If you have been a reader of the China Vortex, this would come as no surprise, since we predicted all this about the iPad way back on January 5, before even the iPad name was announced. When AAPL was trading around $215 per share, compared to today’s $252.73.

Or you could have listened to us in March 2008, when Apple announced the iPhone SDK and China Vortex predicted that it would be a game changer. Back then, Apple shares were trading around $130 per share.

Today, the Microsoft CTO Kevin Turner predicted that the iPhone 4 may turn into Apple’s Microsoft Vista because of the antenna issues. Aside from pointing out that Kevin obviously does not come from a PR background, I have been asking myself a question about the antenna issue.

The question is this: “Why isn’t the antenna issue bigger than it is now?” While some have called for a recall, the demand for the iPhone 4 continues. Why?

My answer: “People aren’t using it for voice calls much anymore.”

The main function of the iPhone 4 is as a data device or computer, not as voice phone. The heavy data usage stats for the iPhone and iPad show that these are devices for asynchronous data consumption, not voice communications. If the primary function of the iPhone 4 was as a voice phone, then yes, the problem would have been much more serious, on a level with Toyota’s recent brake problems.

It’s called an iPhone, but the voice phone function really isn’t that important.

This view is corroborated by this chart (second on the page) posted on Business Insider, which is now capturing close to twice the profit of the rest of the industry combined, even though unit sales numbers are only 3% of the total market sales worldwide.

I expect these numbers to be similar for the China market, and they show why Apple will be in a virtuous cycle in the China market, since iPhone and iPad sales will drive increased marketing expenditure in China, putting extreme pressure on Apple’s competitors in China.

Some individuals, such as Mark Zuckerberg, Facebook’s CEO, and Google’s CEO, Eric Schmidt, have gone so far as to embrace the concept that people should have almost no secrets at all, and that if you do have secrets, you are either backward, or have something bad to hide. Basically, they put forward the view that if you want to hide something, you are old, out-of-date and out-of-fashion, and that you SHOULD embrace openness as the way of the future. Mark Zuckerberg has gone so far as to say that if he had the chance to re-architect Facebook all over again, he would make it completely open, with no privacy controls.

Many in the west, especially libertarians, have embraced this idea without even debating the merits of this argument. People in the IT sector especially are sympathetic to this POV, so much so that it has become a white god. The white god syndrome is the widespread belief is that those in the west have always known what is best for the rest of the world, and that it upholds the precious values of personal liberty and individualism. After all, hasn’t the west been the leader in the struggle for human liberty and progress, fighting two world wars and numerous small wars so that others could be free? Many in the west adhere to this point of view, forgetting to question why accountability in the west is often applied selectively, in spite of all the claims made by its proponents.

If you accept this historical narrative, then anyone, or any government, which dares to object are either ignorant or evil.

Throughout the argument for free flow of information, there is no room left for defining the role of what a government does. There is only 1) information and 2) the rights of the individual to access that information anytime and anywhere.

Because the argument is framed this way, the Chinese government’s claims for Internet sovereignty have been met with derision and even contempt by the western press. The Chinese government’s claim is simple enough: IT companies in China must adhere to PRC laws. Looking at it from the surface, there is nothing revolutionary or different about the PRC claim; other governments, including those in the west, require IT companies to follow the laws of the country they do business in. If there is a difference in China, it has to do with due process, and what the government needs to do in order to obtain data from the IT companies. This is where things get blurry.

The infrastructure for the Internet was built in a way which did not clearly follow national borders. A US IT company may have web servers in Iceland, which now has the most stringent laws protecting data privacy. The data may or may not sit on the company’s own web servers; it could just as easily sit in the cloud, on servers provided by Amazon, Microsoft, Google or Apple, adding yet another layer of abstraction. Just thinking about the legal aspect of this is likely to throw lawyers into a tizzy of billable hours.

In contrast to this, the Chinese government has been very protective of Chinese consumer data. In China, consumer market research is a restricted industry, meaning that non-Chinese market research companies are not allowed to enter the field. In order to enter the industry, most western market research firms need to form joint ventures or partner with multiple Chinese market research firms. While the western market research firms do the analysis, the data is usually kept in the hands of the Chinese market research firms. This way, the data about Chinese consumers is always kept in the hands of the Chinese market research firms, and never leaves China’s borders.

The only exception to this rule comes with regard to personnel files in western multinational corporations. Most US and European firms have centralized HR departments at company headquarters; these include detailed personnel files for all staff and management, regardless of country and location.

