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Missing iPhones May Be in Hong Kong

Online retailer Wireless Imports says it has shipped units to Hong Kong to be redistributed elsewhere and unlocked by their owners. It estimates that there are 100,000 to 200,000 iPhones in Hong Kong alone.

A U.S. mobile phone retailer that sells software to unlock iPhones isn't surprised that more than a million of them seem to have "disappeared." And it thinks it knows where they are.

Wireless industry analysts have been investigating a mystery involving iPhones. The number of phones that Apple says it has shipped doesn't match up with the number of iPhones that AT&T and other wireless carriers have activated. In reporting quarterly earnings last week, Apple said it had shipped some 4 million iPhones, while AT&T said it had about 2 million iPhone customers as of the end of 2007, in its quarterly report.

More than a million iPhones seem to be unaccounted for.

Online retailer Wireless Imports thinks many of them are in Hong Kong. Wireless Imports has 500 to 1,000 iPhones that it has shipped locked in their original boxes. A large chunk of those units were sent to Hong Kong to be redistributed elsewhere and unlocked by the owners. The retailer estimates that there are 100,000 to 200,000 iPhones floating around in Hong Kong alone.

"We ship them to Hong Kong sealed in the box for customers to unlock however they please," said Shawn Zade, the company's senior sales associate, in an interview.

Wireless Imports was the first U.S. online mobile phone retailer to begin offering software in September from iPhone SIMFree, which specializes in unlocking iPhones. The phones sold by Wireless Imports come from original equipment manufacturers, so they're not branded by specific wireless carriers.

The retailer also offers remote unlocking services for some of the most popular device models, including BlackBerry, Windows Mobile, and Palm. It recently began providing the iPhone 1.1.2 Unlocking Solution for $180, which works for iPhones bought out of the box.

For the majority of Wireless Imports' wholesale orders, the iPhones are shipped locked, whereas individual retail customers can get their hands on an unlocked iPhone from Wireless Imports for $600.

While Apple recently cut its retail price on the iPhone, Wireless Imports hasn't marked down its units because of the extra cost involved in unlocking them.

"The unlocking process can take a half hour or it can turn into a huge ordeal and become a six-hour process, which gets expensive," said Zade.

Once a customer purchases an unlocked iPhone from Wireless Imports, he's urged not to upgrade the phone's firmware. But even if the phone is accidentally "bricked," Wireless Imports offers a fix. All a customer has to do is send it in and she'll get it back unbricked.

"Bricking a phone is never permanent; there's always a fix," Zade said.

Upon launching the iPhone in Europe, Apple changed the bootloader that cannot be altered by a simple software downgrade to a previous software version that would unlock the phone. The bootloader restricts people from using a software-based fix to unlock their iPhones. Zade suspects another unknown number of iPhones is sitting on shelves in warehouses because they haven't been unlocked.

"We're hearing reports from vendors overseas that they're already sitting on 5,000 units that they're ready to move out there," he said.

But it's only a matter of time before various unlocking methods flood the European market. In fact, the iPhone 1.1.2 Unlocking Solution offered by Wireless Imports is SIM card-based, not a software-based fix. The explanation of how it works can be found here.

The figures don't add up for AT&T and Apple because the popular device has made its way onto store shelves all over the world, whether the companies like it or not. An article in The New York Times this week compiled comments from global mobile users, who claim to have seen the iPhone sold at local retailers. One of the comments read: "Here in the Philippines, unlocked iPhones are easily available in most cell phone shops in the malls. No big deal. And it must be this way in a lot of other countries as well."

The same is the case in Australia, India, South America, Russia, the Middle East, Canada, Thailand, Africa, and other regions. So it's not a much of a mystery. Rather, it's an example of what happens when carriers and phone makers put a tight grip on a must-have gadget.

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