Donovan’s View: that was the China iPhone 3G announcement
Posted by Dennis Sellers 
Sep 29, 2008 at 9:01am
By Gaurang Donovan
That was the China iPhone 3G announcement. Macsimum New reader Brian called it correctly in his comment to Dennis Seller’s article “China Mobile to sell cut-down version of the iPhone? I don’t think so “with maybe just one mistake in his analysis.”
Part of Brian’s comment from Friday read: “As far as I’m concerned, the iPhone has been announced for Mainland China today through the selling of unlocked phones in Hong Kong. It should be on the shelves in Xi’an in about one month for a small premium. I’m very excited, and so are the people I know here. ”
He was mistaken that it would take a month to reach the city of Xi’ an. I believe it will be there within a few days.
He was very correct in stating that Apple had worked the “system” in China in a Chinese way. The iPhone 3G is on its way.
That part of Brian’s comment read:
“If I were Steve Jobs, I would simply flood the Hong Kong market with unlocked phones. Be very lax on the rules of purchasing them. In doing that he will be selling millions of phones in China without the burden of dealing with the Chinese Central Government and eventually being screwed by them in business. Do it the China way Apple, illegally.”
This is the method to proceed given that something unannounced is holding up the mainland China deal. The method has actually been proven to work quite well once before for Apple but it was by accident. It was in lieu of a missing retail and distribution network in China for iPods a few years back and the discovery that too many iPods were being sold in Hong Kong.
I will return to that story in a bit.
Do note that it is not illegal to sell the iPhone in Hong Kong and Apple is quite within its right to sell it directly into the Hong Kong market as it has been approved by the telecommunications authority.
I expect iPhones to be carried carried into China, Thailand, Taiwan, Pakistan, Nepal, Mongolia, Indonesia and Malaysia by individuals, tour group members truck drivers, ferry personnel, rail travellers and others in greater numbers than the first version. It may be unorthodox but it has been done before in the case of iPods and first version iPhones. I also expect some of the 400,000 domestic helpers from The Philippines in Hong Kong to carry some back home to The Philippines as the unlocked iPhone is slightly cheaper in price in Hong Kong than in The Philippines from the official carrier there. This is not the case for India or Australia.
First let me tell you of my follow-up experiment from Dave Merton’s article “Want to buy an unlocked iPhone 3G?” where he found out you needed a Hong Kong address to purchase an iPhone 3G from the Hong Kong Apple Store.
Since I have one of those addresses, I went ahead and tried to order 1000 units of Black 16 GB iPhone 3G and 100 units of the White coloured equivalent in the same way Dave did in his article. I got further than Dave but decided to pull back at the last step of clicking okay on the credit card as I would have exceeded my monthly budget and could not count on a bailout from the Hong Kong Monetary Authority, and since it was not a house mortgage, the US Treasury. Darn and blast.
Instead I decided it would be best to try some Steve Jobs prank like call tactics as he had done it in a keynote demonstration of the iPhone once with Starbucks. Recall it potentially involved 4000 lattes to go. I put in a call to the Hong Kong Apple Store just to double check that one could buy more than just a few iPhones.
I proceeded with the English language call first and claimed I was interested in buying 37 to 40 units of a black 16GB iPhone 3G for my office personnel in Wanchai for bonus gifts. I wanted to know how many days would it take for delivery. I was told that it was likely they could be delivered on Friday.
I asked about another 50 units or if there was some kind of quota. The representative said there was no limit and he told me his extension number if I wanted to call him back to order if I did not want to do it through the online web site store. Thanks but I will get my accountant to do it online.
My wife did the second call in Cantonese at 4pm on Monday afternoon. She was only buying a mere 15 units of the black 16 GB iPhones 3G for relatives for China National Day gift and wanted to know if they could be delivered in time. She didn’t even mention the suburb. China National Day is Wednesday, 1 October and that left little time. Unfortunately they could not guarantee delivery the next day on Tuesday and Wednesday is the holiday and no deliveries will be made. But they could deliver on Thursday.
Do you remember all those Asian looking guys waiting in line at 3am at the 5th Avenue New York Cube Apple Store last year because they could only buy five units of the first generation iPhone instead of 500?
Remember thousands of the first version of the iPhone showed up in China even though they were never sold in China, Hong Kong or Taiwan.
The bosses of those guys in line in New York have just moved online and now have a Hong Kong address to ship to. It may be their own, a relative or friend, their overseas office, their Hong Kong accountant, their Hong Kong banker, does it really matter? Like Dave Merton mentioned, you can even expect them at eBay shortly.
Now back to the equivalent of the people to people unofficial “back alley news network” method for moving iPods into China.
