Apple’s iPhone in China
I’ve been using an iPhone with a China Mobile SIM card for over half a year now. The device is without rival in the industry, so when I put it on my wish list of things to get when they come to China, (let’s put Lou Malnati’s Chicago style pizza in there) I was ecstatic to find that friendly hackers had engineered a method for me to get around the barriers that the failed Apple- China Mobile talks presented.
While the Apple-China Mobile talks non-delivery is as common knowledge as the fact that thousands of the hacked phones run on other-than-AT&T networks, what is not so well known is that the Apple-China Unicom talks seem to have nonetheless gingerly moved along. In fact, I’ve been informed that you can buy a 4GB iPhone through China Unicom for around 4 thousand RMB. Mind you, every Chinese national that I know with the Apple phone has an 8GB version, which tells you something about the supply line it came from, but never mind that. I’ll be investigating the veracity of the Unicom situation this week. Still, I can’t get the Apple-China Mobile talks out of my head. While not seeing eye to eye on profit structures and distribution are to be expected, its a shame that Apple didn’t stay the course and decide to go another route, one that would have been better for them now and more importantly for their future in China.
The mistake that Apple made here is one bigger than just approaching the deal the wrong way. If that was it then I’d be lumping it together with the NFL’s unfortunate attempt at an exhibition game in Beijing and call it a day. Suffice it to say Western companies using Western “tried and true models” will land face first in a fall. First of all, Apple has failed to see the value of the street credentials they already have here: the iPhone is already desired by the Chinese consumer for its revolutionary combination of technologies, excellent usability, and its just more than slightly back breaking high price. One thing stands salient about the target relevant consumers here, the device’s price conveniently nestled just within a few months salary can do nothing but attract them to it, whether they can afford it or not. This is something China Unicom and China Mobile can confirm for us; they have phones for sale in their service centers that run past the 2500 RMB mark that do nothing to scare buyers off. Second of all, if Apple sold the devices out of their own stores, bypassing an exclusivity deal with the provider for a piece of the services take, then they would see realistic and long term tactical results in creating a sales channel and a brand exposure all in one. China is a market where brand recognition is nascent and rapid wealth accumulation is coupled with an appetite to spend and have the latest and greatest. Even if Apple sold the device out of flagship stores at a loss, they would be benefitting by associating themselves with the mystique of a product that almost stands apart from its brand. An early take on this approach would have been substantially more impressive, not least of all on a balance sheet, than the strike heard ’round the world that the China Mobile talks became.
Creating a lifestyle product at relatively or outright high prices is not a new winning concept in China. If Apple needs to know where to steal some good ideas from, the answer is Nokia’s Vertu brand. By Creating an association with luxury and exclusivity, Vertu continues to expand and turn heads even at an entry level price of around 35,000 RMB. Adjust the Vertu message and tone of voice to match the iPhone price and volume expectations as necessary, and Apple could recover gracefully from passing by a great opportunity. With their recent underwhelming unveiling of the Mac Book Air, now is as good a time as any.
