El Dorado is the fabled place of gold, once thought to exist in the American hemisphere. However, for technology companies, China has long been an El Dorado, the untapped market that will bring black ink flowing into the quarterly financial reports. At the end of the month, Apple will make it real in China with the launch of the iPhone 3GS with partner China Unicom.
At the company's conference call on Monday, Tim Cook, chief operating officer, said Apple was "thrilled."
We're thrilled to be launching there on October 30th with China Unicom and we’re going to start with about 1,000 points of sale and then expand further over the next several months thereafter. They’ve announced the plans and prices that they'll have for the device and for the service. There’s a very wide range here on the post-paid side from $18 a month all the way up to $85, $100 a month. At the higher price point an individual is able to actually get the device for free and it goes up as you go down the ARPU, as it would in most countries.
As you know, as we’ve shipped the 3G and the 2G phone prior to that, we discovered that there were quite a few phones going in to China so it would seem to us to indicate that there’s a good opportunity and we’re really excited to get started. We’re not making any projections on the volume, but it is a huge market — the largest market in the world in terms of total phones. And I think it’s very important that we get started to make it as large as possible on smartphones.
Apple in July opened its first China retail store in Beijing and is reported to open another in Shanghai this fall.
I am interested in whether the iPhone's halo effect will be felt in this new market. What will be Macintosh sales? And before anyone remarks on how totally price-conscious the China market is and how it's foolish to expect any sales there, may I point out that these are the same arguments that have been made for every other market segment worldwide and keep getting knocked down.
Apple sold 3.05 million Macs in the last quarter, a growth of 17 percent over last year's quarter (74 percent were MacBook flavors). And in the Asia-Pacific segment, Macs had a 42 percent year-to-year growth.
The Chinese market has always been an El Dorado to Apple and many other technology makers. I remember a front page story I wrote in a Feb. 1996 issue of MacWEEK about the chances for Apple now that Motorola had licensed the PowerPC platform to a Chinese company. This was a time when Apple was licensing the Mac OS to clone makers to run on a hardware design that could boot Windows NT, IBM's flavor of Unix and the Mac OS.
At the time, analysts said that the Mac OS licensing revenues might total $1.25 billion by the end of 2000. "Even using common sense, Apple has the chance to sell many millions of Mac OS licenses if the deal works," one analyst said.
Of course, that latter bit was the rub. Getting the deals to work. Apple finally is getting in the door in a real deal with real products.
BTW: If iPhone developers in China take to the platform (and they will), just those unit sales alone might constitute a surge.