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IPhone sales in China are nothing to call home about

Only 5,000 of the Apple phones have sold since the Oct. 30 launch. High prices and a lack of Wi-Fi capability are blamed, especially with a thriving gray market in iPhones.

November 07, 2009|David Pierson

BEIJING — Apple Inc.'s iPhone has been a ringing success wherever it has been launched. But in China few are picking up the buzz.

Challenged by high pricing, missing features and stiff competition, iPhones have logged only 5,000 sales since the handset debuted Oct. 30 in the world's biggest cellphone market. By comparison, more than a million units were sold in the first three days when the latest iPhone was launched in North America and Europe in June.

One major hang-up might be the price. China Unicom, the state-owned mobile carrier and the exclusive partner for Apple, has been selling the phones for between $880 and $1,170 with a service plan. The devices currently sold in China also don't feature Wi-Fi. U.S. devices have Wi-Fi capability and sell for $199 to $299 with a two-year service plan.

"They're not exactly flying off the shelves," said Duncan Clark, chairman of research firm BDA China Ltd. "The consumer will quickly figure out it doesn't have Wi-Fi. . . . At the end of the day, it won't be a winning strategy."

With 700 million cellphone users and growing, China represents the largest battleground for mobile phone makers and software developers. Apple faces stiff competition from technology rivals Google Inc., Microsoft Corp. and Blackberry's Research in Motion for market share. Finland's Nokia currently sells the most mobile phones in China.

Though iPhone sales have so far failed to meet analysts' modest expectations, China Unicom officials said they were unfazed by the initial numbers, telling reporters in Hong Kong this week that the device was priced appropriately for a two-year service contract.

"We are satisfied with iPhone sales so far," said China Unicom Chairman Chang Xiaobing.

Apple declined to comment.

The China launch contrasted greatly with those in the U.S., where iPhone unveilings have been received by throngs of eager buyers standing in line overnight outside stores.

Apple, based in Cupertino, Calif., beat Wall Street's expectations last month by reporting a 47% surge in profit in the fiscal fourth quarter largely on the backs of its popular Macbook notebooks and iPhones.

In Beijing, the iPhone was introduced to a more reserved crowd on a cold, damp evening at a shopping mall known for its expansive outdoor television screen.

Analysts said the device was too expensive in a country with growing, less-expensive options for smart phones, computer-like handsets that also have Web browsing and e-mail features.

The iPhone will mostly appeal to the urban elite and those who value the status of carrying the trendy device, they said.

But many people who fit that mold have already been buying gray-market iPhones -- versions that have been smuggled into China and reprogrammed to work with Chinese networks. There are estimated to be as many as 2 million gray-market iPhones in China.

Analyst Clark said there were anecdotal reports that the iPhone release at such high prices had driven up the price of gray-market iPhones by $20 to $30, to about $500.

He said the disappointing initial sales of the phone were also due to the lack of a Wi-Fi feature on China Unicom's iPhone -- a standard function for all other iPhones, including gray-market models.

Chinese regulators had previously banned Wi-Fi in order to promote a domestic version of the same technology. They have since reversed the ban, but China Unicom still procured iPhones with the function disabled.

The feature may be installed on future models.


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