Why does the iPhone cost $199 in the US and 5K in China?

Since the release of the iPhone 4, more and more Chinese people have had the chance to watch Apple's annual iPhone launch event. The majority who watch it for the first time are often shocked by the price revealed at the end: a mere $199 in the U.S., equivalent to just over 1,000 RMB, while in China, an official version costs around 5,000 RMB. Some internet users sensitive to price differences quickly label themselves as living in dire straits. Meanwhile, another group of tech-savvy netizens educate and mock those who are surprised, pointing out that the $199 is a contract price, not the actual purchase price. So, what exactly does the contract entail in the U.S.? And how do iPhone contracts look outside of China?

In this article, we will explain the specifics of overseas carrier contracts and compare the total fees required over a two-year contract period. By combining different regional incomes, we aim to present a parallel world.

China Unicom Represents the Chinese Team

Before stepping out of China, let’s recall China Unicom's contract plans. Many people believe that in the U.S., the iPhone 5s costs only $199, but in reality, $199 is merely the down payment and does not include monthly service fees. If you still insist that the iPhone 5s in the U.S. can be bought for about 1,000 RMB, then I should tell you that in China, you can actually get the iPhone 5s for free. Don't believe me? Keep reading.

For the latest iPhone 5s 16GB version, the total contract price with China Unicom is 5,499 RMB. Depending on the package you choose, the amount refunded each month varies. Generally speaking, the more expensive the contract, the less you pay upfront for the phone. In our selected 386 RMB/month package, the actual cost of the phone drops to 799 RMB, which is already lower than the $199 (about 1,200 RMB) price in the U.S. If you choose a three-year contract, you can get the iPhone 5s for free. This situation gives users a strong sense of satisfaction when purchasing the phone, regardless of the potential pressure from the monthly package fee. Of course, there's no such thing as a free lunch.

We chose the 386 RMB/month package because its content closely matches the packages offered by foreign carriers we will compare. The 386 RMB/month package includes 1,250 minutes of calls, 1.6GB of data, and 580 text messages. If you sign a two-year contract, you will receive a refund of 195 RMB per month, meaning you actually pay 191 RMB per month for the phone. To simplify, the total cost over two years amounts to 10,083 RMB.

At least in terms of contract prices, the U.S. doesn't seem to have a significant advantage, but...

Next, let's cross the vast Pacific Ocean to see how things work in the U.S. Unlike in China, in the U.S., your choice of contract does not affect the price of the phone. No matter which plan you choose, the price of the iPhone remains constant at $199 (for the 16GB version). This pricing model is based on the U.S.'s robust credit system, which would likely result in heavy losses if applied directly in China.

To ensure fairness, we chose AT&T, which operates on the same WCDMA network standard as China Unicom. We compared the 386 RMB package with AT&T's $60 "Smartphone Contract" plan, which includes unlimited calls (including international long-distance, though with some country restrictions), unlimited text messages, and 2GB of LTE data. If you choose this plan, over two years, the user would need to pay a total of $1,639 USD, approximately 9,949 RMB.

In terms of package content, although AT&T uses the term "unlimited," considering the 1,250 minutes of calls and 380 text messages included in China Unicom's 386 RMB package, they meet the basic needs of most users. Subjectively, I believe these two packages are very similar in practical communication usage. AT&T's unlimited text message plan might have a slight edge during Christmas compared to China Unicom's 380 texts during the Spring Festival, assuming Americans also like sending mass text greetings.

The mention of "LTE" cannot be overlooked. With download speeds up to 100mbps, AT&T easily surpasses China Unicom. Although China has yet to officially roll out 4G services, preliminary information suggests that 4G fees won’t be particularly cheap. