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China Unicom's e-commerce partner Taobao.com has only been able to sell 5 iPhones since launch.  (Source: China Unicom)
To say that the iPhone is a flop in China is to put it mildly

China is arguably the world's biggest potential electronics market.  If you can make a product that's a big hit with Chinese consumers it's almost as big a deal as a hit product in the U.S. -- and China's buying power is expected to only grow even more in the near future.  Thus optimism was high when the iPhone finally launched in China.

However, in the time since, the iPhone has proved an epic flop in China even as Chinese telecoms try to defend their weak sales.  China Unicom, the phone's carrier only managed to sell 5,000 handsets in the phone's first few days, far less than at equivalent launches in the U.S., UK, France, and Germany.  While the telecom says it is satisfied with the phone's sales performance, the numbers are disappointing for a phone that has burned up international sales charts.

One major problem is price.  The phone is available in China for 6,999 yuan, or $1,024 without a contract, but can be purchased much cheaper in Hong Kong's so-called "grey market".  The grey market cost in Hong Kong is approximately $800.  Sales were also hindered by the exclusion of Wi-Fi from the phone, following China's ban on the standard, which it was trying to replace with its own standard.  Since May China has begun reallowing Wi-Fi, but new Wi-Fi-ready models still aren't available yet in China.

The epic failure of the phone in terms of sales is epitomized by the sales figures just released by Taobao.com, the nation's leading e-tailer and only firm besides China Unicom authorized to sell iPhones inside China.  According to IDG News Service, since the phone launched on the site on November 22, only two 8 GB models were sold, three 16 GB, and no 32 GB models.  That's right -- in an increasingly prosperous and tech-hungry nation of over 1 billion, the country's largest E-Tailer has only been able to sell 5 iPhones.

In its report IDG says that difficulties with the app store may also be partially to blame for the phone's dismal sales.  Explains the report, "Credit cards are increasingly common in China, but their holders rarely use them to make small payments via mobile phone, local consultancy Analysys International said in a research note.  Credit card penetration also remains low among young people of the sort that would like the App Store, it said. Many Chinese make payments via mobile phone but do so with prepaid cards sold by local carriers. The App Store will need to add new payment options and more localized content to win more users in China."

China Unicom still hasn't given up on the struggling phone.  The company just launched 3G services last month and currently has around 1 million total subscribers.  The company hopes that the iPhone will help drive over 1 million new subscribers per month to the next-generation network service.  Currently the company has over 150 million subscribers on its older networks.  The company is aiming for 10 percent of its 3G subscriptions to be iPhones by three years from now.

In South Korea the iPhone enjoyed a much more enthusiastic launch last week with 60,000 online orders.  That number looks especially pretty when compared to the Chinese total of 5 orders.

Earlier this year, before the launch of the phone, the iPhone made headlines in China for a far different reason.  An employee at Foxconn, a hardware partner of Apple's, reportedly was beaten and tormented by company security officers after loosing a prototype of a next-generation iPhone.  After the ordeal the employee committed suicide.  The company has since paid the family of the victim $52,000 and dismissed several employees.


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RE: Maybe because...
By defter on 12/3/2009 2:13:14 PM , Rating: 3
It's latter. Considering that you can get this kind of phone with WLAN, dual SIMs, memory card slot and replacable battery for $139: http://www.dealextreme.com/details.dx/sku.29240

It's not surprising that Chinese don't want to spend $1000 for the original.


RE: Maybe because...
By ksfa10 on 12/3/2009 2:46:08 PM , Rating: 2
This is what China does best, copy not innovate.


RE: Maybe because...
By sandhuatdt on 12/3/2009 3:00:20 PM , Rating: 5
Everyone started by copying someone and then innovated as they matured. The mighty Japanese electronics and photo industry started as cheap knock-offs of American and European. Later, the Japanese led in innovation and quality. Same for their auto industry.

Then came the Koreans. They started as copycats too. In fact, Samsung and Mitsubishi, both have even the same meaning - three stars or diamonds. Today, Samsung is a premium brand in electronics because of their innovation. In the auto industry too Korean products are now being recognised for their quality and value but they started off as cheap unreliable knock-offs.

Now come the Chinese and manufacturers like Asus and Acer that were bulk OEMs for a long time (read copycats) are now making nicer laptops and other products. Yes, they are still learning but in a decade their brands will become synonymous with innovation.

It's just evolution, the Chinese aren't doing anything new (pun intended).


RE: Maybe because...
By eddieroolz on 12/3/2009 4:33:10 PM , Rating: 2
Amazing how much it changes in 20 years.

We still have 1999-era Hyundais on the road around here. Worth pretty much nothing, but the 2009 Hyundai Sonatas are nice looking cars with high quality.


RE: Maybe because...
By sandhuatdt on 12/3/2009 5:06:11 PM , Rating: 2
Yep. In the US, in the past two years while major US automakers were being rescued from death and even the mighty Japanese were looking to cut costs, one manufacturer was looking to setup a new plant here, very much in the US. And that manufacturer is Kia. Recently, not only did they finish building this new plant but also started production at this facility in Georgia.


RE: Maybe because...
By ShaolinSoccer on 12/3/2009 7:34:09 PM , Rating: 2
I love my Kia Sorenta. One of the best vehicles I ever owned. And believe it or not, it does get good gas mileage.


RE: Maybe because...
By ss284 on 12/3/2009 6:08:46 PM , Rating: 3
Acer and Asus are Taiwanese companies.


RE: Maybe because...
By Oregonian2 on 12/4/2009 12:11:57 PM , Rating: 2
True, but I think (at least Asus) they "outsource" to mainland China.


RE: Maybe because...
By Hieyeck on 12/3/2009 5:14:05 PM , Rating: 2
Damned europeans copying gunpowder, block printing.

Copy and improve. That's what innovation is. If they can clone an iPhone, cram MORE features, and sell it for a fraction of the price, it means something in their process is much improved over Apple.


RE: Maybe because...
By mindless1 on 12/3/2009 7:03:14 PM , Rating: 4
iPhone is made in the orient too, yes? What is improved is cutting out the Apple middleman, avoiding the absurd Apple Tax.


RE: Maybe because...
By The0ne on 12/4/2009 1:47:52 PM , Rating: 2
http://dictionary.reference.com/browse/innovation

China hardly "innovates." They copy. If they were able to innovate the world would really be in big trouble. Thankfully, the people are so fck up it's not going to happen anytime soon.


RE: Maybe because...
By chick0n on 12/5/09, Rating: -1
RE: Maybe because...
By michael2k on 12/3/2009 3:35:23 PM , Rating: 2
Or maybe this?
The grey market cost in Hong Kong is approximately $800.


RE: Maybe because...
By idannyb on 12/3/2009 5:47:23 PM , Rating: 3
Dual SIM is cool but not enough. The pretty on the outside but crippled underneath iClones have much in common. Their UIs are weak and touch screens are unresponsive (often freeze up).

I just spent 10-days touring China and had a chance to demo about a dozen different Shanzhai (counterfeit) iPhone models. More > http://iphonasia.com/?p=8261


RE: Maybe because...
By RjBass on 12/4/2009 9:11:49 AM , Rating: 2
Nice blog piece. Could you maybe go into a little more detail about your user experience with some of the clones?


RE: Maybe because...
By RjBass on 12/4/2009 9:07:28 AM , Rating: 2
lol, look at the reviews, lots of people ordered and paid for their iphone knockoff and never got it.


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