WHAT’S NEXT
China
Schemers Fill an
iPhone Void in China
Apple aims to open shop in Beijing next year; in the
meantime, smugglers and counterfeiters hack away
By Bruce Einhorn and Chi-Chu Tschang
Want to buy an iPhone in Beijing?
Liu Yong is your man. Apple’s hugely
popular mobile device isn’t legally
available in China. Yet at Liu’s elec-
tronics shop near the capital’s premier
universities, you can buy one for $680.
Never mind that Apple hasn’t autho-
rized any Chinese cellular operator to
offer the iPhone. Liu’s iPhones have
been hacked so they can be used locally,
and inputting Chinese A counterfeit
characters on its touch Apple iPhone
for sale in
screen is a cinch.
a Shanghai
There still is one big market
problem—that is, if the
phone happens to break. “If there’s a
software problem, we can fix it for you,”
says Liu. “But if it drops and breaks,
then you’re out of luck.” The handsets
Liu sells were purchased abroad and
Qilai Shen/Bloomberg News
then smuggled into the mainland.
Other dealers market clones that were
illegally made in China. Consumers
who crave the comfort of warranties
will have to bide their time until Apple
inaugurates its first China store in time
for the Beijing Olympics next summer.
For many Chinese, though, that’s
simply too long a wait. More than
160 million are now plugged into
the Internet, which has helped stoke
iPhone mania on the mainland. For
status-conscious urbanites who
regularly upgrade their phones, this is
the must-have gadget. “The iPhone
is considered by many Chinese to be
the best phone out there,” says Shaun
Rein, marketing manager at China
Market Research Group in Shanghai.
Strangely, Steve Jobs and company
seem to be in no rush to leverage the
iPhone’s popularity in what is the
world’s biggest cellular market, with
528 million mobile users. The mul-
timedia handset debuted in the U.S.
in June, and went on sale in Britain,
Germany, and France last month.
Apple plans to open a store in Beijing
in mid-2008. And rumors are flying in
Chinese tech and telecom circles that
Apple is in talks with the country’s
No. 1 cellular operator, China Mobile.
Neither of the companies would con-
firm that they are in negotiations over
the iPhone.
If a deal is indeed in the works,
count on China Mobile to drive a hard
bargain when it comes to profit-
sharing. China Mobile is the world’s
largest cellular carrier, with 369 mil-
lion subscribers, equal to a 70% mar-
ket share of the mainland. “There is
no need for it to make the kind of deal
that American and European operators
have been making,” says Dave Carini,
an analyst with the Beijing-based
research firm Maverick China. ^
–With Peter Burrows in
San Mateo, Calif.
Dece m b e r 24, 2007 I BUSINESSWEEK