China Gets the iPhone…Officially


iPhone in China

If you’re getting into the cellular phone business and want to be a big fish in a very big pond, you need to crack China. Mixed metaphors aside, China is an enormous mobile market. According to eWeek, it boasts more than twice the number of active subscribers than there are people living in the U.S. (630+ million subscribers vs. America’s population of 306 million.)

It’s a big deal, then, that Shanghai Securities News is reporting that China Unicom, one of the country’s largest operators (the second largest after China Mobile), has just signed on the dotted line with Apple (s aapl) and will be selling the iPhone 3G by the end of September.

China Unicom has more than 135 million subscribers. (By comparison, China Mobile has over 470 million.) The company has promised to sell between 1 million and 2 million units per year, with revenue of at least 5 billion yuan ($732 million) in the same period. Reuters reports that the deal gives China Unicom exclusive rights to sell the device for the next three years. According to MacDailyNews, the iTunes Store model will remain unchanged and operate as it does in most other countries, with the usual Apple approval process and 70/30 split.

Apple has been in negotiations with Chinese mobile operators for some time. Sticking points that prevented a deal sooner are rumored to have been focused first on Apple’s proposed revenue-sharing model, and more recently around the wireless radio technology found in the handset. Most mobile devices must remove wireless transceivers before they can be approved for sale in China. There is no word on whether this is the case with the iPhone 3G.

China has had a healthy black market in the sale of imported iPhones for several years. According to The New York Times, by the end of 2007, Apple had reported sales of 3.7 million iPhones. But only 2.3 million were actually registered on the networks of Apple’s wireless partners in the U.S. and Europe. Many of the “missing” iPhones found their way to China, where they were sold for as much as 4,000 yuan (almost $600).

This will be the first time the iPhone has been officially sold in the country, but it’s not for lack of trying. Those strained negotiations I mentioned earlier? Talks between Apple and China Mobile were reportedly on the rocks as far back as January 2008. So it seems Apple has been trying to break into China since the very first iPhone was released. However you look at it, signing a deal with China Unicom is settling for second best; will that still be enough to capture a significant portion of the mobile market in that country? If the answer is yes, Apple’s global smartphone market share is about to get a lot bigger.



Premature news. China Unicom spokesperson says the deal hasn’t be done yet. We’d better just wait until Apple announces it to know for certain.

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