Apple's iPhone in China: CanApple Cash in on the World's BiggestMobileMarket?

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<< Previous Grey Market The Chinese grey market comprises of mobile handsets (fake ones) that are unrecognised by the government. The fake mobile phones in China are produced by unlicensed vendors, who benefit by evading tax and other mandatory issues and earn profits by gaining cost advantage in the production process. Vendors from grey market also offer mobile phones with advanced features like Wi-Fi, Microsoft Windows Mobile operating system, Bluetooth, etc. According to KevinWang, director, China Research, for iSuppli15, "In terms of features, grey-market handsets often are comparable with official phones. Nearly all grey-market phones have 2-megapixel VGA cameras and Bluetooth connections."16 As the grey handsets began competing with legitimate cell phones in terms of features and functions, their exports in the global mobile phone market also increased. The shipments of China's fake mobile phones increased from 37 million units in 2005 to 101million units in 2008 and are further expected to increase by 145 million17 by the close of 2009.

The other threat which legitimate mobile phones in China face is from unofficial mobile phone sellers, who sell the smuggled mobile phones before their official entry into market. Apple iPhone is one such example wherein the brand was unofficially sold in the Chinese mobile market much before its official entry into China. Since Apple iPhone became popular as a stylish gadget with cutting edge technology, it created consumer interest in the product and led to unofficial distribution of Apple iPhones in China. BDA, a China-based research firm, estimated that without the official sale, 1.5 million¹⁸ iPhones were already in use in China.

Apple iPhone's Foray into Chinese Handset Market

Apple Computer Inc. (Apple), a US-based multinational corporation, has always been an influential player in Personal Computer (PC) market by introducing new technologies. The company commenced its operations in 1976, under the leadership of SteveWozniak and Steve Jobs. In 1984,Apple developed Macintosh, a personal computer with graphical user interface, which put the company on success path. Apple also brought in remarkable technologies like mouse, USBports (for connecting computer peripherals) and FireWire (networking standard) into the PCmarket. The company also created consumer electronic and mobile communication devices like AppleTV, iPod (digital music player) and services like iTunes (music stores) along with PCs. In 2007, to mark the wide portfolio of hardware and software products, Apple removed the word 'Computer' from its name and thereafter was known as Apple Inc.

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15]iSuppli is a research and consultancy firm offering services in electronics industry.
16]Roger Field, "Grey handset market surges", http://www.itp.net/578368-grey-handset-market-surges, November 5th 2009
17]"Grey handset market surges", op.ci
18]Chao Loretta, "Sales of iPhone in China Set Under 3-Year Accord", http://online.wsj.com/article/ SB125144884553566179.html, August 31st 2009