A few years back, one day after a new iPod was introduced, I walked into a Apple retailer in Hong Kong as he was taking delivery of his latest order of iPods from Apple into his tiny little 11th Floor store. I did some quick math on the number of boxes and it was US$1 million worth of the just outdated iPods he just took delivery of.
Knowing that he knew what Hong Kong shoppers were like with new models of any electronic good, I asked him if he was worried that he might not be able to sell them. He laughed at my question and stated these would be sold by the end of the weekend and most were headed for China. He explained there would be a 17% saving alone on the value-added tax (sales tax) if the mainland visitors bought one here instead on the mainland somewhere (if they could find an outlet handling them) and carried it back. He went on to say that he made deliveries directly to hotels to the tour group manager by the box load and that every member of the group would carry two, three, four back even if they did not want one as a gift. He laughed to tell me that clueless Apple Hong Kong had recently called a meeting of Hong Kong retailers because Cupertino wanted to know why so many iPods were being sold in Hong Kong. It was like five times more than they should have.
Cupertino was paying attention and they have learned from the experience and are prepared to put up with it for iPhones. There is more than one way of getting business done in China. At a profit to themselves.
If China Mobile, Ministry of Telecommunications or some other ministry are dragging its feet to slow down Apple’s direct efforts, they would be reminded to reflect back on how some products in great demand in the mainland seem to magically make it there when barred, limited or under some kind of state control. I can recall seeing it with invasions of Marlboro cigarettes in the early 1980s, with Japanese sedan cars and television sets in the mid 1980s, and now the early iPods.
The Japanese sedan cars became a problem for the state leaders in 1987 or so when the equivalent to a border security ship carrying some of these cars was fired upon by a naval ship when it refused to stop. Turf wars on smuggling Japanese sedan cars was a serious business. The incident had to be reported up the line given the naval gun firing. Otherwise it might not have come to light as soon since customers, many state organisations and departments, were quite satisfied with obtaining a much demanded car. Front door or back door, it was obtained.
Guess who is not subjected to Hong Kong or China Customs checking when travel between bases in the mainland and Hong Kong? Perhaps they can start some profitable shipping that the soldiers may already be doing on their own.
The tour groups distribution will be doing it on Friday if not today so I expect Brian will see them on the Xi’an shelves very soon. And everybody will be as silent as those terra cotta soldiers near Xi’an on how they got on those shelves.
In time I expect it will become a mere paper shuffle in Hong Kong for China bound iPhones if the deal is not cut in Apple’s favour. The iPhones will be left at the shipping dock 60 miles up the road where they are assembled and the papers will be shuffled in Hong Kong. The importer can save some of his profit margin. It has been known to happen before with other made in China goods.
I have not overlooked that the 3G network in China is still in beta testing in 14 cities. It is simply not enough to stop the demand. EDGE will be fine for many users as that is all they have to use now.
The China iPhone 3G party has started but don’t forget that some other locations in Asia will benefit from this development of unlocked phones being sold directly by Apple in Hong Kong.
Finally for clarity, all the iPhones sold by the official carrier of the iPhone 3G in Hong Kong, Hutchison’s “3”, are unlocked but are sold with a contract.
Brian’s complete comment can be found in the comment section of Dennis’s article “China Mobile to sell cut-down version of the iPhone? I don’t think so
” found at http://www.macsimumnews.com/index.php/archive/china_mobile_to_sell_cut_down_version_of_the_iphone_i_dont_think_so/#post-comments
A tip of the cap to Dave Merton and his article “Want to buy an unlocked iPhone 3G?” found at http://www.macsimumnews.com/index.php/archive/want_to_buy_an_unlocked_iphone_3g/
(Columnist Gaurang Donovan is an Australian “mystery man” who wishes to keep his identify secret for personal and business reasons—Dennis)
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Kiki's friend Says:
Hong Kong papers are reporting today an estimated 6.71 million people would enter Hong Kong in the seven days between National Day and the Chung Yeung festival on Tuesday, a rise of 7 percent. There is a whole lot of traffic to carry an iPhone back into China every week and maybe only a few analysts can see what will happen with China iPhone penetration as it fits outside the orthodox business systems that have never existed in China but only in their home economy. Good article with modern China understanding. The unlocked phones will be available in Macau across the river if they are available in Hong Kong and those Chinese visiting for gambling easily have the money to buy a few to take back.
Posted on October 02, 2008
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Dennis Sellers
Dennis has been a newspaper editor/reporter (seven years) and teacher (seven years). He has over 4,000 magazine, newspaper and online articles to his credit. He has also covered the Mac and tech industries for over a decade for such online publications as MacCentral, MacMinute and now MacsimumNews.
KenC Says:
Great observations. I enjoyed the whole article. I remember that episode where white Japanese sedans were being imported thru Hainan Island by gov’t officials.
Posted on September 29, 2008