It's a Large World After All

Ultimi Barbarorum’s little-known other author, “Bento”, has a great blog entry up about the iPhone in China. Bento lives in Shanghai, and explains very simply why official Chinese iPhone sales are low: official Chinese iPhones are artificially crippled, thanks to a law banning phones with wifi capability. So the tech-savvy Chinese simply buy unlocked (and cheaper) iPhones from Hong Kong instead, which don’t show up in the official sales numbers.

This dynamic is well-known in Shanghai and across much of the rest of China:

The distribution model is extensive and robust, and in fact most Chinese buy their mobile phones from stalls like this. There are no iPhone shortages, as prices fluctuate to meet demand.

Yet somehow, in this age of universal connectivity, none of the Apple-watchers seems to have known anything about it. Instead they took the official statistics at face value, trying to read all manner of implications into them about Chinese demand for iPhones or the lack thereof.

I’m curiously reassured by this episode: It goes to show that markets really aren’t all that efficient after all, and that information flows in unpredictable ways. And that good bloggers and journalists can still be very helpful in telling the markets something they didn’t know, even if it’s common knowledge in Shanghai.

Comments

[Alex Filonov:]

Actually, this information tells us that markets are efficient: they provide people with product they want (iPhone with wifi).

Nov 16 12:56 PM

[Roger Knights:]

What Felix meant was stock market efficiency--the Efficient Market Hypothesis.

Nov 16 04:14 PM

[mollytjm:]

i read that wifi will be enabled on the iPhone in the future for China. but you're right. when it comes to China we have to remember that they can buy their iPhone unlocked and they do and those numbers count, since they did actually buy it.

Nov 17 09:00 AM

[brewer:]

Apple probably makes more on the grey market phones, and has to offer no service for them since they are not official product. It's a win for Apple.

Still, I think China Unicom might end up subsidizing more of the iPhone to compete better with the grey market.

While it's still very expensive for the average Chinese consumer, there will be less expensive models coming out as time goes on. I figure it's about time for the iPhone nano or iPhone classic, etc... probably next year sometime.

Nov 17 12:56 PM

[chano:]

@ Brewer
Why do you, and so many others, think that they understand mobile phone marketing strategies better than the immensely savvy marketing group at Apple? So far, they haven't put a foot wrong in this global challenge dance.
I am not trying to be sarcastic but what market intelligence do you have that Apple is unaware of?

Nov 17 02:33 PM

[Michael Eis...:]

By the way, same is true for Israel. Israeli carriers have not launched the iPhone yet. However, it seems that everyone in Tel Aviv has one. Bought in Europe or the US, unlocked and in Tel Aviv. It will be interesting to see whether Israeli carriers deal with AAPL pays off.

Nov 19 05:16 PM