The mercurial U.S. smartphone market has a new favorite and it’s not the iPhone.

It’s Android, which is now the leading smartphone OS in the States in market share, according to a survey released this morning by Nielsen.

As of March 2011, 37 percent of smartphone users own an Android device, said Nielsen–significantly more than the 27 percent who own an iPhone and the 22 percent who own a BlackBerry.

That’s quite a shift from last October, when 27.9 percent owned an iPhone, 27.4 percent a BlackBerry and 22.7 percent an Android device. But evidently there’s a new trend in smartphone buying intent and it favors Android.

Nielsen’s latest figures show 31.1 percent of consumers planning to purchase a new smartphone leaning towards an Android device, up from 25.5 percent last fall. Meanwhile, 30 percent intend to buy an iPhone–down from 32.7 percent last fall–and 10.5 percent want a BlackBerry, down from 12.6 percent. As the research house notes, that shift in preference is already translating into sales. Half of those surveyed in March 2011 who purchased a smartphone in the previous six months said they bought an Android device.

Apple Inc. is working on the first of a new line of less-expensive iPhones and an overhaul of software services for the devices, people familiar with the matter said, moving to accelerate sales of its smartphones amid growing competition.

One of the people, who saw a prototype of the phone late last year, said it is intended for sale alongside Apple’s existing line. The new device would be about half the size of the iPhone 4, which is the current model.

The new phone—one of its code names is N97—would be available to carriers at about half the price of the main iPhones. That would allow carriers to subsidize most or all of the retail price, putting the iPhone in the same mass-market price range as rival smartphones, the person said. Apple currently sells iPhones to carriers for $625 each on average. With carrier subsidies, consumers can buy iPhones for as little as $199 with a two-year contract.

Where the new line would be introduced couldn’t be learned, but Apple recently has released products first in the U.S. and a few other markets before rolling out the devices more broadly.

Three weeks into his medical leave, Apple CEO Steve Jobs is staying closely involved in the company’s decisions and product development, Yukari Kane reports.
.Apple also is exploring a major revamp of its MobileMe online storage service, the people familiar with the matter said. The service, which lets users store data in a central location and synchronize their calendars and contacts among computers and other devices, currently has an individual annual subscription fee of $99. Apple is considering making MobileMe a free service that would serve as a “locker” for personal memorabilia such as photos, music and videos, eliminating the need for devices to carry a lot of memory, the people familiar with the situation said.

MobileMe, part of an industry wave known as cloud computing, also could become a focal point for a new online music service that Apple has been developing for more than a year, the people said. Social networking would be another key component, one of the people said.

MobileMe and the new line of iPhones are among the top priorities of Apple Chief Executive Steve Jobs, one of the people said. Though Mr. Jobs, 55 years old, went on medical leave for an undisclosed health issue last month, he has been closely involved in the development efforts, the person said.

The new line of iPhones and the revamped MobileMe are intended for release this summer, though those plans could change, the person said.

Mr. Jobs by email declined comment. An Apple spokeswoman also declined comment.

Bloomberg News reported earlier that Apple was working on a smaller, less-expensive iPhone.

Apple’s work on the iPhone and MobileMe come as the cellphone market is heating up. Nokia Corp. last week said it would adopt Microsoft Corp,’s Windows Phone as the Finnish company’s main smartphone operating system. Hewlett – Packard Co. meanwhile unveiled a tablet computer and smartphones based on a platform the company acquired last year.

Cellphone makers are expected to introduce an array of new models at an industry conference this week in Barcelona. Many of them will likely run on Google Inc.’s Android operating system. Research company IDC expects global sales of smartphones to rise 39% this year to 421 million units.

The iPhone has led much of the cellphone industry’s innovation, and 84.2 million units have been sold since the device was introduced in 2007. Still, the iPhone’s industry-wide global market share was just 3.4% last year, according to IDC, in part because of the device’s higher price compared with many other phones.

IPhones nevertheless are critical for Apple, generating 39% of the $26.7 billion in company revenue for the latest quarter. Apple last week began selling its iPhone 4 through Verizon Wireless, a move that could add seven to 13 million units in sales this year, according to analysts. The carrier is a joint venture of Vodafone Group PLC and Verizon Communications Inc.

The person who saw the prototype of the new iPhone said the device was significantly lighter than the iPhone 4 and had an edge-to-edge screen that could be manipulated by touch, as well as a virtual keyboard and voice-based navigation. The person said Apple, based in Cupertino, Calif., also plans to upgrade the iPhone 4.

