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China Unicom buys 5 million iPhones from Apple, ready for sale in September



By Wenwen Meng
12 August 2009 @ 11:53 am ET

Beijing - China Unicom, the potential exclusive distributor of iPhones in China, has poured 10 billion yuan ($1.46 billion) to buy 5 million units from Apple, ready to sell the first batch in September, local media reported on Wednesday.


China Unicom buys 5 million iPhones from Apple
A man holds his new Apple iPhone 3G at Telcel Center in the eastern Indian city of Kolkata August 22, 2008. (Reuters Photo / Jayanta Shaw)
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China Unicom had already paid Apple 10 billion yuan ($1.46 billion) for 5 million WCDMA standard iPhones with unit price of 2,000 yuan ($293), CBN news said, citing a well-informed source.

Details of launching the iPhone have been finalized and the first batch of iPhone will appear in China Unicom 3G stalls at Carrefour and some large retail outlets run by China Unicom in September, said Zhou Youmeng, vice general manager of China Unicom.

"The price of the 8G standard iPhone is set at about 2,400 yuan and the 16G may be sold at 4,800 yuan," said Yu Zaonan, general manager of the customer development department of China Unicom in Guangzhou.

A batch of iPhones was subjected to a battery of tests and so far no network problems or mechanical damage have been found, Yu told the CBN news reporter.

Insider of Carrefour, iPhone's retailer in China said it was "unbelievable" that Apple changed its original profit model and gave up dividends. China Unicom picked up a good deal as Apple is striving to enter the massive Chinese market.

According to Toni Sacconaghi, an analyst from Sanford C Bernstein, in the original profit model, Apple would share 20% to 30% of the profit dividends with its distributors, so Apple's profit share amounts to 32%, while its sales share only account for 8%.

Apple made compromises in the China market because of its great demand and intense competition, but Apple can still make profits from each unit from 1,000 yuan and 1,100 yuan as China Unicom offers a good price for each unit.

China Unicom's Guangzhou manager Yu added that every employee at China Unicom is excited about the potential profits the iPhone may bring since 5 million iPhones means 5 million new customers for China Unicom, leading to profits from cell phone fees three to four times higher.

"China Unicom will likely catch up with China Mobile if our profits grow by 40% with the boost of iPhones," Yu said.

However, the spokesman of China Unicom said that the final agreement hasn't been reached with Apple.

Meanwhile, there are many smuggled iPhones in China, which challenges the legal copy with lower prices.

According to police officer in Pudong New Area, Shanghai, 49 smuggled iPhones were found in a Scientific Square on Monday. The prices of smuggled iPhones vary from 400 yuan ($59) to 1000 yuan ($146), much lower than the average price of 2000 yuan ($293) to 3000 yuan ($439) of legal ones.

An industry source also pointed out that whether China Unicom can win more profits through the iPhone is uncertain and it may largely depend on the iPhone's hardware facilities.

This article is copyrighted by International Business Times.

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Comments
1.
Aug 13, 2009 11:05am

"The prices of smuggled iPhones vary from 400 yuan ($59) to 1000 yuan ($146), much lower than the average price of 2000 yuan ($293) to 3000 yuan ($439) of legal ones." This is clearly not correct. No way you can find a real iphone for 400-1000 yuan in China. You cannot even find old ones for this price. This is either wrong reporting or they are iPhone fakes.
2.
Aug 13, 2009 11:59am

has anyone confirmed that these china iPhones have no wifi? if so, is it through disabling or is wifi simply not present in the chipset? okay, so what happens if i take my Unicom iPhone outside of China? no wifi anywhere? that would suck. hopefully it's just disabled, and there'll be an easy hack to re-enable wifi. lord knows we users in china are used to hacking our iPhones. finally, given that this is a WCDMA phone, will there be a SIM chip so I can use another carrier when outside of China? I travel a lot and would not want to have to pay Unicom for roaming services.... lots to learn about this new device! also, RJ is right: 2G iphones in China are currently selling in shanghai and beijing for around 2,500 rmb (i bought one recently; like the metal case!), and the 8gig 3G for 3,000 or more. thanks
3.
Aug 13, 2009 12:57pm

