Want to buy an iPhone in Beijing? Talk to Liu Yong. Apple's wonder is not legally available in China, but Liu, who operates an electronics shop in the Zhongguancun neighborhood close to the capital's premier universities, has plenty of inventory and is more than happy to sell you one for about US$680.
Worry not that Apple has not authorized any Chinese cellular operator to serve the iPhone; the software in Liu's iPhones is hacked to enable you to use the phone locally. Inputting Chinese characters on the iPhone's touch-screen is no problem either, he said. But buy now, he warns, because prices are heading upward as demand for the world's coolest phone is increasing.
There still is one big problem--if the phone happens to break. Liu, after all, is not exactly an authorized Apple dealer and nobody selling iPhones in China is either. That is because, according to Apple, iPhones are not supposed to be sold in China. "If there's a software problem, we can fix it for you," Liu said. "But if it drops and breaks, then you're out of luck."
No problem finding sellers
That has not deterred determined consumers from buying iPhones from rogue dealers like Liu in big Chinese cities like Beijing and Shanghai. With more than 160 million Chinese surfing the Internet, it is easy for people to follow the latest trends in the United States. Moreover, many upscale Chinese regularly upgrade their phones to the latest high-end model.
And there is now nothing more high-end than Steve Jobs' creation. "There is a real pent-up demand for the iPhone," said Shaun Rein, marketing manager at China Market Research Group in Shanghai. "The iPhone is considered by many Chinese to be the best phone out there."
Finding people selling iPhones in Chinese cities, in districts such as Beijing's Zhongguancun or in the big IT shopping centers in Shanghai, is a snap. Da Lin, a Beijing resident, got his first iPhone from Liu Yong just days after its U.S. debut and has since purchased "a dozen or so" for Chinese friends.
Frank, a 30-year-old European businessman who lives in Shanghai and requested anonymity, said that he bought his iPhone about two months ago from an IT mall in the city. A self-described Apple "fanatic," he owns two iPods and two Macs. He said he had a tough time synching his iPhone with iTunes on his computer: "It took me six hours online to find the right way to do it," he said; but there is no beating the envious oohs and ahhs he gets when he shows it to friends. "Every time I go out for dinner and put it on the table, it's in everyone's hands," he said. "Everyone wants to play with it."
Apple is in no hurry
The challenge for Apple is how to capitalize on that popularity. Seduced by the lure of 1.3 billion potential customers, other Western tech companies have been focusing on China for years. China, after all, is already the world's largest cellular market, with 528 million mobile users. It is the No. 2 PC market, behind only the U.S. The only country with more Internet users than China is also the U.S. Companies like Dell, Hewlett Packard, Nokia, and Motorola have made selling in China one of their top priorities.
Apple, though, seems to be in no rush when it comes to leveraging iPhone's popularity in China. The company's Asia-Pacific spokesperson would not comment when questioned by BusinessWeek, but rumors are flying in Chinese tech and telecom circles about Apple having talks with the country's No. 1 cellular operator, China Mobile, regarding the iPhone.
Ranie Lei, a China Mobile spokesperson in Hong Kong, said that her company's chairman, Wang Jiangzhou, stated last month that the company was interested in talking with Apple. But Lei added that she could not confirm reports that talks have since stalled, reportedly over disagreements about profit-sharing. She called speculation "unfounded."
In the U.S. and other markets, Apple has cellular operators lining up to partner with the Silicon Valley innovator, putting Jobs in a strong negotiating position. In China, though, Apple does not have many choices. The government allows only two cellular operators, both of them state-owned. China Mobile is the bigger of the two and with a 70 percent market share and 369 million subscribers, has a thumping lead over longtime laggard China Unicom.
By year-end, China Mobile will have increased its subscriber base by 22.5 percent compared to 2006, according to a November research report from Sydney investment bank Macquarie, and its profits of US$11.4 billion will have jumped 28 percent.
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