Apple

China Mobile's plans to open its own mobile app store probably have doomed any chance of Apple's iPhone getting onto that network.

(Credit: CNET)

China Mobile is staking out its own ground in the mobile-application marketplace.

According to IDG News Service, the world's largest wireless carrier plans to introduce its own mobile-application store later this year, calling it "Mobile Market." The report says the store will be open to both independent developers and companies, though it's not clear what operating system or platform technologies will be used by the phones running on China Mobile's network when the store is ready to go.

China Mobile's plans for Mobile Market illustrate the difficulties that it and Apple faced in trying to reach an agreement to sell the iPhone through China Mobile. The two companies have flirted for quite some time, but Apple's insistence on being the sole gatekeeper and distributor for iPhone applications would have been at odds with China Mobile's desire to offer its own service, which is why Apple is believed to be negotiating with China Unicom instead.

Apple's approach is rare in the nascent mobile-application world: many other makers of mobile operating systems are trying to find a way to let carriers such as China Mobile in on the action while maintaining their own central roles. With about 415 million subscribers, China Mobile's customers will be an attractive target for handset companies and software developers.

Apple might bring the iPhone to China with China Unicom, rather than China Mobile.

(Credit: CNET Networks)

The iPhone's slow boat to China might be moving into the fast lane.

Chinese news outlets, as spotted by Apple 2.0, are reporting that Apple and China Unicom, the country's second largest wireless carrier, are in talks to officially bring the iPhone to China and could do so as early as May 17, when China Unicom launches a 3G network.

The talks come after an apparent breakdown in negotiations between Apple and China Mobile, China's largest carrier, over control of the App Store: believe it or not, Apple would like to retain sole control over the App Store.

Partnering with China Unicom would give Apple another advantage in that it wouldn't have to modify the iPhone's current wireless chip. China Mobile is rolling out a 3G network based on a proprietary homegrown wireless standard, while China Unicom and China Telecom--players two and three in that huge market--are using the same WCDMA technology that other GSM-based carriers like AT&T are using.

Still, China Unicom, with 130 million customers, is a definite second fiddle to China Mobile, which has 415 million customers. Apple can perhaps take a degree of solace in the fact that there are an awful lot of Chinese wireless users that are already familiar with the iPhone through various unlocking schemes, meaning it might not have to do as much advance marketing.

China Mobile might be asking Apple to ship a version of the iPhone 3G without the 3G--and without the Wi-Fi, too.

(Credit: Apple)

China Mobile might be asking Apple for a modified version of the iPhone to ensure its customers stay within its network.

Apple and China Mobile have been flirting for some time over the prospect of bringing the iPhone to China. Now the South China Morning Post is reporting (via Cellular-News) that China Mobile wants Apple to ship an iPhone in China with the Wi-Fi and 3G chips disabled. Why take out the fast networking chips that make the iPhone shine, you may ask?

Competition. China Mobile plans to build out a 3G network based on a homegrown Chinese standard for third-generation networks that is not compatible with the widely used W-CDMA standard that is also expected to be used by China Mobile competitor China Telecom.

The thinking, according to the report, is that China Mobile doesn't want its customers buying an iPhone 3G compatible with the W-CDMA standard before it can complete its own 3G network. Otherwise, those customers may decide to unlock the iPhone and use it on China Telecom's network rather than staying tied to the China Mobile network. Unlocked iPhones are rampant in China; over 400,000 were estimated to be in use earlier in the year, and few think that number has gotten smaller.

If all Apple has to do is knock out the 3G and Wi-Fi chips it might not be too difficult to ship the modified handset, since it wouldn't be like developing something completely different. But given how closely the iPhone is associated with Apple, the move would create the potential for Chinese iPhone users stuck on a slow data network to blame the iPhone for their poor experience.

China would be a big prize for Apple, but it might not be worth the cost of shipping a crippled iPhone.

Apple is still dancing around an iPhone deal with perhaps the biggest prize remaining in the iPhone universe: China.

We've been down this road before with China Mobile and Apple, but IDG News Service managed to corner China Mobile CEO Wang Jianzhou on Tuesday, who said that "(Apple CEO) Steve Jobs and I hope the iPhone will enter China as soon as possible." Still, there's no agreement to officially get the iPhone 3G onto the largest mobile network in the world.

There are plenty of iPhones in China, but they didn't come in through the front door. Somewhere around 800,000 jail-broken and unlocked iPhones are thought to be in use in China, which has led to China Mobile's reluctance to swallow Apple's old revenue-sharing iPhone model: why should I share any revenue from iPhones on my network if you can't prevent it from being used on my competitor's network?

But the revenue-sharing model is all but dead, courtesy of carrier subsidies that have lowered the acquisition cost of the iPhone 3G. Perhaps Apple and China Mobile are haggling over the size of the subsidy, but don't be surprised if the two organizations find a way to get a deal done before the end of the year.

As many as 400,000 unlocked iPhones were running on China Mobile's cellular network at the end of last year, according to market research firm In-Stat.

Apple sold 3.7 million iPhones in 2007, and more than 10 percent of them are in China, In-Stat said, attributing that information to China Mobile. That helps explain part of the "iPhone gap" created by the difference between Apple's shipping totals for 2007 and the activations reported by its carrier partners in the U.S. and Europe.

Somewhere around 1 million iPhones are thought to have been unlocked, and 400,000 are in China.

(Credit: CNET Networks)

Despite Apple's attempts to keep iPhone unlocking under wraps with new software and changes to the iPhone's bootloader, enterprising entrepreneurs are apparently giving the people what they want. This is a bit of an opportunity lost for Apple, since the company has signed lucrative revenue-sharing deals with its carrier partners that don't apply if an iPhone is unlocked from its respective network.

But, as In-Stat noted in a report, at least it shows people want the iPhone. The firm said Chinese consumers want smartphones with multimedia features and Web browsing, and the iPhone fills that need nicely. And they're willing to pay for it: 20 percent of smartphones sold in China last year went for 4,000RMB ($533) or more.

Apple had at one point discussed the iPhone with China Mobile, but Apple CEO Steve Jobs downplayed the significance of those talks, saying the companies just had a single meeting. The iPhone is set to make its official debut in Asia at some point in 2008, probably sooner rather than later, but it's clearly a hot item in China already.