Apple Wants More Chinese Carriers, Signs of Global Strategy Shift

There's been news that Apple is looking to get out of its exclusive arrangements with AT&T in the U.S. And it seems that this move indicates a global strategic shift. According to a Dow Jones story, the company's deal with China Unicom, which I mentioned last week, isn't an exclusive one. The change indicates Apple's tacit admission of two major changes in its business environment.

According to the Dow Jones report, last Friday China Unicom Chairman Chang Xiaobing said that the company probably won't be the only one offering the iPhone. The purported reason is that China Unicom "operates on the wide band code division multiple access technology standard," or WCDMA. Oh, dear, we certainly can't have an exclusive deal in a specific technology for a given country, can we?

Of course we could -- they could -- if they really wanted. But this gets back to the financial realities of the deal. With an ARPU, or monthly average revenue per user, of about $6.19, there simply isn't the kind of money that Apple has shown it wants for exclusivity. And last month, China Mobile Chairman Wang Jianzhou said that his company still wanted to sell the iPhone. That's been an ongoing desire since 2007, and given that China Mobile is the dominant player in that market, it makes sense that Apple would still be interested in doing business.

But I think this series of events shows the strategic pressure building on Apple. It's been making huge margins on the iPhone, but management must be smart enough to know that can't last forever, especially as it faces descending average net sales for products. To put it differently, the combination of economic reality and product direction shows that Apple continues to move slowly but inexorably into the camp of traditional consumer electronics firms. Part of what that means is keeping products at a premium to bring in margin while you can, and then shifting to a broader distribution strategy, trading off unit margin (which can't be sustained indefinitely) for volume, with the expectation that one will make up for the other.

The other tacit admission is the acknowledgment of competition. Apple has historically wanted to view its products as fundamentally different from those of everyone else. At least, that's been the marketing message that the Apple Core Faithful have embraced. But as the company has to shift to a broader distribution strategy, no longer making product for some elite, it also knows that it is trying to reach customers that refuse to wear blinders. And that means competitors with good products priced right could conceivably ice it out. For example, China Mobile is introducing multiple phones with an OS based on Google'sAndroid. When the by-far-largest carrier is going to sell your competitors' products and not yours, exclusivity with the second-largest carrier doesn't have that cash panache.

In this new strategic reality, Apple has to compete with others, sell for less, and be everywhere, because it can't get the growth it needs and wants to satisfy investors simply by appealing to the same loyalists that have formed its customer base for years.

Bag image via stock.xchng user nazreth, site standard license.