Asia Underground Electronics Markets Await Apple's iPhone

Apple has rolled out its newest iPhone on Friday. All buyers and dealers were anticipating the phenomenal device in Asia's thriving underground marketplace in as little as a few days. Even though iPhones are nothing new to Asia, because the fanatic users from Shanghai to Bangkok already sport fake and unlocked versions of last year's models.

In the Chinese territory, ads pitching unlocked iPhones and services to unlock them (so they can work with any carrier, not just the Apple-authorized ones) where everywhere in a shopping mall with three floors of cell phone stores. Now, electronics markets are preparing for an influx of iPhones capable of 3G (third-generation) cell phone technology.

Demand for the new iPhone was running high, with some dealers saying unlocked 3G-ready iPhones should fetch about US$700 once they are available. The majority will probably come from the United States and Hong Kong.

In Beijing, China, vendors did not have any stocks at known center for sales of smuggled iPhone across the street from the new U.S. Embassy, Beijing Nurenjie shopping complex. Apple does not sell the iPhone in China. However, there are plentiful unlocked versions that brought from other markets.

Cell phone storeowner, Chris Lau, said that he has already taken orders for the new iPhone from 40 enthusiasts and estimated its arrival on the gray market in about a week. He said that he was not 100% sure that the stocks that he was receiving will be unlocked. However, he optimists that it will take no long time to crack the phone. His thinking is referring to the practice of hacking iPhones' computer code, so they can be used with different carriers.

In Japan, usually, legal purchase of an iPhone has locked a buyer into a service provider partnered with Apple, such as Softbank Corp. On the other hand, in Hong Kong, Candice Lam, a 20-year-old university student, was among those considering a gray-market purchase because she did not want to be locked into paying for a two-year contract with Apple's local carrier, Hutchison Telecom.

Apple plans to sell its 8GB iPhone for US$199 in the U.S. and the 16GB version for US$299. It is selling in Japan for about US$215 for the 8GB model, while the 16GB version costs about US$320. On the other hand, online auction sites were offering the iPhone by midday for those willing to pay. Sellers on one mainland China site, taobao.com , were asking nearly US$1,400 for the 16GB version.

In Hong Kong, iPhone comes unlocked but buyers still must purchase a two-year mobile contract; the 8GB phone goes for about US$375. On a Yahoo Inc. site catering to Hong Kong, one seller was peddling 8GB phones purchased in New Zealand for more than US$1,200. On the other hand, the representatives from Apple and its service providers in Hong Kong and Japan declined to comment on the gray market or discuss any countermeasures they might take.

This condition does not mean that Apple is not likely keeping watch over the situation. Last year the company threatened to take legal action against Singapore retailers it accused of selling unlocked phones unless they stopped, according to local media reports.

Steve Vickers, president of business security consultants International Risk said that aside from lawsuits, Apple could track buyers and serial numbers. It also could audit distributors and resellers, who are typically the biggest risk in the supply chain. However, limiting underground sales becomes all the more difficult with a product as widely available as the iPhone. Moreover, Vickers said that there would be less risk if Apple could keep it concealed, but eventually Apple has to sell it.

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