Throughout this discussion, it has become very clear that the Chinese government does not adhere to the currently dominant western notion that information should flow freely across borders. This position has been made crystal clear in the showdown between Google and the Chinese government over censorship. I see the Internet sovereignty assertion as the first step in a systematic pushback against the free flow of information argument.

How could the Chinese government push back further? The simplest and most logical argument would be to claim that all personnel and data files on PRC citizens must not leave the PRC’s borders, and giving the security services the right to go to western MNCs’ HR departments to perform data audits to make sure that they are in compliance. Such a move would throw their HR departments into chaos, as it would mean that headquarters would no longer have the personnel files of PRC employees.

If the PRC government were to make this claim, it would effectively claim that it has control over all data about its citizens.

To sum up:

• There should be a healthy debate about the free flow of information across borders. For too long, this is a position which has been supported without question in the west, and those who have challenged it have been routinely tarred and feathered by the press. This lack of an open debate about this aspect of the white god is not a good thing.
• The PRC government should clearly state its position on data, and express how far it intends to go. If the government stakes a claim to all PRC citizen’s personnel data, will they extend that to their medical information and later, genetic data, too? Will the individual have any control or recourse over their own data, or will the government always be the final arbiter and decision-maker? The Chinese government should makes its position clear, without resorting to slogans and nationalism.

This would be best for everyone, especially the Chinese people.

Last week, it was Apple’s revision of the SDK agreement with developers barring all cross-compilers from use for developing apps heading for the Apple AppStore and which was first pointed out by John Gruber in this post. Most outsiders see this as targeting Adobe’s Flash platform, and it is rumored that Adobe is now contemplating going legal over the issue.

Last September, Adobe purchased web analytics firm Omniture. This was one of the deals where most peoples’ jaws dropped because Adobe’s flagship product is Creative Suite, which is a suite of applications for publishers and creative types.

Omniture’s products are used by business development types, who want to know where visitors are coming from, what sites/search engines refer them, etc. All of this is achieved through the use of tags embedded in each page’s source code. Whenever a request is made to a page, the tag calls a server and logging in that it has been called, including information about the user’s browser, geographic region, etc. With this data, the bizdev types then tell the designers and creatives how to further improve the content and pages, making everybody rich in the process.

Anyhow, that’s the idea.

What made the Omniture acquisition interesting was that in most company organizations, the bizdev and design/creative types don’t work that closely together, let alone use the same production tools. What Adobe proposed through the Omniture purchase was to bring both groups together in its new CS5 product lineup.

But two days before Adobe launches CS5, Apple releases its new guidelines for app development on the iPhone platform, which is aimed at cross compilers, but hits designers using Flash especially hard. For the record, I don’t like Flash myself, it hurts performance, fires up the fan, and is a general nuisance. As far as I’m concerned, real developers use C or a C-derivative language, not Flash.

But banning it!!!??? I believe that apps developed on Flash will probably sell less well in the AppStore, and that the smart Flash developers will say “Hmm, maybe I should start developing using Objective-C and Cocoa frameworks so that I can squeeze that last bit of performance out of OpenGL, etc.” Isn’t wholesale banning a bit much? Why not just let the market deal with the issue?

Now Apple has come out with a new zinger for the new iAd network: developers are not allowed to collect user analytics inside their own applications, while Apple is allowed to insert ads into applications. What does this mean if you are a developer?

• Apple may insert other ads, even your competitor’s ads into your app, and there’s nothing you can do about it.
• You cannot collect download and usage data so that you can improve sales of future versions of your app, but Apple can, and they will not share that data with you.

So if you are a smart app developer, what do you do? I’d say that you’d have to put on a business hat, and ask yourself:

• Do I want broad coverage of a new app to test the waters and see if this app sticks? If so, sell on the App Store.
• Is my app more narrowly targeted, and has more functionality? Then build a web version of it, and optimize it for the iPhone, iPad and Android platforms.

The most important idea behind the platform concept is that it needs to be fair to all players. The AppStore started great, but now it’s showing wear and tear. And that wear and tear is coming from business decisions by Steve Jobs.

Basically, Apple is showing that it wants to be the ultimate ad planner and ad buyer for mobile digital. But good ad planners and buyers don’t compete with their customers. That’s the most basic rule.

Through this action, Steve Jobs is going not only after Adobe’s Flash platform, but it’s Omniture web analytics acquisition too.

Steve, I thought you were a Buddhist? How about taking up golf and getting in touch with your softer side?

