Want to buy an iPhone in Beijing? Liu Yong is your man. Apple's (AAPL) hugely popular mobile device isn't legally available in China. Yet at Liu's electronics shop near the capital's premier universities, you can buy one for $680. Never mind that Apple hasn't authorized any Chinese cellular operator to offer the iPhone. Liu's iPhones have been hacked so they can be used locally, and inputting Chinese characters on its touch screen is a cinch.
There still is one big problem—that is, if the phone happens to break. "If there's a software problem, we can fix it for you," says Liu. "But if it drops and breaks, then you're out of luck." The handsets Liu sells were purchased abroad and then smuggled into the mainland. Other dealers market iPhone clones that were illegally made in China. Consumers who crave the comfort of warranties may have to bide their time until Apple inaugurates its first China store in time for the Beijing Olympics next summer.
For many Chinese, though, that's simply too long a wait. More than 160 million are now plugged into the Internet, which has helped stoke iPhone mania on the mainland. For status-conscious urbanites who regularly upgrade their phones, this is the must-have gadget. "The iPhone is considered by many Chinese to be the best phone out there," says Shaun Rein, marketing manager at China Market Research Group in Shanghai.
Strangely, Steve Jobs & Co. seem to be in no rush to leverage the iPhone's popularity in what is the world's biggest cellular market, with 528 million mobile users. The multimedia handset premiered in the U.S. in June and went on sale in Britain, Germany, and France last month. Apple plans to open a store in Beijing in mid-2008. And rumors are flying in Chinese tech and telecom circles that Apple is in talks with the country's No. 1 cellular operator, China Mobile. Neither of the companies would confirm that they are in negotiations over the iPhone.
If a deal is indeed in the works, count on China Mobile to drive a hard bargain when it comes to profit- sharing. China Mobile is the world's largest cellular carrier, with 369 million subscribers, equal to a 70% market share of the mainland. "There is no need for it to make the kind of deal that American and European operators have been making," says Dave Carini, an analyst with the Beijing-based research firm Maverick China.