NYT on gray market iPhones

The Gray Lady has published a piece examining the so-called "gray market" for iPhones in China -- legitimate products transferred through not-so-legitimate channels. Though we of course have no idea how prevalent this was before the rise of the 'Net, I have to think that the shrinking global neighborhood contributes to this a lot -- it's much easier to ask someone in another country to buy something for you when you talk to them every day on Twitter.

The NYT puts the number of non-AT&T iPhones at a whopping 1.4 million, but of course that includes unlocked phones all over the world, and people who are using iPhones without actually activating them. So we're not exactly sure of the number of iPhones floating around China (where Apple hasn't made a deal to provide official service yet). Analyst Charles Wolf says that Apple definitely enjoys listing the gray market iPhones in their sales numbers, but that the lack of an AT&T agreement with the phone sales undermines their contract plan.

However, he admits also that making the decision to sell the phones unlocked would have earned Apple more demand in the first place, so it's six in one, half-dozen in the other. There's no word on how the impending release of the SDK might affect the sale of phones for unlocking, either. But for now, it's clear that the gray market is a substantial and yet very much unknown quantity of Apple's iPhone business.

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Source: http://www.nytimes.com/2008/02/18/business/worldbusiness/18i…

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The Gray Lady has published a piece examining the so-called "gray market" for iPhones in China -- legitimate products transferred through...

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William Jessup

I wrote about this a day earlier at my personal blog here.
http://muchtodoaboutnothing.wordpress.com/2008/02/18/14-million-iphones-not-accounted-for/

February 20 2008 at 9:57 AM Report abuse Permalink rate up rate down Reply

Michael Janich

Well, I use one of these iPhones in China (Hong Kong
actually), and I only have to say:

You make the greatest phone in the world and you
don't sell it to me? It's Feb 2008 and it is still not
announced in HK. Well, that's your own fault.

BTW: In Hong Kong I see a person with an iPhone
(other then myself and my colleges) every day. Until
November is was exclusively men. But now you see
more and more women with an iPhone.

WE WANT THE (3G) IPHONE IN HONG KONG NOW.

Michael

February 19 2008 at 9:15 PM Report abuse Permalink rate up rate down Reply

Brian Bates

I don't know if this is factored in but A LOT of the 'iPhones' I've seen being sold over here are fakes, very well crafted fakes. BUT as for legitimate iPhones; the other day I was sitting on the subway in Shanghai and three Chinese people around me all had real iPhones. Also, I know two Chinese people that have a friend bringing them one from the states in the next couple weeks, AND one of my students has one. (I teach at an ex-pat school in Shanghai)

So I think this 1.5 million number might be bloated but there are definitely a lot of iPhones in China.

February 19 2008 at 6:43 PM Report abuse Permalink rate up rate down Reply

Mark Scrimshire

The "Grey Market" will continue to grow for Apple. As a newcomer to the cell phone market Apple needed to work with the carriers. By creating a total environment with activation through iTunes Apple has built a trojan horse. This platform now provides them with the ability to make software sales direct without being dependent upon the carriers.

I expect to see Apple building different versions of their phone to support the most popular cell network standards. When they reach the point to renew their contract arrangements with AT&T and other launch carriers I can see them drawing back from exclusive agreements because they will be the dominant smartphone player. The only fly in the ointment on this will be if the carriers start to play games with pricing structures, eg. dropping the all you can eat internet access plans. That, and the chunk of subscription revenue they receive from the carriers, is the only thing I can see preventing Apple from going "solo".

February 19 2008 at 12:06 PM Report abuse Permalink rate up rate down Reply

2 replies to Mark Scrimshire's comment

Hugues de Saint Salvy

to Mark Scrimshire:

I think you (as well as the author of the article) are overlooking the fact that Apple needed the carriers in order to implement Visual Voicemail, and probably had to use the carrot of exclusivity to convince those carriers to spend the necessary capital on back-end network modifications to support this feature.

Until more carriers and phones support Visual Voicemail, I see Apple trying to push this feature by creating exclusive deals with carriers. The carriers need that exclusivity in order to guarantee a minimum increase in subscribers.

I blogged about this here:
http://lepetitradiateur.blogspot.com/2008/02/about-apples-locked-strategy-for-iphone.html

February 20 2008 at 12:33 PM Report abuse Permalink rate up rate down Reply

Mark Scrimshire

Hughes,

you make a good point although the use of the iPhone for internet searches could be taken to suggest the device is used more for data than voice.

I also agree that Apple needed the carriers. Not just for visual voice mail but also to get the volume distribution they needed to gain market credibility.

I think about Nokia and their Communicators/N9X models and Sony Ericsson with their P800/P900/P990 models. They were never picked up by the carriers in the USA and as such have been relegated to niche products.

February 20 2008 at 9:52 PM Report abuse Permalink rate up rate down Reply

Holmes

i was in the apple store in soho last thursday, and there were 7 older asian men and women (50+ years old) and they EACH bought 5 iPhones. there was one person that seemed like the ringleader and gave each person a credit card to use. i couldn't help but think "i bet these get unlocked and mailed overseas."

February 19 2008 at 11:03 AM Report abuse Permalink rate up rate down Reply

2shae

A girl in my class just bought an iPhone in China 2 weeks ago.
There are a lot of people selling them there.

February 19 2008 at 10:23 AM Report abuse Permalink rate up rate down Reply