Sidharth’s Posterous

Taobao.com is the eBay of China. When you see the grey-market iPhone prices (lower with no deposit or contract required) next to the official iPhone (a segregated store), it's hard to choose the official WiFi disabled version.

The new Taobao China Unicom iPhone store > http://iphone.mall.taobao.com/

Taobao.com also has a robust secondary market for grey-market iPhones on their website > http://search.taobao.com/search?commend=all&isnew=2&q=iPhone

I had a knowledgeable source suggest to me that China Unicom was deliberately maintaining it's pricing strategy (high + large deposit required) until the rumored WAPI/WiFi iPhone is ready (sometime next spring/summer?). If this model is real and forthcoming (who knows?), it begs the question why China Unicom did not defer the iPhone launch until such time as they would have an option that would compete on a relatively level playing field with the grey-market version?

One thing that gets overlooked in the press reports dissing Apple's iPhone in China launch is the fact that China Unicom has quite a bit at stake (more so than Apple). The rumored 5 million iPhone pre-sale was neither confirmed nor denied ... it was hedged "not exactly right" (paraphrasing China Unicom CEO Chang Xiaobing). There's plenty of evidence to suggest that China Unicom has in fact made a major commitment to buy iPhones from Apple. The pre-buy makes sense as Apple had to build a custom model per China Unicom's desires and state mandates (50 China apps + Wo Portal and no WiFi). IMHO Apple would not build a custom model w/o a large pre-buy.

If China Unicom has agreed to buy a large volume of iPhones (and I think they have) they will need to make changes to pricing to move the iPhones. There are many ways China Unicom can get more creative with pricing. While the deposit is allocated back (offsets monthly plan fees) over the 24-month contract, it is still a large amount to pay up front + the cost of the iPhone. Hong Kong carrier Planet 3 has a good program with their DBS Bank Visa partnership - No deposit required and a very modest amount each month to pay for the iPhone. South Korea KT has also priced (subsidized) the iPhone very competitively.

It's still early in the game ... I expect we will see new iPhone models (possibly WiFi/WAPI) with new pricing. There is also a possible China Mobile deal that may happen some 6 to 9 months from now - after first batch of TD-SCDMA OPhones have launched. I'm still hoping we will see a low-priced 2G (EDGE) iPhone for China Mobile.

Re the credit card concerns raised in the article ... I agree. China Unicom and Apple need to come up with alternative means to pay for apps/games on the App Store. China Uincom has recently contracted with Tencent and Alibaba to develop e-payments systems (Alipay and Tenpay) for mobile subscribers. A new payment mode somehow needs to be incorporated into iTunes to enable those w/o credit cards to buy apps/games. Music via iTunes in China is likely a lost cause.

~ Dan Butterfield