• Invest in Experience
• Prepare for Regulatory Complexity
• Expect Copycats

His three factors, in my opinion, hit the nail on the head. So how does this affect the average US Internet company which wants to make it in the world’s largest single Internet market (listed by number of users)?

When it comes to investing in experience, most US companies choose someone of Chinese extraction who has worked in the US, not knowing that for the most part, the average ABC (American-born Chinese) knows as little about the Chinese market as any man off the street in the US. Even someone from the PRC who has lived in the US for more than 5 years may not know much about the Chinese market, even though they speak the language, because the market has changed so much so quickly. In the meantime, local Chinese companies have prospered, making mistakes, but the smart ones have learned from their mistakes, getting tougher, stronger and more competitive along the way.

Advantage: local Chinese companies

China is going through a period of regulatory change, and in most cases, Beijing is demanding that the provinces hand back many regulatory decision-making powers that were given to them over the past 30 years of reforms. If you are interested in the macro discussion about this in China, I’d suggest that you read more on GE Anderson’s blog; he goes into considerable discussion about this under-reported discussion.

What this means for the western company coming into China is that you might get caught by regulatory decisions and changes from Beijing, even though you hire expensive consultants to help you navigate your way through this maze. This is not to say that the system is biased against westerners; even leading Chinese companies such as Netease have made major mis-steps in dealing with a changing and opaque regulatory environment.

Advantge: Nobody

When it comes to copycats; they are all over the place in China when it comes to the Internet. US lawyers who specialize in IP love to paint vivid pictures of how awful this situation is in China in order to scare their clients into paying large legal fees to get IP rights protection. Any company would be unwise not to make a certain investment, but they would also be wrong to go overboard.

This is because success in China it is all about executing and learning quickly. To give an example which most Americans are familiar with, it would be like the browser war between Microsoft and Netscape in the late nineties. Netscape came out with the first browser, Mosaic (which soon became Communicator), then some time later, Microsoft introduced Internet Explorer. Netscape sued Microsoft, at which point the legal gears started turning. But by the time the legal system had run its course, Netscape was no longer around as a company, having been bought and absorbed by AOL, which had merged into Time Warner. From a legal standpoint, Microsoft lost the battle, but it didn’t matter, because Netscape was no longer there to collect on its winnings.

Now, China is like that, except the market is changing much faster. And when it comes to execution, the Chinese companies can make the changes faster because they don’t have to explain their changes to someone in Mountain View or New York who has never worked outside the US in their whole careers.

Advantage: Chinese companies

At this point, you may be thinking that it would be wrong, even insane, for a western company to enter the China market. That is not my point. Instead, I would argue that most western management teams get overly enamored of the huge promise of the Chinese market, and in the process, overlook what it takes to succeed in ANY market. And, I would like to point out that because of changes in the technology and business ecosystem, there are more opportunities than ever everywhere, not just in China, and the initial investment costs required to test the waters are much lower.

The platform I have found most engaging is the iPhone business ecosystem, which I have been enthusiastic about since the very beginning in March 2008. Since I wrote that article more than two years ago, the iPhone and AppStore have turned into a thriving market all over the world. A few individual developers and software companies have become successful, even wealthy, over this market, which now includes 50 million iPhone users worldwide, and if you include iPod touch owners who also buy apps, now total 85 million.

When I look at this market, I see the long tail which Chris Anderson first talked about. When Anderson spoke about the long tail, he was talking about companies getting more and more of their revenue from small customers, and moving away from the 20/80 rule, which dictated that 80% of business comes from 20% of customers. When western marketers look at China, they see $ signs in their eyes, and think of money flowing into their bank accounts on a daily, even hourly, basis. To a large extent, the Chinese government wants to perpetuate this view; it serves to attract foreign investment into China. But in reality, there has been no western Internet company which has made it big in China. In this respect, the reality of China has never lived up to its promise.

However, I believe that there is a change and opportunity underway for the long tail to finally come to China, in the form of the iPhone platform. (The Android platform is in a state of flux because of Google’s recent troubles with the Chinese government; the three government-owned carriers don’t seem to be know what to do.) In China, the iPhone is sold and distributed through the China Unicom network.

So let’s say you are in the software business, and you want to build your presence in China. You have two choices:

• You can go the traditional route which Bill Bishop outlined and which many other companies have taken, including Google.
• You can build games and apps in Chinese, which are distributed through the AppStore, relying on Apple as your channel. But along the way, you can learn about each individual market at very little cost. And you can do this ANYWHERE.

