iPhone Underground
Posted on: Saturday, 10 May 2008, 03:00 CDT
By O'Hara, Carolyn
It might be the perfect recipe for an illicit market. Take an attractive, expensive new gadget and slap an exclusivity agreement on it. In short, create the Apple iPhone. So, it shouldn't come a surprise that when the much-hyped device was launched last June, it became the subject of a global mystery. Apple's sales figures didn't match the number of activations on AT&T's network, Apple's exclusive carrier in the United States. More than 1 million iPhones were "missing."
In reality, though, they weren't. The phones had simply been "unlocked," or modified to operate on any service provider's network. Most were sent overseas. It's difficult to determine just how many unlocked iPhones ended up where, but consumers from Afghanistan to Brazil to Russia report buying and using the devices. China Mobile, reportedly had 400,000 unlocked iPhones on its network at the end of 2007.
Within weeks of the iPhone's release, a cottage industry emerged that helped chip away at Apple's unique business model. Bladox, for instance, a Czech firm that manufactures SIM cards that can be used in unlocked iPhones, says it was overwhelmed with orders from some 100 countries. And distributors in China say that at least some of the illicit iPhones came straight from the factory, where workers stole them for sale on the street.
Surely Apple must have anticipated such a massive gray market? Actually, no. "I don't think they really saw it coming ... [or] the scope of it," says David Zeiler, who writes the Baltimore Surfs Apple a Day blog. But that doesn't necessarily mean Apple is too concerned about it, either. "If they sell a handset and someone takes it overseas and unlocks it, they still make money," says Zeiler. In fact, Toni Sacconaghi, an analyst with Bernstein Research, says a vast gray market may have some benefit to Apple's long-term strategy. "It helps Apple get to its goal of 10 million [phones sold] ... and it helps increase global awareness of the Apple brand."
What's more, there's evidence that Apple is using the global gray market as a way to test markets where the iPhone has not yet launched. "We view [unlocking] as a positive indicator in future demand," Apple's Chief Financial Officer Peter Oppenheimer has said. Gregory Ng, editor of the blog iPhone Matters, believes selling more iPhones, no matter where or how, is Apple's ultimate aim. "From a very romantic point of view, [Apple] likes to think that they're changing the way people use phones," he says. "They care about making an impact and driving the market." Apple may not let on, but those "missing" iPhones are likely music to their ears.-Carolyn O'Hara
Black marketed: Apple has embraced the iPhone's illicit spread.
For More Online
Learn how to unlock an iPhone at ForeignPolicy.com/extras/ iphone.
Expert Sitings
Isaac Mao is cofounder of the Social Brain Foundation and vice president of Shanghai-based United Capital Investment Group. He helped pioneer the practice of using overseas servers to host Chinese blogs and served as cofounder of CNBlog.org. His Web site is isaacmao.com.
1bao.org
Chinese journalist-blogger Zhai Minglei started his blog after his print magazine, Minjian, was banned in 2007. Roughly translated as "newspaper for only one person," 1bao's insights on politics, culture, and the media are popular among young Chinese, who access it despite China's censors.
kurzweilai.net
The Web site of futurist Ray Kurzweil is my go-to source for the latest news and commentary on technology and artificial intelligence. Through a weekly e-mail newsletter, Kurzweil highlights the best theories and visions of how science and technology can make the world a better place.
chinadialogue.net
ChinaDialogue is the first fully bilingual Chinese-English site dedicated to environmental issues in China. It collects links to news stories and reports-both positive and negative-on everything from the melting glaciers in the far northwest to Beijing's smog.
en.yeeyan.com
YeeYan (or "voice of translation") is a "bridge blog" between the English- and Chinese-language worlds. Chinese users can read the most recent articles from Western media, including those from Web sites banned in China. Westerners, meanwhile, will find translations of Chinese blogs and media on topics ranging from the recent uprisings in Tibet to this summer's Olympic Games.
Joshua E. Keating is editorial assistant, Lucy Moore an editorial researcher, and Carolyn O'Hara a senior editor at FOREIGN POLICY.
Source: Foreign Policy
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