Spoutin' Off: Reasons behind missing iPhones

By Michael Rau

April 7, 2008

As I've occasionally noted, I really don't like writing about the same subject in two consecutive columns, but there are developments from Apple that impact some of the things I wrote about previously, and I don't want you to have incorrect information because of it.

In what some are referring to as the “Great Missing iPhone Mystery”, analysts and journalists are rampantly speculating on the whereabouts of some 1.4 million missing iPhones.

Back in February when the missing units first started to become noticeably absent from the supply chain, the speculation was that Apple was somehow hiding these phones to enable giving out inflated sales figures for the devices.

But now, there at least three competing theories as to what happened to the missing handsets.

The least rampant of these comes from Sanford C. Bernstein analyst A.M. Sacconaghi Jr., who simply believes that there is simply a genuine shortage of phones owing to strong sales.

The most interesting of the three comes from an anonymous poster to a respected tech blog, and has a flavor of international intrigue to it.

You've probably heard of the so-called “Gray Market”. This is the sort of virtual marketplace that exists for products that, while not necessarily against the law to own in any given locality, have no legitimate means of being imported or exported from one country to another.

The most common application for this term is in the buying and selling of high-end exotic automobiles. Many people with money to burn and a need to own something unusual will pay extraordinary amounts of money over cost to bring in cars that are models that won't meet normal U.S. emissions or safety standards, but for which loopholes exist to get them through customs.

In this case, the gray market demand for iPhones is apparently much greater than normally would be expected for an electronics device. The market for these is in countries with emerging economies that don't yet have access to an officially sanctioned iPhone service, including China, India, Brazil, and countries in the Middle East.

According to the Washington Post, a conservative estimate of the number of iPhones currently being bought up for gray market resale is 15-20,000 per week. The phones are then shipped overseas and unlocked by a hacker to allow them to operate on generic cell networks. Some of the gray market resellers are reportedly going so far as to offer tech support on the hacked phones. I could find no reference as to exactly how much of a premium buyers might be paying to lay hands on a gray market iPhone.

There's no definitive evidence that this is where those 1.4 million iPhones have gone, but it's an intriguing speculation.

It's actually the third theory which interests me the most, and frankly, based on past experiences with Apple, is entirely plausible.

ATT Mobility president Ralph de la Vega made a statement last week in which he strongly hinted that the release of a 3G iPhone compatible with their domestic network was not too far away. This indicates that such a release may not wait until the reported September introduction slated for Singapore that I mentioned in my last column.

Many industry watchers are speculating that the reason the supply of iPhones is drying up is that the release of the 3G version is weeks, if not days, away.

If you consider the pre-release pattern Apple has demonstrated in the past - namely allowing their inventory of a soon-to-be obsolete model of a product to dwindle - then the fact that current generation iPhones have become hard to come by is a likely indicator that a new model is on the way.

Of course, Apple is notorious for its ability to hold such developments very close to their vests (which is why it's so much fun to try and crack their corporate secrecy). But based on past behavior and circumstances, I'm betting it's true.

There's also one other possible indicator of this development. Intel has announced it has begun shipping its “Atom” line of microprocessors.

So why is this a big deal? The processors in the Atom line are smaller in form factor and more importantly, use significantly less power than current chips. Their not as powerful as say, the Core line of chips currently used in Apple Notebooks, but the smallest of the Atom chips draws 10% as much power as a Core processor.

3G cell devices require significantly more power to access the network and run effectively. iPhones, in turn already require more power than a normal cell phone, or even a smart phone like a Blackberry because -well - they do so much more than those devices.

Many manufacturers of ultra-portable devices are lining up to take advantage of this new chip and there's little doubt that Apple is one of them.

So is that 3G iPhone I've been waiting for about to pop up in the market? It's looking that way…

Michael Rau is a mass-communications consultant in Virginia Beach. To send feedback or view past columns, go to http://dailypress.asoundidea.com.

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