The new MobileMe file-storage and music service could be available as early as June, depending on the progress of licensing talks that are in their preliminary stages, the people familiar with the situation said. Apple had planned for the service to roll out a year earlier.

The new service would give users access to their iTunes libraries from, say, an iPhone or iPad, instead of requiring that the devices be synced by cable with a computer and use space to store the actual files, the people said. The new service likely would be compatible with the iPhone 4, one of the people said.

Some MobileMe features, such as a service that locates lost or stolen iPads and iPhones, already are free.

Verizon Wireless stopped orders for the iPhone after selling through its initial inventory.
Verizon Wireless, the biggest U.S. wireless carrier, sold through its initial inventory of Apple Inc. iPhones in less than a day after starting to offer the device to its current customers.

The preorders were halted at 8:10 p.m. New York time yesterday, about 17 hours after they began, Verizon said today in a statement. All potential buyers can order online on Feb. 9, and the devices will be in stores on Feb. 10, according to the company’s website.

The touch-screen smartphone broke Verizon’s first-day sales records in its first two hours, Dan Mead, chief executive officer of Verizon Wireless, said in the statement. Verizon said last week the iPhone may help drive sales and profit up as much as 8 percent this year, if the company can sell 11 million of the phones.

“Verizon rolled out a very targeted campaign toward their own base to upgrade the device,” Jennifer Fritzsche, an analyst at Wells Fargo & Co. in Chicago, said in a note to investors today. “We note both companies had said that inventory would be limited.”

Verizon isn’t disclosing how many phones were sold, spokeswoman Brenda Raney said.

Previously, U.S. customers could only get the iPhone on the network of AT&T Inc., the country’s second-largest wireless carrier.

Verizon Communications Inc., which co-owns the wireless company with Vodafone Group Plc, fell 3 cents to $36.35 in trading before U.S. exchanges opened, after closing at $36.38 on the New York Stock Exchange yesterday. Apple gained 56 cents to $344 in early trading, after closing at $343.44 on the Nasdaq Stock Market.

Apple has redesigned the iPhone 4’s antennas for Verizon, perhaps to foil the “death grip” problem that roiled AT&T customers last summer, an expert said today.

“They’ve moved things around, and my guess is that they went to a dual antenna,” said Spencer Webb, an antenna engineer with nearly a dozen patents to his credit, and president of AntennaSys, a mobile device antenna design and consulting firm.

Webb was reacting to photographs that have been published on the Web that show a different configuration for the slots in the external stainless steel frame, which houses the phone’s antennas.

Shortly after the introduction of the AT&T iPhone 4 last summer, customers complained that holding the device in certain ways or touching it in specific spots lowered signal strength and dropped calls.

Experts, including Webb, explained at the time that placing part of one’s hand over a slot degraded performance by bridging the separate antennas, changing the length of the cellular antenna and thus its ability to receive and transmit.

The iPhone destined for Verizon has four such slots, one near the top, the other near the bottom on each side. The original iPhone 4 sported three slots, one on the top, and one low on each side.

Based on the number of slots and their symmetrical position, Webb speculated that the Verizon iPhone has two identical cellular antennas. Covering a slot on one side of the new iPhone may hamper reception, but the phone should still be able to receive and transmit properly as long as the other isn’t similarly bridged by a finger or palm.

“That looks like it’s a possibility,” said Webb, who was taking an educated guess — as everyone will be doing until Verizon’s iPhone goes public on Feb. 10. “Apple might have done something clever here by scrambling to come up with a better solution — two cellular antennas.”

Others have also said that Verizon iPhone has multiple cellular antennas.

The technology site AnandTech, which was among the first last year to quantify the signal loss caused by a “death grip” on the iPhone 4, said that Verizon requires dual-receive antennas for devices that access its network.

AnandTech, however, claimed that the top of the Verizon iPhone — the frame segment defined by the two slots at the top of either side — was the second receive antenna.

On AT&T’s iPhone, the top of the frame was split with a slot; one segment was part of the cellular antenna and the other was a section of the Wi-Fi, Bluetooth, and GPS antenna.

If the top of the Verizon iPhone is a second receive antenna, what happened to the one for Wi-Fi?

Webb thinks he knows.

“There’s evidence that Apple moved the Wi-Fi antenna into the case, under the glass back,” said Webb after poring over available photographs and looking at the some of the smartphone’s testing documents published this week on the Federal Communications Commission Web site.

