In China, a glut of black market iPhones and a glum new reality for Apple
When Apple's latest iPhones went on sale this month in Hong Kong, Singapore and New York, among the hip urbanites and tech-obsessed was another group clamoring for the devices: Chinese scalpers looking to make a premium by flipping the phones to smugglers. But the gray market for the new iPhones has already dried up, even though they will not officially go on sale in China for a few weeks, at the earliest. Wholesalers who helped orchestrate the smuggling of tens of thousands of the phones into the country are now slashing prices to move inventory. At an electronics market in central Beijing, one retailer was recently selling the low-end iPhone 6 and 6 Plus for 6,500 renminbi to 8,800 renminbi ($1,060 to $1,436), down from 12,000 renminbi to 15,000 renminbi ($1,960 to $2,450) just after the release. "Stocks of the iPhone 6 are way too high right now," said one wholesaler of smuggled iPhones in Beijing's northwestern tech hub Zhongguancun. The smugglers' experience represents the new reality for Apple in China. Four years ago, the iPhone 4 was a status symbol, with the black market booming before the product was officially introduced. Today, the iPhone is simply one option among many, as local companies like Xiaomi and Meizu Technology rival Apple in terms of coolness while charging less than half the price. The primary route the iPhones have taken into China is via Hong Kong, according to the wholesaler, who declined to be identified because of the illegality of some parts of the operations. Scalpers organize Hong Kong customers with local identity cards to preorder phones that the scalpers then collect outside the store, paying about $325 extra per phone. The phones are then smuggled to wholesalers in the southern Chinese city of Guangdong, across the border from Hong Kong, and from there are shipped to cities across China. When the prices were high, early last week, the wholesaler said he was making more than $163 per sale. But his profit margins have dissolved as prices have fallen.
The new models will help Apple solidify its position in the country. In China there are about 50 million iPhone users, according to Kitty Fok, a managing director of the research firm IDC. She estimates that the company will sell about 4 million phones a month as customers swap their old iPhones for the new ones.
The new models will help Apple solidify its position in the country. In China there are about 50 million iPhone users, according to Kitty Fok, a managing director of the research firm IDC. She estimates that the company will sell about 4 million phones a month as customers swap their old iPhones for the new ones.