Summary
Entering China is a dream for every cellular end equipment manufacturer. However, Apple is not "every" cellphone producer. Retaining its unique position will cause changing its revenue/royalty model because China is not just another country.
Analysis
The huge and growing market of cellular users in China attracts every cellular end equipment manufacturer. Apple is not different but it will do it in its own business model.
It is obviously unrealistic to sell the iPhone for $500 in China due to the different salary scale compared to US and Europe. Riding on the hype wave of the iPhone and the young Chinese generation makes it an ideal match to heavily subsidize the product and gaining revenues through add features and services. Using iTunes as the basic selling platform for many open applications will re-model the business structure Apple is usually using. 350 million users is a market segment Apple cannot and does not want to ignore. As iTunes is already the biggest music store, it seems just natural to have it served as the by-side revenue generator in an elegantic way by spreading the hansdet cost over 24 or 36 months.