One clue that the move was feasible is the lack of a SIM card slot; AT&T’s model has one, but Verizon’s does not.

“As soon as you get rid of the SIM card, you get a whole lot of real estate inside the phone,” said Webb. “Enough to shove a Wi-Fi antenna behind the glass back.”

By moving the Wi-Fi, Bluetooth and GPS antenna inside the iPhone, it freed space for Apple to craft two cellular antennas within the steel frame, Webb added.

Unlike journalists and bloggers who had brief hands-on time with the Verizon iPhone at the Tuesday launch event, Webb declined to speculate on how well the new antenna design will handle calls and data, or whether the “death grip” problem may return to haunt Apple.

“We’ll see how it works next month, but I think the steps Apple took were all good,” said Webb.

Google’s Android platform is most often compared to Apple’s iPhone, because they’re the two most advanced smartphone platforms, belong to the two giants of Silicon Valley, and because they compete over consumer mindshare, developer mindshare, and bragging rights.

But if you look at the data, it’s not the iPhone that has necessarily suffered the most from Android’s rise. It’s RIM and the BlackBerry.

Earlier this week, we ran a chart showing comScore stats for U.S. Google Android subscribers by carrier, noting that Verizon was responsible for about half of Android’s subscribers in the U.S. (The context is the new Verizon iPhone, which kick-starts a new stage in Apple’s war with Google.)

At Asymco, Horace Dediu then added a few months’ worth of AT&T iPhone subscriber data to our chart, showing how much bigger the iPhone is than Android at AT&T.

Now we’ve added the full year’s worth of AT&T-iPhone data, and as you can see in the chart above, it’s still growing nicely, despite the rise of Android at every other carrier.

But what’s just as interesting is how much RIM and the BlackBerry have suffered at Verizon because of Android’s gains there. Verizon was once RIM’s most important carrier partner; now the BlackBerry is about to become Verizon’s third-favorite smartphone platform.

Over the last year or so, RIM — led by the crappy flagship BlackBerry Storm, remember that? — fell to 45% of Verizon’s smartphone subscriber base in November, 2010, per comScore. That’s down from 69% of Verizon’s smartphone subs in November, 2009.

Meanwhile, during that time, Android rose to 44% of Verizon’s smartphone subscriber base, up from 2% the year before. (For the record, these comScore stats represent 3-month averages ending in the months specified.)

Because of the growth of the smartphone market, RIM managed to keep its absolute number of Verizon subscribers flattish until it started dropping late in 2010. But compared to Android’s growth during that time, it’s very troubling.

The bigger question going forward is whether Android will keep growing at Verizon now that it’s going to start selling the iPhone. And, then, what the heck happens to RIM?

Verizon Wireless has strengthened its 3G network in the New York metro area, perhaps anticipating an influx of new 3G subscribers following its iPhone 4 announcement yesterday.

Today, Verizon flipped the switch on 16 new cell towers around the state, including New York City, Palisades, Yonkers, Medford, and a dozen other sites.

For the full list, see Verizon’s press release.

“The iPhone is a great and exciting addition to our large portfolio of 3G smartphones,” Verizon spokesman David Samberg told PCMag. “To support the increasing sales and usage of all our 3G products, we continue to invest in the 3G network and expand both coverage and capacity. We like to stay ahead of demand, not play catch up.”

According to Verizon’s statement, the cell towers will boost reception and lead to fewer dropped calls, faster download speeds, and high-quality viewing of videos and VZ Navigator’s turn-by-turn directions.

“As it stands now, the 3G network is what most of our customers are using now. While many will eventually cross over to 4G for business applications and heavier data usage, a good percentage will find that our 3G network will continue to suit their needs very well for the foreseeable future,” said Pat Devlin, New York Metro region president for Verizon Wireless, in the statement.

It remains to be seen how the new cell towers will affect Verizon’s performance in New York. In PCMag’s search for the Fastest Mobile Networks 2010, our analysts found that AT&T actually performed faster than Verizon in New York, though Verizon’s reception was more reliable. The test did not include Verizon’s month-old 4G LTE network, which many expect will carry the iPhone in the future.

After months of speculation, Verizon Wireless said Tuesday that it will make Apple’s wildly popular iPhone available on its cellular network.

The announcement, which has been widely anticipated because of problems with AT&T’s network, is also good news for Qualcomm. Analysts believe the San Diego wireless giant will be the supplier of radio chips for the new iPhone. Qualcomm declined to comment.