Hey JKP I'm north of you in ChangChun but was done in SH not too long ago. Would be great if there was a way to simply hack the phone and restore wifi, I know that they enable wifi on a lot of Nokia phones here through hacking also. I'm pretty sure though the iphone won't have a slot for the gsm chip, one can only hope though. I figure my best bet is to just wait till I head to HK next and pick up an unlocked 3GS at the apple store. Going price is about 4890-5250 RMB so thats not bad at all, plus it's fully unlocked so no worries about having to get it unlocked once a new firmware is out! Going price for UNLOCKED 3GS in SH, at least what I was quoted was 5000 RMB but these are the software unlocked ones, where at the HK versions were an additional 600-800RMB! Safest bet is the HK unlocked GSM version, which by the way also has a full warranty from HK, although you can just apple care it and get it servied anywhere. Plus I hear China Unicom's service sucks!
4.
Aug 13, 2009 6:50pm

Becareful!!!! phone is not built solid. it will explode.
5.
Aug 13, 2009 7:12pm

Let them eat cake.
6.
Aug 13, 2009 7:13pm

Nice instant marketshare boost and income boost for Apple there.
7.
Aug 13, 2009 7:14pm

Stock up $2.20 today already, the market has already priced it!
8.
Aug 13, 2009 7:14pm

Doesn't take them long does it?
9.
Aug 13, 2009 7:16pm

Umm...no. Barclay's upped its target price - that's where the bump is coming from.
10.
Aug 13, 2009 7:22pm

In China, they know how to place an order
11.
Aug 13, 2009 7:24pm

Does anyone know how the iPhone has faired in Japan? I have my doubts that the iPhone will do that well in China.
12.
Aug 13, 2009 7:28pm

Generally, 4th quarter is everybody's best. Gotta love the holidays -- I know I do as my business is directly related to the shopping season. Apple typically has a record breaking 4th quarter EVERY year. They stack the deck in their favor with new laptop updates and redesigns for their iPod lineup... But this year, while I believe they'll have new laptops and ipods... they've got Snow Leopard coming out at a ridiculous price that NO ONE will pass up. And being that the talk is all of the POWER of MULTI-CORE with SL, I wouldn't doubt if we see something new in the iMac/Pro lines (I'm hoping Pro because I need a new system bad)... and now 5M iPhones to sell to China -- wow -- we are going to see a quarter from Apple like no other.
13.
Aug 13, 2009 7:30pm

Factory capacity? How long would it take to make that many? Can they make 100,000 a day? It still would take 50 days just to build them, and thats not counting the rest of the world demand
14.
Aug 13, 2009 7:36pm

Well according to earlier rumors production had started a few weeks back.
15.
Aug 13, 2009 7:41pm

So with Apple making WCDMA phones there is no doubt they are capable of making a CMDA phone, hopefully soon
16.
Aug 13, 2009 7:47pm

Epic amounts of iphone and cash.
17.
Aug 13, 2009 7:49pm

Is there really going to be such a big market for iPhones at those prices?
18.
Aug 13, 2009 7:53pm

You'd be surprised how much Chinese yuppies (and tech-savvy teens) pay for their phones. Service is relatively cheap, so they go all-out on the latest do-it-all phones from Japan, or, in this case, Apple.
19.
Aug 13, 2009 8:04pm

the problem is that iphone is neither do-it-all nor latest.
20.
Aug 13, 2009 8:05pm

Agree, I remember when pager was first introduced in China in the 80s. People would spend their WHOLE YEAR wages to get one. It was something like USD$200. It's pretty sad but it's still true...
21.
Aug 13, 2009 8:10pm

