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


Themes: Strategy
Pub Date : 2009
Countries : India
Industry : Telecommunications

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

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"We think of China as a never-ending fountain of revenue, but there are far more people in China who cannot afford this technology than there are those who can."1

- Philip M. Nichols, Wharton Professor, Legal Studies and Business Ethics

"There's this upper crust of people who have a lot of money and they want the latest accessory. The iPhone is the latest accessory."2

- Marshall Meyer, Wharton Professor, Management Studies

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

After making a place for itself across several countries, Apple iPhone entered China to tap the world's biggest mobile market. On August 28th 2009,Apple entered a non-exclusive deal3 with the second-largest mobile carrier of China - China Unicom - to sell iPhones in China. Although, Apple is optimistic about the Chinese smart phone market, players like Nokia and Motorola, which already have a strong foothold, are bound to give a tough competition to the brand. Moreover, Apple iPhone entered China lately (after 2 years of US launch), which led to unofficial distribution of iPhones in Chinese grey market. Hence the questions arises - Can Apple iPhone grab a share in the Chinese mobile market, by competing with the existing players? Will grey market be a boon or bane for Apple iPhone's sales?

Mobile Handset Market in China

"To be happy in this world, first you need a cell phone and then you need an airplane. Then you're truly wireless."4 As runs the cliché, mobile phones brought in happiness in the lives of billions of people across the globe by connecting them. While developed nations have already fosteredmobile

growth, emerging economies are not far behind in embracing mobile services and technologies. China is one such emerging nation exhibiting an incredible speed in the development of its mobile telecommunications.

China's foray into mobile services took place in 1980s.Although, China started offering wireless telecommunication services in 1981, its official entry came about in 1987, in Guangdong province. Mobile communications in China, launched by Ministry of Post and Telecommunication (MPT)5 , began with Total Access Communication System (TACS) and Frequency Division Multiple Access (FDMA) - the 1st generation (1G) wireless telephone technology based on analogue standards. However, the equipment for supporting the mobile technology was imported from foreign firms - US-based Motorola (the foremost player in Chinese mobile handset market, with over 80%6 market share) and Sweden-based Ericsson, the only suppliers of analogue cellular systems during those times. Ever since the launch of cellular services in China, the demand for these services has grown rapidly.

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1]"The iPhone in China: Will Apple Connect with the World's Biggest Mobile Market?", article.cfm?articleid=2335, September 16th 2009
3]The intellectual property rights granted to several licensees within the same field.
4]"Quotes about cell phones",
5]MPT was the then regulating authority of Chinese telecommunication industry and exercised monopoly till 1994.
6]Farhoomand Ali, et al., "Developments in China's Mobile Handset Industry",