Maverick China Research

As Apple is making big news by becoming the world's 3rd largest mobile handset vendor, Chinese OEMs are making a push to promote their own brands in what is still an "iPhoneless China". On display at the ongoing P/T Expo in Beijing were HTC, Techfaith, Qigi, Aigo (which is well-known in China for its mp3 players), and many others handset brands that were once primarly OEMs - which are in the business of building handsets for larger established handset brands. Many of these new handset models feature a touch screen interface, accelerometer for automatic screen rotation, and large colorful screens - three qualities that have made the iPhone successful with consumers. The iPhone has pushed the boundaries for handset vendors worldwide, and from what I saw at the P/T Expo, competition is certainly pushing for greater innovation from the market. 

In other noteworthy observations, Sharp made a strong impression with its newly released SH 8010C and SH9010C handsets, both equipped with automatic screen rotation and the latter with a beautiful Aquos display screen. Motorola, on the other hand, was either not in attendance or lost among the smaller booths. 

According to MIIT's latest statistics Personal Handset subscribers this month dropped 0.99 million to 79.488 million. 

Just one week before the iPhone 3G is set to make its debut onto store shelves worldwide, it appears that Apple has finally agreed on a deal with China Mobile. According to a recent article that appeared in Reuters UK , Apple has relinquished its demand for a share of the content fees, while China Mobile has agreed to offer users subsidized rates to purchase the iPhone.

By backing down on its demands for mobile content revenue sharing, it looks like Apple has learned first hand of the strength that China Mobile holds in the telco markets here in China, and that they cannot bully them with revenue sharing and mobile content particulars like they do with operators in the US and in other markets. This is a pretty big concession on the part of Apple to enter the China market, though I wonder if it was necessary.

Recently, China Mobile announced that they are going to do the real-name registration for all newly issued SIM cards. This new policy includes prepaid accounts Shenzhouxing and Donggandidai (or M-zone), and is effective from January 2008. This new policy is enforceable at China Mobile service centers, but the problem is that many prepaid SIM cards are sold by independent dealers such as newspaper kiosks, supermarkets, and mobile phone shops, most of whom cannot be bothered to enforce this new policy.

It remains to be seen how China Mobile can ensure all of its newly issued SIM cards are registered under the user's name unless they cut off their dealer distribution network around China. If they do this, however, China Mobile will have to invest in drastically increasing its direct sales network, something that I'm not sure they are willing to do.

According to a new article from BusinessWeek.com titled "Millions of iPhones Go AWOL ", there may be more hacked iPhones out there than analysts first expected - up to 1 million out of the 3.7 total iPhones sold as of end-2007!

As I previously mentioned in a blog post back in November 2007, iPhone demand is strong in China and a quick scour of the grey markets shows that unlocked iPhones remain readily available for sale. Even with the widely-documented non-deal with China Mobile, opportunities remain for Apple to expand their business by selling unlocked iPhones directly to the China market. 

According to our friends over at BlogNation China, Apple plans on opening its first Apple Store in Beijing by the summer of 2008. It will be interesting to see then, how consumers will react and how the prices will compare to the current going iPhone street price of $550.