By ChinaTechNews.com Editorial Team
If history is an indication for how Apple will fare in the future in China, the company should be prepared for some rough riding as it starts selling its iPhone in China tonight.
Apple's iPhone goes on sale through China Unicom, a smaller competitor to behemoth China Mobile. China Unicom claims only a tad more than 140 million subscribers, while China Mobile has about 508 million subscribers. Since Apple announced its deal with China Unicom, China Mobile has responded with its own weapon: a device ingeniously named the OPhone.
Even if the OPhone never existed, Apple would still be competing with an even tougher rival — itself. With an estimated two million unlocked iPhones already being used in China, these black market phones offer better value to consumers. The unlocked phones are cheaper and they have Wi-Fi. A black market iPhone 3GS with Wi-Fi can be purchased in Shanghai for CNY5400, but a similar phone will be sold by China Unicom for CNY6999. China Unicom wants legitimate iPhone users to pay to cruise the Internet, so Wi-Fi availability has been nixed from Apple's approved phones — that black market iPhone 3GS is both cheaper and has more features than its approved, more expensive brother.
Apple has had growing pains as it tried to understand the Chinese market and the myriad ways of doing business in the Middle Kingdom. It was only in 2008, days before the start of the Beijing Olympics, that Apple finally, officially, opened its first self-owned store in the Sanlitun area of Beijing. Prior to its opening, Apple operated through a network of Chinese resellers who were frequently scorned by Chinese netizens for poor after-sales services.
That store's opening came almost two years after the December 23, 2006, media reports about Apple's unfair after-sales service for iPods sold in China. But Apple learned its lesson and reportedly sent a letter to Shanghai Municipal Consumer Interest Protection Commission in which it stated it would make improvements on its after-sales service.
A potential headache for Apple in the future is what happens when owners of unlocked iPhones purchased on the black market now seek Apple's after-sales service to fix those unlocked phones. Will Apple fix black market phones? In China's technology markets in Beijing's Zhongguancun or Shanghai's Xujiahui, there is little distinction between approved and unapproved phones.
Apart from its retail focus, Apple's operational history in China has been scrambled with its manufacturing relationships. A few months ago, Chinese media reported that Sun Danyong, a 25-year-old employee in Shenzhen of Foxconn, the manufacturer for Apple's iPhone, committed suicide allegedly over mistreatment he received after an iPhone prototype was lost. Foxconn quickly suspended staff related to the incident and provided a high level of transparency to Chinese media.
But those reports came three years after Britain's Mail on Sunday newspaper reported that Chinese workers were being mistreated in a Foxconn factory that manufactured the iPod. Apple dispatched an audit team comprised of members from its human resources, legal and operations groups to carry out a thorough investigation of the conditions at the Foxconn manufacturing site. Apple says it found Foxconn to be in compliance in the majority of the areas audited.
By choosing a smaller company as its partner and by placing itself in the unenviable position of competing with itself, Apple already is at a deficit. How it reacts to Chinese consumers in the coming months will either be a continuation of its ongoing saga or the rewriting of a new book on how the obstinate company plans to do business in China.