Apple 2.0

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China's iPhone deal: New details emerge

July 28, 2009: 8:09 AM ET

china-iphoneThe headlines out of China overnight Tuesday were headsnappers.

First Shanghai Security News reported that Apple (AAPL) had reached a three-year deal with China Unicom to market the iPhone in the world's largest cellphone market (600 million-plus subscribers).

Then AFP and Reuters reported what China Unicom's spokesperson told them: that the two companies were still in negotiations and no agreement had been reached (something, by the way, any company dealing with Apple will say before Cupertino has had a chance to break the news itself).

What's important in all this, says iPhonAsia's Dan Butterfield, a veteran China watcher, are the detailsĀ  leaking through the cracks.

"File this under rumor," he warned in an item posted Monday, before the wire services caught on to the story.

Then he listed the key takeaways from Tech.QQ, a Chinese blog quoting "informed sources" who claim a deal has been reached to launch the iPhone in China by the end of September 2009.

  • The Apple and China Unicom deal will be a 3-year exclusive.
  • The iPhone will be customized for the China market (e.g. Chinese language and preloaded with "for China" apps).
  • China Unicom will pay Apple 3,000 CNY ($439 USD) per unit.
  • China Unicom will subsidize iPhone by pricing the iPhone below the 3,000 CNY paid to Apple. This would take the official iPhone price below the grey-market price for smuggled iPhones.
  • China Unicom has promised to sell a minimum 1 million units per year with significantly higher sales targets.
  • The iPhone for China will make use of Apple's China App Store. (link)

Butterfield notes that in terms of exclusivity, it's not clear whether the deal would be for all iPhones or 3G models only, leaving the door open for an unlocked 2G model in 2010/11 for all carriers, including giant China Mobile.

Nor does the reportĀ  mention when China's Ministry of Industry and Information Technology (MIIT) might grant Apple's iPhone the required Network Access License (NAL).

When the markets opened in Hong Kong Tuesday, traders bid China Unicom's stock up 1.5%

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Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for

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