iPhone Inches Closer To China Deal, But Here Is Why It Will #Fail

• ‘China and the iPhone’ rumors have been brewing for quite some time, with nothing concrete coming from either Apple or Chinese telecoms…until today. 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). AFP and Reuters reported what China Unicom’s spokesperson told them: the two companies were still in negotiations and no agreement had been reached. Then, Tech.QQ, a Chinese blog quoted “informed sources” claiming a deal has been reached to launch the iPhone in China by the end of September 2009. The details are as follows:

• • The Apple and China Unicom deal will be a 3-year exclusive.
  • The iPhone will be customized for the China market (e.g. Chinese language and preloaded with “for China” apps).
  • China Unicom will pay Apple 3,000 CNY ($439 USD) per unit.
  • China Unicom will subsidize iPhone by pricing the iPhone below the 3,000 CNY paid to Apple. This would take the official iPhone price below the grey-market price for smuggled iPhones.
  • China Unicom has promised to sell a minimum 1 million units per year with significantly higher sales targets.
  • The iPhone for China will make use of Apple’s China App Store. (link)

• But will the iPhone even be a big success in China? I spent a year of my life living in China, when no one had an interest in the phone. China is a Microsoft lover and besides that, what they expect out of a phone, is much different than what the West is interested in. Take Japan for example. Softbank Mobile, one of Asia’s biggest tech companies and the exclusive carrier for the iPhone in Japan, can’t even give away the iPhone. They are the only country in the world actually offering the phone for free with a contract. They even discounted the data plan from $62 to $45.60 per month for existing and new subscribers. Many blamed the iPhone’s lack of MMS and Video for poor sales, but many blame the fact that a cell phone in Asia is the primary computing device for the mass majority. The iPhone requires a computer to be plugged into as well as iTunes (two things not common in an Asian household. Japan and China are identical in these instances. Apple must see the power in numbers, that of the 600M mobile suscribers, only a small percentage of that could make the phone a success. I polled 10 of my friends stilll living in Beijing and Shanghai, who said that interest in the iPhone is high (because it is American), but it’s more of an interest to play around with the phone that to actually want to purchase it. I think it will be an epic #fail.

Tagged as: Apple, china, china telecom, iPhone, Market Share