Things have changed now. People spend a lot more, but it's a far smaller fraction of their yearly income. The divide between rich and poor in China is rather large. There's a lot of poor people, for sure, but there's a large middle-to-high-class demographic to go with it. These phones will sell in the cities: Shanghai, Beijing, Shenzhen, Guangzhou and Chongqing. The demand for technology and electronics in these places is ridiculous.
22.
Aug 13, 2009 8:15pm

That's true. Now the mid-high class spending is huge. Just consider one city, Shanghai with population of 24 millions, if 5% is mid to high class, that would be 800k consumers there. So I guess Unicom ordered 5 millions units make sense...
23.
Aug 13, 2009 8:16pm

No. Just no. Verizon is going to LTE. There will not be a CDMA iPhone in America. Ever.
24.
Aug 13, 2009 8:21pm

So what is unique about the Chinese market iPhone models? Might it be that there's a 3GS with an 8GB capacity? Or is the new part number rumor related to packaging or something like that?
25.
Aug 13, 2009 8:25pm

^There's no WiFi chip in there.
26.
Aug 13, 2009 8:41pm

Ahh, thanks. I missed the "no wifi" rumor and the associated apparent PRC law prohibiting phones sold there from having wifi and cellular services.... Verrry interesting.
27.
Aug 13, 2009 8:47pm

Welcome. It's really about not letting people get outside of that firewall. But that's a for a different thread.
28.
Aug 13, 2009 9:03pm

So wait, Apple is only getting paid $293 per phone, and then China is turning around and marking the phones up to $351 and $702 ???? (doesn't Apple get about $550 per phone in the US? $199 or $299 from the consumer and then $300 from AT&T?) This is great for Apple... but let's see if China Unicom can turn around and sell those 5 million iPhones.
29.
Aug 13, 2009 9:07pm

With users only on the cell phone connection, it's easier for the Chinese government to spy on them. The more routes that people have to access the internet (WiFi) or their own VPNs (WiFi) or illegal VPNs (WiFi), the less the government can spy on them. Terrible but true. We all know that our data goes through AT&T's network, but what government laws do we have to protect our privacy from AT&T snooping employees? (I assume it's the same law as for our home computer ISPs, but is there a federal law that is protecting our privacy?)
30.
Aug 13, 2009 9:41pm

Which is why I would've avoided China if I were in charge at Apple. "Instant marketshare boost" though they may be, I would have moral conflicts about making tons of cash selling a dumbed-down version of a phone that would be used by an oppressive government as yet another spy tool. Jeezus, the thought of how intrusive they are just creeps me out.
31.
Aug 13, 2009 9:43pm

It's probably just a matter of time before the Chinese government, via China Unicom, hacks their way right into Apple and starts recording everything at Apple.
32.
Aug 13, 2009 9:44pm

5 million only?... Well that's gone in 2 days. I think the order should have been like - 50 Million to fill all of those orders. China has about billion people. 5 million to them is like filling a 16 oz glass with 2 tablespoons of water.
33.
Aug 13, 2009 9:59pm

That's like the myth about all the billions of GSM users being a market for the iPhone. Many of those billions can't afford the device or the data bill, even if they had 3G coverage. The majority of Chinese make around $1200 a year. The better-off ones who work at say, making Apple iPhones, might make $300 a month. Which they probably owe most of to the factory for room and board. There are more people with money in the cities, but I suspect many of those have already gotten grey market iPhones (supposedly there are at least a million of them in China already). Scroll down to see average salaries in China.
34.
Aug 13, 2009 10:00pm

The story sounds odd for so many reasons, most of all because 5 million iPhones sold would put the Chinese market immediately at number 2 worldwide. UK and France crossed 1 million a few months ago, Germany this month. All 3 countries had the iPhone for almost 2 years and each of the 3 countries has a bigger potential market for the iPhone. I know there are people who are ready to believe anything about China, but this sounds very unusual. And it is, of course, going to become another rumour which by many will be seen as a fact until disproven.
35.
Aug 13, 2009 10:02pm

