Chinese iFud Takeout


The sheer amount of disinformation being bandied about by posters on this story about the iPhone's launch in China is absolutely staggering.

Here are some of the more amazing bits:

"Wow, china unicom failed at their pricing."

The iPhone is a high end phone with a high margin, like most Apple products. While the Chinese market is large, and a large portion of it does not participate equally in the country's economic development, that does not mean there are no potential purchasers with money to spend. The iPhone has been an underground success in many poor countries with hacktivated phones selling for high margins. An official iPhone, even without wifi, only needs to be marginally cheaper than those in order to be successful. If Apple were to significantly reduce the prices of Chinese iPhones without tying then even more strongly to the local networks (which they have so far been unable to do) then all they would achieve would be to help those exporting iPhones unofficially into unsupported markets, which does not help Apple any more than selling locally, helps them less than selling on the local market for a higher price, even if they sell more units, and does nothing to help their local partners, the Chinese operator.

"i would have thought the pricing would be cheaper in China for Chinese consumers. ie a more stripped down iphone with no wifi = Cheaper."

The iPhone design in other markets contains a single radio unit that does Bluetooth and Wifi. Acceding to the Chinese demand that Wifi be removed likely either meant the disabling of the wifi functionality of the radio (which might eventually be defeated and would have done nothing to reduce manufacturing costs anyway) or meant doing a separate design and separate manufacturing just for the Chinese market, in which case any reduction in cost by going with a cheaper radio that did only bluetooth and not wifi may have been partially made up for by having to change the design in the first place. I would be surprised if the total impact on parts costs was more than $10 or $20 per unit in any case.

"Oh the irony. The country that makes the most 802.11 devices has such restrictive rules on their usage."

China doesn't have restrictive rules on the usage of Wifi devices. Plenty of other phones have wifi in China, and many people use wifi devices with their computers. This restriction was put in place at the request of the Chinese operator, which stands to derive no income from mobile internet traffic if people just use wifi. It came down to who wanted it more-- did Apple want into the large Chinese mobile market, or did the Chinese operator really want the iPhone. It turns out, Apple wanted it more, hence the compromise.

"The cell phones in China are like light years a head of iphone... And maybe Apple will see that people don't wanna be tied down by contracts with sucky service... If I have a great working iphone without a contract then why would I want to go to on a contract being tied down and no WiFi.. AND MORE MONEY?? Yeah.. No thank you..."

...and someone agreeing with him:

"I can actually confirm this. I was chatting w/ a guy from outside of Beijing who came to Canada to visit me. He actually scoffed at all our "new" cell phones when too him around to the malls, that had already been around for a quite a while in China and already been replaced w/ more superior ones."

All that's really been confirmed here is that some other person scoffed at phones for sale elsewhere. Although he mentions Beijing it's also quite possible the phones being referred to are Shenzen knock-offs. I don't know if you've seen the Chinese iPhone knockoffs, but it's a real stretch to call them "superior". It's missing most of what makes the iPhone a good handset-- a lot of the screens are truly atrocious. The claimed superiority is, most likely, a single feature or subset of features that the Shenzen studio thought was interesting that was missing from the iPhone, and then grafted on. There are Shenzen handsets with cigarette lighters in them. No doubt some people consider that superior-- after all, a real iPhone doesn't have one!

Cell phones in China are not "light years ahead of the iPhone". The iPhone itself is made in China, as are many other handsets. HTC easily makes the best handsets of Chinese design and manufacture, and they compete in the market with other smartphones, including other phones using Windows mobile/smartphone editions.

I think the most you can really say is that by and large the phones in Japan, Korea and China tend to favor different features and designs than those manufactured in Asia for western consumption. If any Chinese company had technology "light years ahead" of other manufacturers it would hardly benefit them to sit on it and keep it in the local market. Even the Chinese operators pushing their own standards have more ambition than that.

"No Chinese market won't help AAPL! Apple needs new product line in the future to sustain AAPL. In the short run, AAPL will tank to where it was."

Apple is right now where the iPhone and good Mac sales have put it: at an all-time high. How access to a huge new untapped market can fail to impact Apple's stock, all other things being equal, is beyond me.

Apple is probably working on new product lines. They usually are. Often they take a long time to develop, like the iPhone. However I'd hardly say that Apple urgently needs an entirely new class of product in order to stave off failure.

Even the Motley Fool link this poster added doesn't support his hypothesis. It says that Apple won't get great growth because pirate iPhones are already popular. However, those are even more expensive than the official ones, and Apple is getting less of that revenue. When someone in an unofficial market buys an iPhone for over $1000 (as is often the case) they don't get all of that. They get whatever the official sale price was in Italy or Belgium or any of the other markets where unlocked phones are sold. Or, worse, they got the subsidized price of the phone in a locked market, plus the operator's share of a 2 year contract-- a contract that then got shifted to someone else and perhaps eventually canceled.

So, yes, any growth in the official Chinese market may have an impact on the grey channels. However, I think overall growth is going to drown that trend anyway.

"Was it China Unicom pricing or was it Apple setting the price wanting to recoup some of the lost revenue from pirated iPhones? "

That's not really the right way to look at it. Apple can't recoup "lost" revenue on pirated iPhones. Unless the phones were stolen, they did get paid. However, high-priced hacktivated phones show that in some markets, Apple is leaving money on the table because they are pricing too low in other markets, and the grey market is filling the gap. They understand that they need to undercut the black market-- but not by too much, because then the Chinese domestic market will become a supplier for the grey market elsewhere.

"i think that was the point. Chinese like to promote Chinese products and do what they can to give themselves competitive advantage. It's no cooincidence that the rule was changed after a gimped iPhone was already made."

This is no more true about China than it is about Japan. The Chinese government and Chinese operators want to promote income for Chinese companies and business for Chinese technology developers-- just like American ones do. If China Mobile really was under orders, or was just more interested in promoting Chinese companies than it was in selling phones, they don't have to ask for wifi to be removed, they can just continue not to sell iPhones.

"I'm not sure what China has that we don't either, though when I was in Taipei 5 years ago, the people I was visiting could watch broadband TV on their phones & if I remember right, carry on a conversation over them at the same time. I was momentarily amazed at this, until I became embarrassed for being amazed. We're just now starting to really be able to do that here. Hell, AT&T couldn't even handle MMS til a week ago. Not sure how popular an iphone without a front-facing vid camera or wifi will be over there, but then, the Chinese have their strange taste for American brands too, so who knows which way this'll go."

This is not as amazing as it seems. Handsets that support CDMA for voice and data as well as DVB-H or T-DMB for television are not new in Asia, they've been very popular for years. However, these two features really have nothing to do with each other. The TV signal comes from an ordinary terrestrial or satellite signal, and usually shares only a screen with the phone portion of the device. You can talk and watch TV at the same time because it's basically two devices joined at the hip. These devices aren't popular (for the most part) outside Asia because those countries aren't operating compatible television broadcast infrastructure.

Probably the person above thinks they were observing IPTV "broadband" when all they were really seeing is DVB-H, which isn't even a particularly new technology. The video support in these phones is also receive only-- phones that do videoconferencing don't use this technology-- although there are phones in Korea that support it and DVB-H (although not simultaneously, of course).