Where do unlocked iPhones end up? China

I've done a lot of interviews about gray market entrepreneurs who would walk into the 5th Avenue with piles of cash and buy 5 iPhones each. I have always assumed these phones would be unlocked and then exported for resale in other countries where no legitimate iPhone channels exist. After all, there are 193 countries with representatives in the UN, and only three of those have legitimate ways to buy iPhones today; I presumed that these iPhone buyers simply saw an opportunity to supply the other 190 countries.

But Wired News today has what I think is a pretty good clue about we can assume many of the gray market phones have actually ended up. The article is titled China's New 'Love Craze' — Black Market iPhones, and it has this telling paragraph:

The iPhone is readily available in computer superstores in most large Chinese cities. In Beijing's Zhong Guancun, a 15-story mall filled with technology vendors, almost all the stalls are stocked. Two weeks ago, the blogger of Too Many Resources for the iPhone asked several of these vendors whether they could sell him 100 iPhones. They all answered "No problem."

With more than a billion consumers, China has the potential to consume Apple's entire iPhone production output for several years, especially if Apple provided a built-in SMS program that supported Chinese. I have to assume that such a product and plan is on Apple's radar for 2008. But with no Chinese carrier signed to date, no official supply of iPhones, and no Chinese texting software, Chinese entrepreneurs have come up with their own answer for Chinese consumers looking for iPhones: No problem. And I have to believe that's because they have a pretty reliable source of iPhones through Mom and Pop US exporters.

Technorati Tags: Apple, China, iPhone, Gray market, Wired