If you go the first route, you may or may not succeed, and you will have spent millions in the process. If we look at what has already happened, the odds are against you.

If you go the second route, you may or may not succeed, but your costs are much lower, and you will learn a lot about what Chinese like, and maybe even make a little money in the process. Then you can decide how much you want to commit to the China market.

Maybe it’s time to look at things a new way.

You decide.

Like other Apple fans, I get excited at the new hardware the company puts out on a regular basis. I have reconciled myself to the fact that the top-of-the-line Macbook Pro I now use will shortly be replaced by a newly refreshed iteration of this line, and I will soon torment myself when I see others with their newer computers. The sames goes for my iPod touch.

I am also a fan of Steve Jobs; he shows what can be done by a very smart guy who has fallen down a few times in life who now has a good plan, and who just focuses on implementing his plan. The guy knows exactly what he wants, and doesn’t let anyone or anything get in the way of his plans. He is the poster boy for a smart authoritarian and autocratic management in an organization. I’m convinced that without a firm grasp of the challenges the company faced in 1997, Apple would have quickly gone into bankruptcy.

Steve Jobs saved Apple.

This is why I get upset with the company’s policies towards China. I mean, for Apple to criticize the Chinese government for not being open and nice to minorities is just completely wide of the mark.

With this in mind, let me show you how the Chinese government, in comparison to Apple’s management, is in fact much more open and democratic:

• China now has a group leadership on the national level. Who is in the group leadership at Apple? And how much do you see others besides Steve Jobs talking about “different directions” at Apple?
• Who is going to be the successor to President Hu Jintao. I can name several candidates including Xi Jinping, Bo Xilai, Zhou Yongkang, just to name a few. Who is going to succeed Steve Jobs? I can’t name any.
• Leaking any information about any new products which have not yet been announced at Apple are grounds for immediate dismissal. Same goes for China.
• Apple employees are not allowed to publish unofficial blogs without company permission. Doing so may be grounds for dismissal. China has 100 million blogs; all of them are unofficial.
• In private meetings with Steve Jobs and Apple senior and executive management, the senior and executive management turn and look to Steve Jobs for permission to speak before speaking, even when they are addressed directly. The Chinese national government leadership is more relaxed than Steve about other senior officials speaking about national affairs.
• For many Apple employees, the most dreaded moment is sharing the same elevator ride with Steve. If he talks to them and he asks what they do, and they go not give a good response, he just might terminate them.

Basically, Apple (the company) is an extension and implementation of one man’s (Steve Jobs) vision of what the consumer electronics and computing industry should look like. And ironically, laws in the US permit Steve Jobs to run his company in a very autocratic fashion. I have not yet heard of people being “dismissed” from China because they were not productive according to one ruler’s definition. On the contrary, the Chinese government goes out of its way to keep the Chinese economy on a growth track, creating more jobs. (I must admit that I think many of these jobs are of questionable value, but that’s another discussion.)

And yet, Apple doesn’t like things the Chinese government does because they are less than democratic and are autocratic? How many current Apple employees do you see protesting at the way the company is run? I’ll tell you how many there are.

Zero, nada, zilch.

Sure, Steve Jobs is running a company and the Chinese government is running a country, but is there anything to suggest that Steve would act any differently and suddenly become open and democratic if he were running a country?

Come on Steve, look in the mirror. When it comes to autocracy, the Chinese government can’t hold a candle to you.

I’m really trying to wrap my mind around this and am trying very very hard to understand Apple’s criticisms of China. If anyone can explain this to me, I’m all ears.

For this transgression, China Mobile is:

• Saddled with China’s own 3G mobile standard, TD-SCDMA, which by China Mobile’s own admission is behind the competing western-developed standards;
• Facing new marketing rulings which stand to help China Mobile’s competitors, especially the newly resurgent China Telecom;
• Even considering partnering with Apple to distribute the iPhone in China. The only way this would make sense for both parties is if Apple agrees to build China iPhone3Gs with the TD-SCDMA chipset, since TD-SCDMA is not currently supported by the iPhone3G.

The greatest beneficiary of the great China Mobile slapdown is China Telecom, which has shrewdly positioned itself as an underdog to the China Mobile bully. With its recent rulings, the State Council is cheering on the underdog.

China Telecom, for a long time, was the odd man out, until the May telecom ruling allowed it to introduce 3G mobile services in direct competition with China Mobile and China Unicom.

Obviously, the Chinese government feels that there is a lot of room for pruning back on China Mobile’s dominant position in the mobile market.

