Assignment3 Part2 Article3

iPhone Finally Welcomed by China, but Apple’s Not So Optimistic

Apple is busy preparing to enter the enormous Chinese market by introducing iPhone in cooperation with the second biggest Chinese telecom company—China Unicom. Although China’s approximately seven-hundred-million mobile user base seems like an inexhaustible profit source, many people doubt Apple will encounter the same predicament it faced when trying to launch iPhone in India.

In August 2008, Apple tried to sell iPhone to Indian mobile users but failed to create a market buzz. Some reports said journalists even outnumbered customers in iPhone’s launch parties in eight cities in India. There were two major factors that caused the lack-of-excitement situation. First, there was no effective marketing strategy. Second, the price was higher than what Indian users were willing to pay.

Apple definitely has learnt its lessen in India and will be more cautious with the Chinese market this time. First of all, it will abandon its traditional revenue-sharing model and earn money through wholesaling iPhones to China Unicom. Secondly, Apple and China Unicom will put more emphasis on marketing. According to Philip M. Nichols, an Associate Professor of Legal Studies and Business Ethics from Wharton Business School, the hype had already started to build when he visited China in August. “You cannot go into Carrefour in Beijing right now without getting iPhone advertising right in your face. They are really advertising the heck out of it,” He said.

Another reason for China Unicom to stay optimistic about the potential sales is that there is immense demand for iPhone in China currently. More than one million iPhones are smuggled into the country and are sold in the black market every year. Clearly Chinese users have already shown great interest in using iPhone. If Apple does not make the same pricing mistake it made in India, the official introduction of iPhone by Apple and China Unicom can be exactly what Chinese users have been craving for.

Speaking of pricing, many Chinese media and users have been criticising China Unicom’s calling rate plans will just not work out. One of the major reasons is that most people who can actually afford the relatively expensive iPhone are using China Mobile—the biggest Chinese telecom company. China Unicom’s users are mostly younger people with lower allowance. Furthermore, users think the handsets introduced this time are crippled without WiFi, which was not allowed under Chinese governmental policy when Apple and China Unicom sealed the deal. Many Chinese users feel like they are “second-class users” to Apple when their iPhones are lack of such important function. On the contrary, iPhones sold in the black market not only keep WiFi, but are also more than a thousand yuans cheaper. For example, China Unicom is selling iPhone 3G 8GB for 4999 RMB (around US$732); while the black market price is only 3600 RMB (around US$527).

However, China Unicom claimed the subsidised price will be cheaper and even affordable for students if users sign a two-year subscription contract with the company. Users can receive an iPhone for free by choosing one of the two-year subscription agreements. The problem is to receive a free iPhone, a user has to pay 586 RMB (around US$86)every month, which is a far more expensive price than most ordinary users in China would like to pay.

Clearly it is unwise to assume iPhone can be popular everywhere. The journey of introducing iPhone to the biggest mobile market in the world will be rugged and rough and will require a lot more effort from Apple and China Unicom.

Here’s a news clip about the launch of iPhone in China.