It seems the annual “freak out about Chinese iPhone knockoffs” spell has hit today — suggesting that Apple (AAPL) should greatly fear an abundance of cheap, fake iPhone lookalikes in China, as it eventually plans to sell real iPhones there. This is silly, and Apple has much bigger problems to deal with.
You can read my colleague Nicholas Carlson’s post for the gist of the argument. He falls for half-baked stats sourced from other sites to suggest that knockoff iPhones could pose a “$500 million” problem for Apple. (Which is actually not a very big problem for Apple.) He also gets irrationally excited about what sounds like an especially crappy iPhone knockoff, which has a 0.3 MP camera, terrible software, no multi-touch, no App Store, no 16 GB built-in storage, etc.
The reality is that Apple likely has much bigger concerns in China than crappy iPhone knockoffs. In fact, it’s probably the least of its worries. Instead, Apple’s headaches are:
- Negotiating with the carriers, which has so far taken many months, full of complications and disagreements over revenue sharing, who controls the App Store, iPhone features, etc.
- Real Chinese mobile phone makers, who dominate the market. Building Apple’s brand there. Etc.
- New “oPhone” smartphones running operating systems like Google Android, which carriers are going to be pushing.
- Dealing with the fact that Apple’s suppliers in China could leak prototypes or design specs to Apple’s competitors.
- The complexity of doing business in China, ranging from formalities to the actual infrastructure required to support a country that’s so big population- and geography-wise.
- Making a custom iPhone for China without wi-fi.
- Staying cool, a problem Apple faces everywhere.
Sure, no doubt there is some market for crappy iPhone lookalikes in China. (Or anywhere! Research In Motion manages to sell a ton of BlackBerry Storms.) And no doubt it is a big market, because China is big! But those aren’t the customers Apple wants. Anyone who actually uses an iPhone and then uses one of these knockoffs can tell the difference. And that should pose little threat to Apple as it seeks to start selling iPhones in China officially.
Don’t forget that even in the first six months on the market, Chinese mobile users had already brought 400,000 real, unlocked iPhones into China. That number is likely in the millions now. The Chinese appetite for the real iPhone is strong, and knockoffs — until they are awesome, running OS X with multi-touch and the App Store — pose little threat.
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