Apple’s popular iPhone, a runaway hit in the US and Europe, has encountered headwinds in China where it is looking for its next spurt of spectacular growth.
Apple has had difficulty penetrating China. Apple’s efforts to bring the iPhone to the world’s most populous country appear to have have stalled, although lengthy discussions with China Mobile and China Unicom, two of the country’s top cell phone operators, have been reported.
Holding the iPhone back are a combination of high prices and lengthy service contracts.
Apple’s difficulty grabbing a bigger piece of the cell phone market in developing economies comes as the company leans on the iPhone for an increasingly larger portion of annual revenue that’s expected to reach $35 billion this year. In Apple’s recently ended second quarter, about 18% of its $8.1 billion in revenue came from iPhone sales, more than from desktop computer sales or the iTunes store.
In China, although it isn’t sold via legitimate channels, an estimated one million iPhones already circulate on the Chinese black market, according to various estimates. This is an advertisement for one.
NASDAQ however reports that reaching a mass market in China might be difficult. A key iPhone attribute, downloadable music and videos from iTunes, is unavailable in China.
Apple doesn’t have a Chinese version of its iTunes store, in part because music labels are concerned about the potential for intellectual property abuses.
And without a local partner, like China Mobile or China Unicom, Apple might find it difficult to reach the audience it needs. The current strong suggestion is that it will be China Unicom but that, as yet, has not been confirmed.
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