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The Great Apple iPhone 5 Question: China Mobile Or Not China Mobile?

This article is more than 10 years old.

We are in the middle of the usual frenzy of speculation leading up to a new Apple product release. The company itself is of course saying nothing but we're told that all will be revealed on Sept 10th, there will be two new iPhones, the 5S and 5C, one will have fingerprint recognition, the other will be a lower end phone with a plastic case.

Hmm. But the really big question about this next generation of iPhones is really: China Mobile or not China Mobile?

Leave aside for a moment how Apple is going to enrapture the masses with the next upgrade to the iPhone plus iOS7. Think only of their particular problem in China, a problem that comes in two parts.

The first is that the iPhone is still very expensive for what is after all still a middle income country. That rumoured iPhone 5C could well be the solution there.

The second is that the iPhone simply doesn't work on China Mobile's network: this uses TD SCDMA and no Apple phone can work to that standard. So in order to gain access to the 70% of the market held by China Mobile Apple will need to change the internal design of the phone. Which they might do in order to gain access to those 700 million people.

This particular problem will slightly go away as 4G rolls out in China. But even then Apple will have to build specifically for this market: China Mobile will be using TD LTE as its 4G standard. There are chips that can handle this (along with the other LTE forms in use elsewhere) and Apple could use those, e.g. the ones from Qualcomm . But then we get either Apple uses these chips only for the Chinese market, meaning again a fork in the hardware design, or it uses them everywhere meaning extra expense everywhere.

But even that's not the whole problem solved. Even if Apple does bring out hardware which is compatible with the China Mobile network, the company still has to persuade China Mobile to take it. And that's not going to be entirely easy.

It’s not quite true that it’s (ie, TD SCDMA) inferior, it’s just a little different that’s all. Sufficiently different that Apple would have to change the design of their handsets for them to be able to work at all. This isn’t something that Apple’s likely to do without a pretty hefty commitment from China Mobile to push a goodly number of them through the system. And therein lies the problem from China Mobile’s side. They are very unhappy about the idea of taking on the large commitments to upfront subsidies that Apple tends to demand of airtime providers. Either in terms of making huge purchasing orders in advance, or in providing the handset subsidies that we’re all used to in the US. And without those subsidies the iPhone would be revealed as being a very expensive option.

So you see the basic problem here? Apple would dearly love access to all those potential customers. But the investment required to make a new version of the iPhone to reach them would require a substantial guarantee from China Mobile. And China Mobile has already insisted that it’s unhappy with the idea of any handset subsidies. Something of an impasse here then.

I've no doubt that the new phone (or phones: after all, we are all still working on rumour here) will be both lovely and successful. But the part of the announcement that I will be looking for is whether Apple has managed to square this circle with China Mobile yet.