multiply China's 700 million mobile phone users by a percentage pulled out of a hat, and now that China Unicom has announced its deal with Apple (AAPL), everybody seems to be doing it.
Result: Published estimates of how many iPhones Apple will sell in China next year that range from a low of 1 million to a high of 14 million. Here are the numbers we've seen:
- UBS analyst Maynard Um: 1 million in fiscal 2010
- Sanford Bernstein's Toni Sacconaghi: 2.9 million by end of 2011
- Standard & Poor’s Clyde Montevirgen: 4 million in calendar 2010
- Susquehana Financial's Jeffrey Fidicaro: 2 million to 5 million
- Broadpoint AmTech's Brian Marshall: 5 million to 7 million in 2010
- iPhonAsia's Dan Butterfield: 14 million in the first year of sales
China Unicom signs iPhone deal
China Unicom announced Friday that it had struck a deal with Apple (AAPL) to bring the iPhone to the world's largest cellphone market.
The announcement ends months of speculation and represents a coup for China Unicom, the country's No. 2 carrier with more than 140 million subscribers. Apple's negotiations with giant China Mobile (nearly 500 million subscribers) broke down earlier this year.
"We believe China Unicom's high-speed mobile broadband network, coupled with … (the iPhone) will create new communication and different experiences for customers in China," said Unicom CEO Chang Xiaobin at a news conference.
A brief statement in the press release announcing China Unicom's interim earnings said that a three-year deal agreement with Apple had been reached on Aug. 28 and that the initial launch was expected to occur in the fourth quarter of 2009. No details of pricing or revenue sharing were announced.
But according to earlier reports in the Chinese business press, China Unicom has agreed to buy 5 million iPhones for $1.46 billion.
Apple execs reportedly flying to China
Chinese iPhone? Photo: Sina.com
Either there's a last-minute hitch that requires high-level intervention, or preparations to sell iPhones in China have entered their final stages.
"Senior officials from Apple Inc are to visit China this week, and they haven't arrived in Beijing yet," an unnamed "informed source" told the website Sina.com Monday night.
"Their visit aims to visit (sic) senior officials of China Unicom and discuss with them how iPhone should enter Chinese market," the source said, adding that Apple's representatives may also meet senior officials from the Ministry of Industry and Information Technology (MIIT).
China's iPhone deal: New details emerge
The headlines out of China overnight Tuesday were headsnappers.
First Shanghai Security News reported that Apple (AAPL) had reached a three-year deal with China Unicom to market the iPhone in the world's largest cellphone market (600 million-plus subscribers).
Then AFP and Reuters reported what China Unicom's spokesperson told them: that the two companies were still in negotiations and no agreement had been reached (something, by the way, any company dealing with Apple will say before Cupertino has had a chance to break the news itself).
What's important in all this, says iPhonAsia's Dan Butterfield, a veteran China watcher, are the details leaking through the cracks. More
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).
An iPhone for China on Sunday?
UPDATE: China Unicom, as promised, launched its 3G service in 55 cities Sunday — with plans to expand to 284 cities by the end of September — but there was nothing in Chinese press accounts about its negotiations with Apple to carry the iPhone.
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For months, Apple (AAPL) watchers — counting the days until Cupertino finally brings the iPhone to mainland China — have had their eye on May 17, 2009.
Not only is Sunday World Telecom Day — or as the United Nations unhelpfully renamed it in 2005, World Telecommunications and Information Society Day — but it is the day China is scheduled to get its first 3G service based on WCDMA (Wideband Code Division Multiple Access), the protocol the iPhone 3G uses.
China's 640 million mobile subscribers represent the biggest prize on the planet for cell phone makers — the last missing piece in Steve Jobs’ master plan to blanket the earth with iPhones.
Before he went on a medical leave in January, Jobs had reportedly been working— without success — for more than a year to negotiate an iPhone deal with China Mobile, the country's (and world's) largest carrier with 477 million customers at last count.
One of several sticking points was the fact that China Mobile is planning to use its home-grown TD-SCDMA (Time Division Synchronous Code Division Multiple Access) protocol for 3G cell-phone coverage. In order for Apple to serve China Mobile's customers, it would have had to build a special Chinese iPhone with a new cellular modem chipset.
In February, a flurry of Chinese language news reports suggested that Apple had switched horses and was in serious negotiations with China Unicom, the country's second-largest carrier (135 million mobile customers), which has planned a high-profile launch of its 3G WCDMA service in 55 cities Sunday.
In March, China Unicom's Shanghai branch briefly posted an ad for the iPhone, as if the device were already in stock.
All the pieces would seem to be in place — except Steve Jobs is missing and so is the buzz from the Chinese business press that usually precedes a deal this big.
"We would like to be in China within the next year," COO Tim Cook told analysts in a quarterly earnings call last month, "[We] are currently working on that, but I have got nothing specific to announce today." (link)
Dan Butterfield, whose iPhonAsia blog keeps close tabs on Apple's business dealings in the Pacific Rim, wrote last week that the company may prefer to hold the announcement of any China deal until it can combine it with the unveiling of the next-generation iPhone.
Besides, he adds, "it is one thing to announce a deal, and another to actually launch."
"Given production, distribution and other corporate logistics, it is iPhonAsia’s view that there will be no iPhone launch in China before July 1. It is more probable that a formal launch won’t happen until mid to late summer 2009." (link)
The key dates to watch, according to Butterfield:
- Sunday, May 17 — World Telecom Day and China Unicom's 3G launch
- Monday, June 8 — The World Wide Developers Conference keynote, a logical place to unveil new iPhone hardware and announce a big distribution deal
- Late June or early July — The timeframe in which Piper Jaffray's Gene Munster speculates Apple may host a special event to celebrate Steve Jobs' return and launch iPhone 3.0.
See also:
Is wave-to-pay coming to the iPhone?
Almost as curious as the fact that China Unicom has started advertising Apple's (AAPL) iPhone on its Shanghai website — even though no agreement to sell the device in China has been announced — are some of the advanced features Unicom is promoting.
As Dan Butterfield reported early Wednesday on his iPhonAsia website, these include several functions that aren't officially available on current model iPhones, including:
- Wave-to-pay
- Mobile TV
- Tethering (connecting a laptop to a cell phone's wireless network)
- Video conferencing
The first item — wave-to-pay — is of particular interest to Chinese customers, according to Butterfield. Visa Inc. (V) offers similar service in the United States, called Paywave, whereby cardholders can make purchases at some 32,000 retailers by waving their Visa card in front of special point-of-sale cardreaders. In Japan, half of cell phone owners — about 50 million users — carry phones that have so-called near field communications capability built-in. (link)
Will the next-generation iPhone — expected to arrive in July — also have it?
China Unicom seems to think so. Here's how the capability is described on its Shanghai website (translation provided by iPhonAsia):
"Near-Field-Communication (NFC) swipe card handset a.k.a. "wave-to-pay," offers convenience for those who use public transportation. It's possible to use a handset swipe card to buy a ticket. This wave-to-pay has replaced the former public transportation IC card. Using the swipe card handset for shopping eliminates the [need to carry] cash. Using wave-to-pay also makes it easy to pay in the ferry terminal. Through the swipe card, the handset (phone) can purchase your passage and avoid the worry of lining up to purchase tickets. Not only does this technology eliminate the need to carry a public transportation IC card, you don't even need a bankcard. All you need is the wave-to-pay handset (phone), to buy a ticket and do your shopping. One machine in the hand, opens access, and gives you control. Wave-to-pay makes life more convenient." (link)
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