5,000 Reasons to Dislike the ChiPhone

China doesn't love the iPhone? That's the message I'm getting from China Unicom's (NYSE: CHU  ) first sales report. Apple's (Nasdaq: AAPL  ) partner for the country managed to move just 5,000 iPhones during the handset's debut weekend, The Press Association reports.

Color me unsurprised. China Unicom's iPhone not only competes with cheaper, Wi-Fi capable gray market models that run on China Mobile's (NYSE: CHL  ) network, but also comes with two app stores: one from Apple, the other from China Unicom, according to Steven Millward of CNET Asia. Does anyone else see this as a problem?

Don't get me wrong. Dell's (Nasdaq: DELL  ) forthcoming smartphone for China Mobile's network may as well be a host for the carrier's relatively new applications store. SK Telecom (NYSE: SKM  ) , which has said it's evaluating the iPhone's success on the Korean peninsula, also has an applications store. Everyone wants a piece of Apple's pie, and for good reason.

With more than 100,000 apps, many of which earn a 30% revenue slice for the Mac maker, the iTunes App Store looks to be the high-margin winner that the iTunes Music Store never could be. The difference is that, unlike AT&T (NYSE: T  ) here in the U.S., China Unicom is partnering with and competing with Apple. Expect users to be confused.

If, that is, they buy China Unicom's iPhone. So far, they aren't. Earlier iPhone rollouts have typically resulted in 20,000 handsets sold per day, the Press Association  estimates; 5,000 in a weekend looks weak by comparison.

I'm not convinced China Unicom can buck this trend. Not unless either (a) China cracks down on gray market iPhones, or (b) the carrier does more to earn the 20% or so price premium it's demanding of buyers.

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Fool contributor Tim Beyers had stock and options positions in Apple at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy has never once lived in a van down by the river.


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  • Report this Comment On November 05, 2009, at 1:40 PM, brickcityman wrote:

    I'm not above drawing seemingly strained conclusions so here goes.....

    Could this be less an indictment of the Chiphone and more an indictment of China's so-called economic growth as of late?

    My government can blow all the smoke it wants, but if I don't have the money at hand, or the confidence to spend it, then I don't buy things.

  • Report this Comment On November 05, 2009, at 3:02 PM, mreedpgh wrote:

    My question as an AAPL shareholder is, why isn't Apple bricking the gray-market phones? They've shown a rabid willingness to do so in the U.S.

  • Report this Comment On November 12, 2009, at 2:19 PM, anothy wrote:

    I'm not sure where this claim of Apple's "rabid willingness" to brick jailbroken phones comes from. The things are all over the place. It's true Apple has no apparent regard for keeping them working when updates happen, but I see no evidence that they're specifically targeting the problem.

    Which, really, is a good thing. Apple walks a fine line there between protecting their partners and constraining their support costs on the one hand, and irritating customers (they do pay for their phones, remember, and can be quite vocal) on the other.

    This is almost entirely China Unicom shooting itself in the foot.

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