Monday, February 18, 2008

Apple's business model in China

I talked to a friend in China last week, and he is expecting that his friend is going to bring him an iphone from U.S. later. "Could u use it in China?", I asked. "Definitely, a lot of my colleages have been using it for a long time", he said.

The fact that the decoded iphone has become very popular in China. According to unofficial data, there are already 400,000 decoded iphone running on China Mobile's network. Of course, it is illegal, but people seems pretty much enjoy the service....(not sure if all the applications will work, but definitely surfing on the internet is the best attraction).

Speaking of this, Apple and China Mobile are still yet to start the official negotiation. I guess the point is that Apple is stick to the profit sharing model it was using in the collaboration with AT&T or some European Carriers. However, in China, the dynamics between carriers and service providers are not quite the same. And more importantly, China Mobile dominates over 60 percent of the market, which has much more market share compared with AT&T in U.S.

Besides sharing profit with carriers, Apple should focus more on selling the content to users via iphone, such as music or video. In some extent, it's more like printer business. firms make 90 percent of the money from cartridge instead of selling the printers along.

In addition, China is going to issue mobile licenses to fixed-line operators such as China Telecom and China Netcom soon this year. Apple's iphone is definitely a big attraction to customers, which will help carriers increase the user loyalty. Some investment bank in Hong Kong said Apple shouldn't partner with China Unicom, but I don't think it is 100 percent true. China Unicom definitely needs iphone more compared with China Mobile, which may lead to a better deal for Apple.

For emerging markets with more carrier monopoly, Apple should change its strategy to a more user-friendly one. Users are everything, and it's better to provide users service sooner than later. There is also chance to cooperate with small/new carriers in those countries, if Apple could assure the service quality of customer support is the same.

It's always not wise to wait for things to change. Better change something first, my two cents to Apple.

2 comments:

Joel said...

>Of course, it is illegal, but people seems pretty much enjoy the service.

In what sense is it illegal?

Just because Apple locks its phone for use in the US and UK, what does that have to do with anyone else buying it, and then using it as they want?

Illegal in China or the US?

Amy G said...

hmmm, Joel, I understand your point. But we have to admit that Apple does inhibit the usage of iPhone in China. If we know Apple makes most of the money from its agreements with carriers in U.S. and Europe, instead of making money from selling the phone, we could say it violated the copyright in some extent by using the iPhone in other countries. If we want Apple to continue its creativity, we have to respect their brainpower in innovating new stuff, isn't it?