China Daily USA, News Report, Wong Gege, Posted: Jul 29, 2010

BEIJING — The fever for iPhones is alive and well in China.

Despite a sluggish market for smart phones that has only recently picked up, Apple’s iPhone sales are rising, a telecommunications operator in China said.

Apple recently opened its second mainland store in Shanghai, hoping to attract more iPhone buyers, who number in the hundreds of thousands already.

“In many of our shops throughout China, our iPhones are all sold out,” said Wen Baoqiu, a China Unicom spokesperson.

China Unicom is the only authorized seller of the iPhone on the mainland. “The demands for iPhones are really high.”

According to data provided by AdMob, a US mobile advertising company, total sales of iPhone in China is more than 720,000 after it was introduced two month ago.

China Unicom’s data show that more than 10,000 iPhones are sold each day. The company refuted a report by the Financial Times that said Unicom sales of iPhones have not been remarkable.

China Unicom is still in the process of negotiating with Apple regarding the sales of the iPhone 4 in China and Wen refused to reveal any details.

Apple plans to open 25 stores in China in the next two years, according to Ron Johnson, the company’s senior vice-president of retail. Industry insiders expect the new iPhone to make its way to China by winter.

One of the reasons why iPhone sales are picking up, Wen said, is the recent growth of the 3G smartphone market.

“In May, 3G smartphone users with China Unicom increased by more than a million,” Wen said. There are more than 6.5 million 3G users in China.

Liu Chuanzhi, chairman of computer company Lenovo, whose OPhone product is battling head-to-head with the iPhone in the local market, earlier told the Financial Times that Apple missed its opportunity to attract China’s 800 million cellphone users.

He said that Steve Jobs, CEO of Apple, is actually one of the obstacles for Apple’s expansion into China.

“We are lucky that Steve Jobs has such a bad temper and doesn’t care about China. If Apple were to spend the same effort on the Chinese consumer as we do, we would be in trouble,” Liu said in the article.

Apple refused to respond to Liu’s comment, said Tiffany Yang Yan from Apple’s office in Beijing. She also didn’t answer any questions regarding Apple’s marketing strategies, sales or its cooperation with Unicom.

“We are most concerned with letting our potential customers know what iPhones can do for them,” said Yang, refusing to comment about Apple’s image in the media.

But industry insiders said that Apple’s iPhone marketing strategy doesn’t lure a lot of buyers. Nokia, on the other hand, has tailored its advertisements to specifically target mainland customers.

Chinese consumers generally prefer the pay-as-you-call approach in which they buy cell phones and services separately.

In addition, they are also given a Unicom number with the purchase of an iPhone, which has spurned many consumers from buying it because they are unwilling to change their numbers.

“Apple fails to consider the specific needs of Chinese consumers,” said Liu Liang, a senior analyst from iResearch Consulting Group in Beijing, with regards to Apple’s marketing failures.

“Selling Apple’s iPhones through two-year contracts does not accord with the spending habits of Chinese consumers,” he said. “Chinese consumers are very sensitive about the initial price they have to pay rather than the package of services.”

Lack of access to Wi-Fi on Unicom’s iPhone is another drawback. It makes the iPhones offered in the gray-market more attractive because they are cheaper and are altered to utilize the Wi-Fi function.

On the gray market, a 3G iPhone costs about 4,600 yuan ($680), while a Unicom 3G iPhone costs more than 5,000 yuan. A 16-gigabyte 3G iPhone in Beijing costs 5,880 yuan.

He said that Apple should sharpen its competitive edge against competitors such as Blackberry and Lenovo “by creating a unique mobile phones culture and add more meaning to the brand of Apple”.

“Strengthening its cooperation with local cellphone sellers will lower costs,” he said.

China Unicom will continue to play a large role in selling iPhones because “Unicom has better social networks in China and closer relationships to cellphone factories,” Johnson said.

Liu added that he doesn’t see any threat to Unicom from Apple’s plans to open up more stores.

“Unicom mainly acts as a proxy where Apple products are exhibited. It provides a platform for Apple to learn about consumers’ needs and opinions. Selling iPhones is a very minor objective for them,” he said.
Unicom is also confident in its advantages over its competitors, China Mobile and Telecom. Unicom officials said that “by adopting the 3GSM, we fully take advantage of technological advancement. Also we have better terminal and industry chains. These will ensure that China’s Unicom will remain as the main channel to provide iPhones.”