I"m pretty sure there will be a wifi radio in the phone, it will just be turned off and locked. It would be silly to change the production line and circuitry when Apple can just do it through the software / firmware. Further, you ARE allowed to sell cell phones WITH wifi in China, its just that you have to have the Chinese homegrown version of wifi in the phone. You can also sell it with the international wifi standard activated but then you have to have both standards in the phone and therefore two different wifi radios. That might happen later for the iPhone, but doesn't sound like it will be in the first iteration, and especially if this info on pricing is accurate.
36.
Aug 13, 2009 10:06pm

2.4k yuan isnt much actually. A lot of people in the cities can afford it. Image is pretty important in China and people will buy this if the marketing is good just so they can say "look I am successful".
37.
Aug 13, 2009 10:10pm

@Sehnsucht - What planet are you living on? Haven't you been following the news for the last 8 years? The US govt. is already monitoring your calls and all internet traffic. Get a life dude!
38.
Aug 13, 2009 10:12pm

All iPhone 3G and 3GS are WCDMA. They are UMTS via WCDMA with HDSPA), which is a GSM 3G standard. Nothing to do with CDMA, which was a standard no longer supported by its developer, Qualcomm. Qualcomm now pushes HSPA and LTE as a replacement for CDMA networks. The few developed countries outside the USA that had any CDMA networks have already shut them down and moved to HSPA. (Australia, New Zealand, South Korea)
39.
Aug 13, 2009 10:18pm

now this will be great for the apple and the iphone
40.
Aug 13, 2009 10:25pm

500.000, maybe. 5 million, no. The statement would rather be "look, I couldn't afford the real thing when it was 3000 yuan on the grey market, but now I got the cheaper crippled version." This whole vanity argument is a red herring. Sure there are people in China who will waste money on a product they don't really want, but aren't there a lot in the West as well? And aren't there limitless other ways to show your status through expensive brand name products? And aren't most Chinese just as aware of their financial possibilities as most Western people are? All statistics point to the facts that Chinese rarely take up consumer credits, that they tend to save money rather than spending it and that the average price for a cell phone in China is very, very low.
41.
Aug 14, 2009 12:28am

If this report is true, Unicom will have no problem selling 5 million units. They will offer them for a discount or free as a loyalty incentive to VIP customers who use tons of minutes. Also, don't forget that Chinese consumers already have bought maybe 1 million or more unauthorized iPhones (jailbroken and unlocked), meaning a ton of people will put up with a lot of hassle to have the most stylish phone. Half of my friends here have iPhones. Even without WiFi, people will be happy as long as Unicom's WCDMA network delivers quality 3G. The problem will be for anyone who goes abroad. Will I be locked into Unicom roaming when overseas? Will I be able to ask Unicom to activate my WiFi whenever I go abroad? I'm checking with iPhone Dev Team (the pwnage/redsn0w folks) to see if they have any insight or plans to unlock and activate what I hope is a standard iPhone WiFi radio that is merely switched off for China. Fingers crossed...
42.
Aug 14, 2009 7:34am

the iphone will do very well in china - it is the phone to have and all the chinese want it
43.
Aug 14, 2009 10:32am

Chinese consumers spend a disproportionate amount of their incomes on mobile phones. Here are the reasons why: 1) service costs are low but phones tend to be unsubsidized 2) there is a large market for second hand phones on Taobao (China equivalent of ebay) so it is possible to sell a phone for reasonable value after 6 months of owning it 3)Phones ARE a major status symbol for a lot of people because most can't afford to buy a house or a car. The next most visible item is a phone. They have it with them every day so they can use it to make a statement 4)The statement that Chinese rarely take up consumer credit is not true. Traditionally Chinese are known as having a high savings rate, but younger consumers are not following this trend. Use of credit has taken off in a major way in the last two years and this is impacting the way people spend 5)Younger consumers, including a lot of white collar workers in their 20s, still live at home with their parents. In many cases they do not pay rent, and pay very little for food. This means that the income they do have can go towards purchasing items like iphones 6)Walking into any electronics market in a major city in China you can find handsets from Nokia, HTC, LG, Rim, and yes gray market iPhones for 4000 RMB so the pricing isn't going to deter people looking at the phone as a status symbol 7)China just conceded to the WTO on regulations regarding the sale of media into China which is going to make it easier for concepts like the app store to work here 5 million, doable, definitely. China Unicom is like China Mobile's redheaded stepsister, but still has an awful lot of subscribers.
44.
Aug 14, 2009 10:40am

