Julian Ivan-Alexander

How Apple and iPhone Blew It in China

Good lord... all that really matters is that Apple's selling millions of iPhones to the Chinese. Whether its on the black, grey, white or yellow market, quite frankly, doesn't matter a tinker's cuss: official channels be damned. 3-4M iPhones in China is 3-4M iPhones in China. If you can't deal with that fact, then you can't accept the reality of how strong demand for the product obviously is in that country, and how simply enormous future sales will be. If you can't do the math, you shouldn't be trading on the stock market.
I weep - with laughter - as I recall how everything Apple has done since 2001 (from the iPod, to the iBook, to OS X, and especially the retail stores) has been doubted and called out by bloggers and experts as "doomed to failure/irrelevance", only to see the company's stock price rise several thousand percent and total global domination of the consumer electronics market in areas it chooses to compete in.
Armchair anaylsts indeed - please, someone pass me an Advil (not an "Advill" please note); I've got a headache.

How Apple and iPhone Blew It in China

My God man, are you smoking crack? The iPhone is the biggest success story - worldwide - the mobile phone industry has ever seen. Please explain how "the iPhone is not doing well in China and will NOT do well elsewhere overseas" when its already been bought by some 3-4M Chinese at full retail price and is blowing the doors off smartphone sales worldwide?

As for your remark that other countries are way more advanced than American tech, only Japan and North Korea have markets which enjoy "bleeding edge" technology built into their mobile phones, and that's chiefly because they operate in highly unusual markets, using unique and proprietory networks.

Sorry fellow-contributor, but you really need to get out more.
On Nov 08 11:35 AM Tony Daltorio wrote:

> When are American investors going to ever look beyond US borders?
>
>
> The reason the iPhone is not doing well in China and will NOT do
> well elsewhere overseas is that these markets had similar products
> years ago...despite the belief that the US is still the leader in
> tech, the truth is that America is no longer the leader in tech...American
> tech is now years behind their competitors.

How Apple and iPhone Blew It in China

Chimin, I'd really like to hear how 3-4M iPhones sold at full retail price into China via the grey market from its own US stores at high margins represents a miserable failure.
A sale is a sale, official or unofficial. Retail channel or grey market. It doesn't matter. The iPhones sold into the Chinese (and other) markets via unlockers represent the highest-margin units Apple sells. They are generally sourced from Apple's own US stores rather than retail/carrier partners, cutting out the middleman, and have no warranty or support costs.
The Chinese networks only have themselves to blame for the dysfunctional nature of the official launch and subsequent slow sales. The fact that they went ahead and ordered the phone without WiFi (with what must have been an absolute commitment to a significant quanitity for Apple to agree) when they must have known the law was going to change to allow WiFi shortly thereafter shows the networks blinked first and realised they had to get moving, or lose out.
An iPhone bought in Hong Kong, New York, or Shanghai is still an iPhone sold. Frankly m'dear, I don't give a damn so long as Apple is being paid in full for each and every phone. Local chinese networks may have to ultimately discount these crippled phones by a massive margin to get rid of them as the WiFi-enabled version is rolled-out, but Apple will still receive the full value of the original agreed price. Its the networks which will take the hit, not Apple. In the meantime, savvy Chinese buyers will continue to buy grey market imports as they see fit, and the iPhone sales phenomenon will continue to grow exponentially as it has since its launch.
What's happened here is that the Chinese networks, so arrogant and confident at the outset of their negotiations with Apple, have been forced to eat humble pie. They blinked first. Apple simply outflanked them from the outset by ensuring the phone was both accessible and usable by Chinese consumers almost from the outset, as 3-4M unlocked iPhones testifies to.
I fail to see why anyone refuses to acknowledge the brilliance of Apple's China strategy. It has already been a wild success. The first stage was the invasion of 3-4 million unlocked phones into the hands of Chinese consumers. The second stage will be those users upgrading to the next version of the iPhone (whether the 3GS with WiFi enabled, or a version to be released next year). Sudddenly you'll see millions of official iPhones sold in China in 2010, and I doubt you'll be reading much about "miserably failing launches" then.
Just remember: the real Chinese launch already happened, 2 years ago. The "official" launch last month was just for show and lays the foundations for the next tsunami of sales in 2010.

How Apple and iPhone Blew It in China

So let me see... 3.5M chinese have bought an iPhone since it was launched (irrespective of whether those were grey market imports or not) and those would have been bought at full price from US Apple stores unsubsidised by a network, and then unlocked.
In addition, some stupid Chinese laws stopped Apple from including WiFi - which were only recently repealed. This caused manufacturing to go ahead - presumably at the networks', not Apple's, request, without WiFi included.
This, coupled with the equal stupidity of the local network providers who tried to get Apple to cripple the phone's software to only work with their own app stores and bickering over revenue sharing arrangements meant the phone's official roll-out in China was delayed by 2 years.
And this is how "Apple and the iPhone" blew it? Lol! What a "whoring for hits" headline. Its the networks who blew it, and the Chinese government who up until just a few months ago wouldn't allow the phone to include WiFi. The networks commited to purchasing millions of devices, and Apple is no better or worse off irrespective of how many - 5000 or 500,000 - of these crippled devices they can sell on to end users. By now manufacturing lines will have switched over to producing WiFi-enabled versions, and normality will return to the Chinese market once they do and grey market, unofficially-supported units no longer seem so attractive.
But to say Apple blew it? Please, Apple already has almost 4M iPhone users in China from grey imports - all potential upgrade candidates for its next official release there. I think that's a pretty outstanding success story especially as all those units will have been sold at full price, from Apple Stores, and with resultingly higher margins.
Offiicial iPhone sales may be off to a rocky start in China, but blame the Chinese government and the networks' stupidity for that. Apple has played them both like a violin, and reaped the benefit of almost 4M full-cost sales booked in US dollars from their own stores WITH NO SUPPORT OR WARRANTY REQUIREMENTS as a result.
Put that in your spreadsheet and eat it. Blown it? In the UK we have a different expression for when you manage to hit on something which brings in unbelievable amounts of cash: "coining it."
Apple played the Chinese to perfection, probably the only Western company to have ever done so in modern times. While seemingly intrasigent in the face of official negotiations, it ensured it looked the other way and actually encouraged Chinese unlocking (the phone fully support Chinese character sets and has done for years) so that grey market importers could saturate the Chinese market with its devices sold at full price, giving the carriers no choice but to eventually capitulate.
Now Apple has grown a user base so huge that the upgrade sales into the official sales channels for the next-gen devices is all but guaranteed to be one of the biggest roll-outs in the company's history.
The guys with egg-fried rice on their faces are the Chinese networks. Apple is laughing all the way to is non-GAAP accounting revenue bank account.