Now, there are early signs that the strategy is paying off for some early application developers who have developed popular apps for the iPhone and iPod touch (which uses the same SDK as the iPhone) users. Eliza Block, who developed 2 Across, a word game for the iPhone platform, has reportedly cleared in the area of $2,000 a day according to this article.

The App Store is a new updated version of the shareware movement which took hold in the early 80s with the launch of the Apple Macintosh 128K. In those days, homebrew developers would develop games, apps and productivity tools which were distributed on floppy disks. (Remember those? If you do, you’re showing your age.) More often than not, these came with a message which went something like “If you liked this app, please show your appreciation by sending a contribution to this address.” More often than not, people just used the apps without sending money, although there were a few kind and generous souls who did.

Now, Apple has become the doorkeeper for these independent developers. There is no more reliance on the kindness of strangers; Apple takes care of global distribution and payment for new apps in return for 30% of the app’s sales price. For devs, the App Store is the perfect barometer for what’s hot and what’s not.

In contrast, Facebook and others have not been able to find the magic balance point between independent developers and their own corporate needs for revenue. When Facebook opened its platform to developers, it ended up enabling app developers to spam the FB audience, driving many away from Facebook. Now, with Facebook Connect, FB is trying to find that balance point.

Chinese social media companies are no better at finding the right balance between independent devs and their own need for revenue. While there has been talk about open systems in China, all of the competing business models in fact, are not open. Apple’s system is certainly not open. it’s just that Apple is willing to share in order to grow the pie.

Apple and Steve Jobs have successfully put themselves at the juncture of technology, business and hardware, and are willing to share a larger cut in order to drive up sales of a very attractive new hardware platform. With growing earnings from hardware sales, Apple can afford to be generous with devs, and is effectively subsidizing a new business ecosystem. By making some independent developers financially successful with App Store and getting that word out, they do something none of their competition have been able to do yet.

The question for Chinese companies such as Tencent is whether they are willing to use their high corporate earnings to subsidize their own independent developers’ business ecosystem as Apple has, and share some of the revenue in order to grow the pie for everyone? Or do they still think that they can own the whole pie? Tangos Chan says that they still believe that they can own the whole pie.

But Tangos believes that this will change in the future. In the meantime, more independent devs will gravitate to developing for the iPhone platform. It’s better to open up sooner while there is still interest in their platform because opening up later means that they will have to be that much more generous in order to attract developers away from Apple’s platform.

After all, that’s where the money is. And I’m sure that Steve loves how his competitors’ moves help his platform.

What more could he ask for?

But occasionally something finds its way through the cracks.

This article is really exemplary; it seems like the writer has taken all the stereotypes about Apple and China, and thrown them all together in one basket. Judging from the tone of the article, and what he professes to be truth, it seems like he has never set foot in China. Otherwise, how could be believe some of the things he writes?

Let’s take a look at some of the choice statements:

Apple has less than 8 percent market share in China for media players, and far less than 1 percent of either PC or cell phone market share.

Yes, so? I wonder if the writer has walked into any cafe in Shanghai, Beijing and Shenzhen, and looked around? Or has he taken any of the subways in any of those three cities and looked around for the signature white earbuds? The question should not be the percentage market share. It should be the trend, and whether it is tracking up or down.

Apple’s second biggest hit in China, the iPhone, isn’t authorized. One Chinese analyst estimates that some 1 million Apple iPhones are currently operating on just one Chinese carrier — China Mobile — with a smaller number on other carriers. Most Apple “Authorized Resellers” in China sell black-market iPhones, and many even offer illegal cracking services — a process that reportedly takes less time than activating an iPhone 3G in California.

Apple makes money off of every iPhone sold, whether it is through authorized or unauthorized channels. Sure, Apple would like to have a carrier agreement in China, but having a group of fans, even though it is relatively small percentage-wise, which is very enthusiastic about Apple products, is a good thing. Besides, there are a lot of people in China who pay even more for more expensive feature-packed mobile phones in China. In fact, the iPhone is not the most expensive phone in the market. Ask Nokia.

Apple succeeds because customers love the products and the brand. But in China, brands mean little to most potential customers, and hardware even less. Chinese consumers prize value above all.

This quote is a true gem and qualifies as one of the most ignorant sweeping statements about China for 2008, even though we are only halfway through the year. Obviously the writer has not been to China and walked in the downtown of any major city. Here is an article about the runup to the recent opening of the Sanlitun store in Beijing and another story about Chinese youth camping out in front of the Beijing Apple store, where they were behaving just like American Apple fans.
I guess that’s why there are no Mercedes Benzes, BMWs, and Chinese women don’t care about the labels they wear? Maybe he thinks that they still wear Mao suits?