Really? 5 million is not a small sum! So far the users of China Unicom is not over 100 million.Ineed-electronics.com
45.
Aug 14, 2009 10:45am

Sorry, I didn't mean to indicate that 5 million was a small sum. It certainly would represent a major achievement, but it is doable. As of July 2009 China Unicom had 140m subscribers to its mobile phone service. So 5 million phones would require 3.6% of its user base purchasing an iPhone and/or a significant number of China Mobile subscribers jumping ship to follow the phone. Big numbers yes but within the realm of possible. I have no idea if the 5 million phones purchased rumor is true, the last time I spoke to an Apple employee here they told me that talks were 'ongoing' despite the site's claim to be offering the phone. It will be interesting to see what happens. A lot may come down to solutions to the App store. If China Unicom doesn't offer significant improvement over what can be had purchasing a phone out of HK and jailbreaking it then tech savvy consumers might stick with the gray market. If a version of the app store does make it live over here then 5 million could make sense.
46.
Aug 14, 2009 10:59am

W-CDMA is GSM using a different communication protocol. Sorry CDMA is dead
47.
Aug 14, 2009 11:09am

Its like if Chuck Norris and Kim Jong Il had a baby. The only way Western Worlds could make a difference is to stop trading with China until the Government becomes a democracy or the US government could umm, eradicate these inconveniences to Democracy. A lot changed at the Olympics, lets push some more.
48.
Aug 14, 2009 11:10am

I have been living a few years in China now. Here is some info which i have collected: - the income is rising very quickly, so statistics from 2004 won't get you very far (kdarling) - many Chinese people have an income from property which is almost as high as their salary and which does not appear in most statistics - people in the modern cities Beijing, Shanghai, Shenzhen etc make much more money than other big cities in the back of the country. They can easily afford an iPhone - i already see lots of people having an iPhone. Very easy to go shopping in Hongkong or order them from ebay.com. - regarding the spying/monitoring issue, i don't think iPhone users will have any problems. Rich people bring benefit to the Chinese country and usually don't get into any troubles. Monitoring is against poor and unhappy people who might team up and cause problems to the government.
49.
Aug 14, 2009 1:58pm

Rumor proven untrue: http://www.thestreet.com/story/10575642/1/china-unicom-denies-its-buying-5m-iphones.html
50.
Aug 15, 2009 1:30am

Ah but there's more ... Despite this denial, Zhou Fang, the CBN reporter who broke the story, stands by his report and states that he made audio recordings of the interviews with the Guangdong Unicom executives (Zhou Youmeng and Yu Zaonan) who spilled the beans. Adding further legitimacy to the original CBN report is a post today (8/14) on Interfax TMT (sourcing another China Unicom insider who validates the 5 million claim) and the news today from a Carrefour source. Chongqing Evening News, quoting a Carrefour employee, states that the iPhone in China deal is a "go" and Carrefour would indeed be part of the distribution plan. The report states that iPhones could be ready to go on sale as early as late August and that Carrefour stores in Guangzhou and other costal areas have begun preparing store displays. DoNews in China, citing “unnamed sources,” claims that China Unicom’s handset distribution division Vsens intends to have two other iPhone distribution channels (aside from retail chains including Carrefour), Gome and Suning. iPhonAsia (yours truly) had previously speculated that retail chains distributing iPhones might include Best Buy China and Wal-Mart China. More w source links > http://iphonasia.com/?p=6069

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