What Tim Cook's Secret Meeting Means to the Future of iPhones in China
Apple's CEO sat down with the chairman of China Mobile to discuss "matters of cooperation," a phrase that generated immediate excitement — and marks a shift in strategy between Steve Jobs and Cook, who might be seeking a big Chinese contract.
The reason behind Tim Cook's mysterious visit to China may have been revealed Thursday, and it may have big implications for the iPhone continuing to take over the world: Apple's CEO sat down with the chairman of China Mobile this morning to discuss "matters of cooperation" in a meeting otherwise shrouded behind confidentiality agreements. The two companies have been talking since 2009, with the outlook looking uncertain as recently as this past December. But the word "cooperation," in an otherwise vague statement from China's dominant cellphone carrier, has generated immediate excitement — and marks a shift in strategy between Steve Jobs and Cook, who might just be seeking a big contract for the biggest market on Earth.
If Apple and China Mobile were to reach an agreement, it would mean a lot of potential customers. China Mobile has the biggest 3G network in the country and remains the last of the top three Chinese carriers not to offer the iPhone. Importantly, the 3G market is still developing in China — out of China Mobile's 222 million customers, only 82.4 million have adopted 3G. When the rest of those users upgrade from slower options, Cook wants them to upgrade on an iPhone.
Cook has shown a particular interest in China because of its potential to be the company's biggest market. Unlike Steve Jobs, Cook cares a lot about market share, even if it means compromising on Apple's essence. Hence the smaller iPad and the cheaper iPhone and the multiple visits to China, which Jobs never deigned to do. On Cook's last visit to the Far East, he reportedly met with China Mobile, but to no avail. At the time, the holdups were both technical and business related: China Mobile runs its 3G on a different technology than China's two other big carriers, China Telecom and China Unicom. (TD-SCDMA, as the China Mobile's 3G wiring is called, doesn't support the iPhone 4S or iPhone 5.) But it also sounded like Cook hadn't yet made an offer that China Mobile liked — China Mobile president Li Yue said in December said that a roadblock was "[m]ainly the issue of business model and mutual benefits."
So far, Cook's moves in China have worked in Apple's favor. The company has doubled its stores since his last visit 10 months ago. And Cook's trip to a Beijing Apple Store Wednesday may indicate that he plans to continue the company's Chinese expansion domination. As of last quarter, the company was the sixth largest phone vendor in China. (Apple leads in America.) With China Telecom and Unicom carrying the iPhone, Apple has seen "robust" sales, selling 2 million iPhone 5s in a weekend of sales. Considering the iPhone only arrived on China Telecom's service in early 2012, that is a lot of phones. Apple sold 5 million in the same time period back in the U.S.