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ChiPhone fails to ignite consumer frenzy

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Legal iPhones have been available in China since last Friday, but Chinese consumers aren't falling over themselves to buy the pricey smartphones.

But don't let the low sales figures fool you.

According to a report by Reuters, China Unicom has sold a mere 5,000 iPhones since their release last week. That's approximately one iPhone per quarter-million residents of the Middle Kingdom.

At first blush, the steep prices China Unicom is asking for the phones may be a major stumbling block. The loss-leader of the line, the 8GB iPhone 3G, runs a cool 4,999 yuan ($732, £445). Neither is the 16GB 3GS a bargain buy at 5,880 yuan ($861, £524), and the top-of-the-line 32GB 3GS commands a princely 6,999 yuan ($1,024, £623).

But those are just the up-front costs. If you take a longer view, the prices - although still high - are less egregious. China Unicom's eight levels of service plans run from 126 yuan ($18, £11) to 886 yuan ($130, £79) a month. The plans have a complex subsidy structure, but as The Wall Street Journal reports, the top-end plan for a top-end ChiPhone costs just under $3,100 over two years - which is not heinously higher than AT&T's priciest phone-plus-plan, which totals $2,600 over two years. Plus tax.

To be sure, US iPhones have the notable advantage of WiFi, which is absent in ChiPhones due to the Chinese government's recently relaxed paranoia concern over that wireless technology.

Sophisticated Chinese customers may simply be waiting for the next batch of iPhones, which may very well be WiFi-equipped. The Chinese government relaxed its ban in May, but this came too late in the manufacturing process for the first batch of ChiPhones.

And before the meager 5,000-sold figure prompts you to prematurely declare Apple's China move a failure, remember that the iPhone's US debut - despite a frothing hype storm unmatched in recent memory - was not itself meteoric.

Accompanied by news reports with headlines such as "iPhone Sales Disappoint", the iPhone's first month saw a mere 270,000 units make their way into American pockets. Today, there are over 33.7 million in the wild worldwide, with 7.4 million having been sold in Apple's most-recent quarter alone.

Fortunes have been lost by betting against Apple in recent times. In the past year alone, for example, Cupertino's stock price doubled while the rest of the world slogged through the Meltdown mire.

China Unicom's sales of 5,000 iPhones in four days may not portend a breathtaking surge of legal Chinese iPhone sales, but neither does such a small sampling merit investor wailing and gnashing of teeth.

Check back in a fiscal quarter or three, when we'll reassess the ChiPhone's success. ®

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