Fast Company

Why Apple Won't Care About Slow Chinese iPhone Sales

china iphone

According to reports, Apple's ridiculously successful iPhone has stuttered badly in its attempt to conquer the Chinese market. Because conquering is very far from what's going on: It's sold just five units. But Apple probably doesn't mind.

The dismal sales figures apparently represent two weeks of sales through the official Taobao.com online sales portal, and equate to two 8GB and three 16GB units. Though network China Unicom is also selling iPhones through its own store, and keeping those sales figures quiet, the Taobao figure should be taken seriously since the e-Bay-like site is where many Chinese do their online shopping--it's the country's top online sales establishment. Five phones sounds like a disaster, when you look at rocket-powered sales of a million units in just one weekend for the iPhone 3G S on its global launch, and when you consider exactly how big (and how ridiculously lucrative) the Chinese cell phone market could be.

But the discussions about this inside Apple's executive meeting room probably aren't even that heated. Why not?

1. China Unicom is probably selling a fair number of phones all by itself--it reported around 5,000 units went off its shelves in the period shortly following the device's launch. Given the extremely high actual price (around $1,000 for a 32GB 3G S with no contract) and the sky-high relative price of the device, given China's low cost of living, early sales figures were never going to be enormous.

2. China's grey import market for the iPhone is pretty enormous. In Hong Kong you can get hold of a 32GB 3G S unit for around $200 less than the official price at China Unicom. This is going to seriously impact sales of the official units until the price comes down--a move Apple would be crazy not to make at some point soon, particularly since it changed its mind about the original iPhone's price shortly after launch.

3. Credit card use is still not ubiquitous in China, affecting the success of the App Store--one of the iPhones biggest selling points. Apple will be wise to this, and will likely launch a different payment system that fits in with the usual Chinese practice of using pre-paid cards--they're not too different to its iTunes Gift Card system after all.

4. The illegally-imported iPhones have Wi-fi, the official ones don't. That's thanks to an over-protective Chinese maneuver in favor of its own wireless standard that occurred during the deal-making between Apple and China Unicom, and resulted in the new Wi-fi-free version of the iPhone dubbed "China Brick" inside the iPhone 3.0 software. This ban on Wi-fi tech was repealed recently, opening the way for 802.11 Wi-fi capable iPhones to be sold. Smart Chinese iPhone buyers will know this, and will be waiting before plonking down such an enormous sum of cash on a fully-capable Apple device.

In short, though the sales figures are dismal, they probably don't accurately reflect the genuine short- to medium-term sales prospects of the device. China Unicom's execs certainly feel differently, and fully expect the phone to capture 10% of the 3G user market there. It's just going to take time, and some careful and well-orchestrated business moves...luckily that's something Apple is great at.

[Via PCWorld]

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2 Comments

  • NT Balanarayan

    The iPhone is custom made for the west.. the contract system.. using credit cards to buy apps.. poor support for sms.. these don't work so well in markets like India and China where people prefer to use Debit card/prepaid cards for such transactions. Apart from well known brands such as Nokia, there are also tons of local companies who come with cheap knock offs of pretty high quality. A lot of these Chinese phones land up in India as well and unless Apple comes up with a different strategy they can forget about the billion here.
    There's on thing that Nokia is doing really well and that is encouraging devs to create apps for meet hyperlocal demands, apple hasn't done that as yet.

  • Mikhail Turilin

    I think Chinese market is extremely important for Apple in it's fight for second billion of consumers. If they don't change their approach China will be dominated by cheap Android devices made by local companies. This is potentially huge blow for Apple, because widespread of Android phone will create an app ecosystem crucial for Android platform take off. Also, China is core market for Nokia and their last chance to hold the ground in smartphone business. Therefore, Apple need to pay attention to Chinese market to be successful there. Maybe they need to launch cheaper version of the phone (iPhone Nano) to match willingness to buy on that market.