Inititially Apple was talking to China Mobile, the largest mobile operator in China with over 70% in market share. Unfortunately China Mobile uses TD-SCDMA technology, China's own 3G version and it is now working with HTC in Taiwan on the OPhone. China Unicom, uses W-CDMA 3G technology and it is the only fit for Apple with the same 3G technology. (China Telecom uses CDMA-2000). How many Apple buyers in China will understand that Wi-Fi will be disabled in their Apple's 3G handsets? Yes, Apple iPhones will sell well in China despite its much higher price (and lots of copycat versions were already sold) but this is like marrying your second or third choice of brides. Applications will develop and worst case is you pay via your cell phone company.
The iPhone is going to China, which means more than 100,000 developers will have a chance to hitch a ride along with it.
China Unicom ( CHU - news - people ) announced a deal on Friday that will bring Apple's ( AAPL - news - people ) smart phone to China, beginning in the first quarter. The move opens up a market with 687 million wireless subscribers.
In a note to investors Friday, Susquehanna Financial Group analyst Jeffrey Fidacaro argued the deal will translate into an additional 2 million iPhones sold if Apple can grab 3% of China Unicom's 65 million to 70 million postpaid subscriber base.
The deal, however, is an unusual one for Apple. China Unicom will buy the handsets from Apple, rather than sharing revenue with the Cupertino, Calif.-based company. Another wrinkle: The iPhones sold by China Unicom will not have Wi-Fi capability.
The deal, however, could be a much better one for developers cranking out applications for the iPhone. "China was definitely the big one," says Colin Smith, vice president and co-founder of mobile games developer Freeverse.
Bart Decrem, chief executive of Tapulous, the company behind the music-rhythm game "Tap Tap Revolution," says it's going to take a while for iPhone developers to figure out how to compete in China. Language isn't the only barrier. The average income is much lower in China. Credit cards are much less common. Despite these obstacles, however, Decrem points out that sales of virtual goods through services such as TenCent are thriving. "It's going to take six to nine months to figure out the impact of this," Decrem says.
North America, where the iPhone went on sale first, remains Freeverse's strongest market. Some of the company's games, however, clock as much as 40% of their sales in Europe. And a game's popularity, Smith says, varies from market to market. "It's a big unknown for us," Smith says of China.
The first step, says Decrem, will be connecting with affluent Chinese whose tastes are similar to those of iPhone users in the U.S. "There are many people in China who have musical tastes and lifestyles similar to people in the United States," Decrem says. "There are many, many people in China who will be looking for different kinds of music."
Lack of wifi in the Chinese version of the iPhone is a short term problem. You are not allowed to sell mobile phones in China with only the international standard for wifi. If you want to sell a phone with the international wifi standard enabled, you have to also have the Chinese developed standard (homegrown) included which therefore requires two wifi radios and a re-engineering of the phone which Apple apparently is not going to do in the first iteration. I would expect them to have it in the next version either as a dual wifi standard, or if the Chinese govt changes their position, just the international standard. Regardless, you can expect the phone to sell very well as there are already over 1 million iPhones in use here which have all been brought in from other markets. The average selling price for the phones that are here is probably in excess of $700 - 800 USD on average. A couple of months ago a store quoted me a price of over $1,000 USD for an unlocked 3Gs iPhone out of Hong Kong.