AT&T has had an exclusive deal with Apple to sell the iPhone since the device was introduced in 2007. The iPhone led the way for consumers to download applications and connect wirelessly to the Internet.

But all that data traffic — which exceeded AT&T’s expectations — sometimes overwhelmed the company’s capacity.

Verizon’s main sales pitch has been the strength and coverage of its network. That strength could be tested if the iPhone becomes a runaway hit with its subscribers.

In a news conference in New York, Verizon Wireless said it will begin selling the iPhone 4 at its stores Feb. 10. Prices range from $200 for 16 gigabytes of memory and $300 for 32 gigabytes of memory with a two-year contract. It did not give details on its data plans for the iPhone.

For Qualcomm, the iPhone coming to Verizon most likely means that the San Diego wireless giant will have a baseband radio chip — the modem for data and voice — in the phone.

Today, Qualcomm doesn’t have a chip in the iPhone. AT&T’s 3G network is based on a technology standard for which several companies make baseband modem chips. Apple uses one of Qualcomm’s competitors.

Verizon’s 3G network, however, runs on Code Division Multiple Access (CDMA) wireless technology pioneered by Qualcomm, and the San Diego company dominates the market for radio chips that work on the most advanced CDMA networks and devices.

“It should be good because incremental volume (in chip sales) increases for Qualcomm, but there also could be some cannibalization,” said Vijay Rakesh, managing director of investment firm Stern Agee in Chicago. “But it’s a net positive because volume is always positive.”

Consumers may choose to buy the iPhone 4 instead of some competing brand of smart phone that uses Qualcomm chips, hence the potential for ”cannibalization.”

But analysts also think the biggest potential market for the iPhone 4 is existing Verizon customers who want to trade up from basic phones to smart phones, which can access the Internet and download applications.

In addition, analysts don’t forecast a large migration of AT&T iPhone users to Verizon, in part because they still have months or years remaining on their wireless service contracts.

“I think a majority of iPhone volumes for Verizon are going to be internal to Verizon,” said Francis Sideco, principal analyst for wireless communications for IHS iSuppli, an industry research firm. “From Qualcomm’s perspective, that’s actually a good thing.”

There also is potential for growth internationally, Sideco said. Now that an iPhone is available on a CDMA network in the U.S., overseas wireless operators with CDMA networks could soon begin selling the device as well.

“We believe that at some point in the year, probably China Telecom in China, or may one of the other global CDMA guys, will take advantage of this version of the iPhone.”

iSuppli forecasts that Apple will ship 12.1 million CDMA iPhones through Verizon and other global carriers in 2011. That will help boost total iPhone shipments 24.5 percent this year compared with 2010.

Craig Berger, an analyst with FBR Capital Markets, said in a research note to clients in November that Qualcomm may be developing a stronger business relationship with Apple.

He said that Qualcomm chips could ship in all iPhones and iPads by mid 2011, including those on non-CDMA networks like AT&T’s.

In that case, Qualcomm would replace the existing radio chip supplier Infineon, which is selling its wireless chip business to Intel. Berger recently raised the price target for Qualcomm’s stock from $52 to $55 a share.

Apple Inc. watchers are already doing rough calculations and think Verizon Wireless could generate sales of millions of iPhones this year.

Verizon has invited reporters to a press event where it is expected the wireless carrier will announce it will carry the iPhone. At the Consumer Electronics Show, conference goers weighed in on the news.
.Sales estimates vary, but many analysts agree Apple will likely sell 9 million to 12 million iPhones on Verizon’s network this year, a huge boost in the iconic phone’s most important market.

To put that into perspective, AT&T Inc. sold 11.1 million iPhones in the first nine months of 2010. Piper Jaffray & Co. estimates a full-year total of 14.5 million iPhones for AT&T, accounting for 12% of Apple’s overall revenue and 30% of its iPhone sales. In its fiscal year, ended September, Apple reported revenue of $20.34 billion.

Verizon, the country’s largest wireless carrier, will have the phone available in stores around the end of the month, a person familiar with the matter says.

.Piper Jaffray analyst Gene Munster said Wall Street is expecting sales of the new Verizon iPhone to boost Apple’s overall sales by 5%, though he believes it could have as much as twice that effect if Verizon lures enough new customers to the phone — as opposed to those it steals from AT&T.

“There’s so much pent up demand,” said Mr. Munster, who himself has set a conservative sales estimate of 9 million iPhones via Verizon in the current year.

