Where are all the iPhones? Apple Inc. sold 3.6 million of its hit mobile phones last year, but its official partners only registered 2.3 million new customers. Meanwhile, many of its US retail stores are having trouble keeping the hit handsets on shelves. In Manhattan, for example, daily shipments are sold out before it’s time for a second cup of coffee. Apple is tight-lipped, but the two stories could be related.
The iPhone is usually tied to a single phone network in each country. In the US, software locks users into AT&T Inc.’s network. Similar agreements exist in France, Germany, Ireland and the UK. In exchange for this exclusivity, Apple gets a cut of users’ monthly fees. The problem, at least from Apple’s point of view, is that the software can be relatively easily tweaked to allow the phones to run on other operators’ GSM networks.
China Mobile, one of two mobile operators in China, doesn’t have any deal with Apple but still reckons there were 400,000 iPhones on its network at the end of 2007. That number is probably much higher now. Those phones must have been bought somewhere.
That’s where the stories come together. The fact is that iPhone smuggling has become a lucrative, if legally questionable, way for travelling students and flight attendants to earn a bit of extra cash.
An iPhone costs $499 (Rs19,960) plus tax in the US—call it $550. Unlock it, for $50 or less, and you can sell the same phone for the equivalent of $900 or so in Europe. The more the dollar falls, the more attractive this arbitrage.
Perhaps it’s no coincidence that iPhones, unavailable in Apple’s Manhattan stores, are in stock in Buffalo, also in New York state. Manhattan is full of tourists armed with strong euros, roubles and Brazilian reais. Few of them visit post-industrial cities in upstate New York.
Of course, there could be other explanations. Apple could be clearing the decks for a more advanced version of the iPhone. Or it could have simply misjudged demand or run into parts shortages.
Listen to the babel of languages in Apple’s New York City stores, though, and it’s easy to imagine the missing phones in suitcases flying overseas.