The rest of the world’s love of the Apple brand has enabled Apple to get favorable terms with carriers around the world. But this hasn’t helped much in China. Apple initially demanded a big two-digit percentage of carriers’ wireless revenue as a condition for granting its coveted exclusivity deal, according to reports (one company says Apple demanded 30%). The Chinese carriers were apparently unimpressed by the value of Apple’s brand compared with the value to Apple of access to Chinese consumers. They appear to have forced Apple to drop its demand for any share of wireless revenues.

The reason Apple has not been able to get an agreement with China Mobile is because they are both big companies with very big egos who want to control everything. I would say that Apple and the carriers have trouble reaching an agreement because they are so much alike, and don’t believe in compromise.

One-party rule in China actually affects product quality. One example is that Apple will probably be required to disable the iPhone’s Wi-Fi feature in order to comply with the Communist Party’s strict Internet control and censorship rules.

The relationship between one-party rule and product quality is an arguable point. But if it is that simple, then why are ALL of Apple’s products made in China? As for the disabling of Wi-Fi on phones sold in China, that is a China Mobile requirement, not a State Council requirement. (If you think that the rulers of China don’t have better things to worry about than whether mobile phones in China have Wi-Fi functionality, you don’t know anything about the country and how it’s ruled.) Besides, with the recent re-arrangement of the Chinese telcos, it’s not as if China Mobile is able to control Wi-Fi as much as it would like.

China is number one in intellectual property theft

Apple’s whole business model is based on creating value through exquisite design, superior branding and the sale of creative intellectual property (IP) — then defending its rights against the IP thieves, pirates and counterfeiters.

How will this formula succeed if China doesn’t enforce intellectual property laws?

The music piracy rate in China is between 90 and 99 percent, depending on whom you ask. China is the global epicenter of intellectual property theft in general, and of Apple IP theft in particular — especially iPhones and iPods.

Fake iPhones, and phones that steal Apple branding; illegal iPhone unlocking services; trade in illegal movie and music files; all appear to be tolerated and even government-protected activities in China.

Oh yes, how can we talk about China without IP violations? Seriously though, this is an issue. The best way to fight IP though, is for a country to get more prosperous. As people become wealthier, they are more willing to spend money on software, music, etc. In China, it is also very important to explain the importance of IP to various government ministries, and even be flexible about how much you charge Chinese consumers. Many Chinese think that they should not have to pay as much for music as US consumers because they have a lower income and standard of living. Does that fit into any American companies’ equations? Up until four years ago, Microsoft had a very high level of illegally installed Windows licenses in China, and constantly lobbied with the US Congress to “punish” China. When Microsoft China changed tactics and chose to engage Chinese ministries, educate them, and lower the license fees (as China’s standard of living increased), first the ministries, then the schools, then the people started buying original software from Microsoft. Now Microsoft gets more revenue from China, and the relationship with the government is much less confrontational. Piracy of Microsoft software still exists, but again it’s about the trend, which is improving.

Steve Jobs is an exemplary business and marketing genius. But when it comes to learning about other markets, he is lazy. He would like nothing better than to set prices for all media products sold through iTunes himself, and he would like it to be the same all over the world. China is a major kink in his vision.

How many times has Bill Gates been to China? How many times has Steve Jobs been to China?

I rest my case.

For many of those users, there is the fear that once Apple ties up with a Chinese carrier and starts offering the iPhone3G in China, their first-generation iPhone will become an iBrick because it will not be recognized by the Chinese carrier and/or Apple, and there will be no upgrade path. (Apple and Steve Jobs are kind of famous for not particularly caring about background compatibility and upgrade paths. If you’re screwed, you’re screwed.)

Fortunately, Matt Cutts of Google has posted an article on his blog called “5 Steps to Upgrade From a Hacked iPhone To and iPhone3G”. The article is written for an American audience, but there is no reason why it could not apply to an iPhone user in China (or anywhere else).

The good news is that your first-generation iPhone will not become an iBrick, and you can likely sell it on Taobao. The bad news is in step two: there’s no way you can avoid spending money on another cool device from Apple.

UPDATE:One week after its release, the iPhone3G has been pwned (that’s geekspeak for cracked). So do you want to go legit or are you hardcore for open? It’s your call.