Some see an even bigger impact. Brian Marshall, an analyst at Gleacher & Co., said he believes the iPhone could capture 5% of Verizon’s customers in its first quarter on sale, a faster rate than when it launched through AT&T in June 2007.

“There’s probably around 17 million subscribers on AT&T that use the iPhone cumulatively — I think over time Verizon could be even bigger than that,” said Mr. Marshall, who has set a 2011 sales estimate of 12 million units.

Verizon had 93.2 million subscribers at the end of September. The company not only stands to win new subscribers, but also to increase the percentage of its customers who pay for data service each month. Carriers are looking to data to drive sales growth and offset declining voice revenue.

Heavy demand for the iPhone could put pressure on Verizon’s current suppliers of high-end smartphones.

Motorola Mobility Holdings Inc., which spun off from Motorola early this month, stemmed years of losses last year by focusing on selling smartphones based on Google Inc. software to Verizon, which needed an answer to AT&T’s exclusive hold on the iPhone.

Motorola Mobility CEO Sanjay Jha acknowledged in an interview last month that a Verizon iPhone could widen his company’s losses in the first quarter, but he believes Motorola can still compete, in part by focusing on phones that work on Verizon’s new 4G network.

HTC Corp., another big supplier of smartphones to Verizon, says its devices remain competitive.

Opinions are split on how many iPhone customers Verizon could take away from AT&T. Charles Golvin, an analyst at Forrester Research said he believes initial sales will mostly involve existing Verizon customers who want to upgrade to the iPhone and Sprint Nextel Corp. and T-Mobile USA customers who weren’t willing to switch to AT&T because of its poor network reputation.

AT&T made it easier for its subscribers to upgrade to the iPhone 4 last summer, in the process locking them into fresh two-year contracts. Many other iPhone owners are on the carrier’s family or business plans, making it trickier to switch.

Last week, the carrier also cut the price of an older model of the iPhone, the 3GS, to $49 from $99.

“The percentage that will come from AT&T escapees is going to be relatively small because of the heavy promotion that AT&T did to lock customers to contracts,” said Mr. Golvin. While Verizon could offer to help offset the costs of switching to its network from AT&T, that would be an expensive endeavor, he said.

Kuo Ming-Chi, an analyst for Concord Securities in Taiwan, estimates that Apple’s manufacturing partners in China will ship 7.1 million iPhones compatible with Verizon’s CDMA network in the first quarter. It isn’t clear whether some of those phones could be headed for CDMA carriers in other countries like China or India.

Apple co-founder Steve Wozniak thinks Android will eventually beat the iPhone as a mobile-phone platform in much the same way Windows computers squeezed Apple’s market share in the PC market, he said in an interview with a Dutch newspaper.

In an interview with De Telegraaf reporter Alfred Monterie, Wozniak said that Android will become the dominant smartphone platform. He didn’t write off the iPhone completely, however, saying it “has very few weaknesses” and that, “when it comes to quality, iPhone is leading.” While he admitted the quality of Android phones hasn’t been consistent, he championed the platform, saying “Android phones have more features” and that eventually the quality of the experience will match iOS.

Wozniak had one or two more interesting revelations – notably that Apple had tried to create a super smartphone as far back as 2004. The company had partnered with a well-known Japanese phone manufacturer (that he didn’t name) to make the phone, he said, but it wasn’t quite good enough for Apple.

“Apple was satisfied with the quality but wanted something that could surprise the world,” Wozniak revealed. “If Apple comes with a new product it must have a real breakthrough.”

Finally, Wozniak took a parting shot at Nokia, saying its phones are “the mark of a previous generation.” He suggested the company should launch a fresh brand that appeals to a young audience.

Oct 13, 2010 (San Jose Mercury News – McClatchy-Tribune Information Services via COMTEX) — BEIJING, China — The store clerk polished the iPhone 4 as though it were a diamond. Then he reverentially handed it to Liu Jia.

“You have to have it. It’s like religion,” said Liu, a 29-year-old public relations manager. “I don’t think a lot of people understand the essence of the iPhone, but it looks cool and it makes you a star in front of your friends.” Apple infatuation has officially arrived in the land of 800-million-plus mobile phone users.

The recent launch of the iPhone 4 on mainland China created a frenzy, with fighting breaking out among shoppers at Apple’s flagship store, located in a high-end shopping and bar area of Beijing called Sanlitun. The store had to be closed to restore order. Shortly after the latest version of the iPhone officially went on sale Sept. 25, Apple’s carrier partner, China Unicom, announced it had received 200,000 pre-orders, even though the country is already swamped with “grey market” iPhone 4s brought in from Hong Kong and the United States.

Compared with Americans and consumers in other developing countries, relatively few Chinese lined up for Apple products. But the intensity of those that do underscores the importance high-end products mean to newly wealthy Chinese, many of whom are willing to pay above suggested retail prices to get their hands on devices like the iPhone 4 before others do.

Cupertino-based Apple, after years of effectively ignoring the country with the world’s largest number of mobile phone and Internet users, is now aggressively courting Chinese consumers. Products like the iPhone and iPad are hitting the Chinese market faster than ever before — the iPhone 4 went on sale just about three months after its U.S. release while it took more than two years between the debut of the first version of the iPhone and its rollout in China.

And the recent opening of the Apple Shanghai store, featuring a stunning 40-foot-high glass cylinder, is part of a new retail strategy to open 25 stores in China by the end of next year, a dramatic increase from the four that now exist — two in Beijing and two in Shanghai.

During the company’s second-quarter conference call with analysts, Chief Operating Officer Tim Cook said revenue for China, Hong Kong and Taiwan were nearly $1.3 billion — a more than 200 percent jump from the same period a year ago. Piper Jaffray analyst Gene Munster estimates China represents about 5 percent of the company’s sales and expects that to double some time between 2015 and 2020. And Apple’s shares topped $300 Wednesday, in part on investor excitement over its growth here.

Apple would not comment on its China strategy.

“It’s critical that Apple is in China,” Needham & Co. analyst Charles Wolf said. “There is a strong move toward conspicuous consumption and that means there is a strong move to buy Apple products.” The iPhone conveys status in a status-conscious culture.

“It’s pretty,” said Zhang Ya Nan, a college sophomore who visited an Apple reseller just to touch an iPhone, which she planned on buying with help from her mother. “I don’t want to wait too long.” It’s not uncommon for Chinese to spend two months’ salary — or more — on an iPhone, which costs about $750 for a 16 gigabyte model without a China Unicom contract, though the relative scarcity of the devices has driven the price up among scalpers and resellers. Consumers can also get a 16 GB iPhone 4 with a two-year contract that costs about $880. Some Chinese don’t even use the device as a phone because it’s too expensive for them to make calls; instead, it’s used to send text messages, said Shaun Rein, managing director of Shanghai-based China Market Research Group.

“They use the iPhone as a status symbol to show their sophistication in the world, even though they can’t afford it,” he said.

Apple’s lure goes beyond the iPhone. Wen Diren, along with his wife, Shi Guoling, visited the Sunlitun Apple store last week to check out the iPad. “I just came to try it out and I fell in love with it,” he said, cradling the new 16 gigabyte iPad he bought for a little less than $600, about $100 more than what the device sells for in the United States.

Like all infatuations, though, there is a risk the attraction is temporary — or that obstacles could impede a long-term relationship.

“Apple hasn’t learned how to tackle markets that have very different characteristics from the United States,” Shanghai-based Gartner analyst Sandy Shen said.

Among the difficulties Apple faces in China, for example, are competing with easily made iPad and iPhone knockoffs and marketing its high-priced products to a population that has a much lower income than consumers in more developed countries like the United States.

“There are a lot of shanzhai,” or fake mobile phones, said Jixin Huang, investment manager with expertise in China’s mobile market at Innovation Works, an early-stage start-up venture fund. “They are everywhere.” Apple will also face strong competition from phones running on Google’s Android mobile operating system, whose aggregate market share is already higher than that of the iPhone in China, Shen said.

Apple is used to having its way in every market it enters, but in China the company must contend with a government that does not hesitate to dictate its wishes to foreign companies, Piper Jaffray analyst Gene Munster said. When the iPhone first came to China, for instance, government officials mandated that the device could not be equipped with WiFi. That rule has now changed.

“Apple has great products the whole world wants,” said Rein with the China Market Research Group. “But Steve Jobs looks at America too much. The company is too Ameri-centric. This is a complaint you hear throughout the world.” For now, though, Chinese consumers are riveted with Apple’s splashy presence in Beijing and Shanghai.

Every day, Apple’s split-level, glass-walled Sanlitun store is packed with jostling shoppers. Young Chinese, like fixated gamblers, press around tables filled with iPhones, iPads and MacBooks.

Most visitors to the box-like store, though, seem content to just gaze at the gadgets.

New iPad owner Wen believes Apple’s sleek design has a good chance of winning over the masses. But, he added, “We still have to wait and see.”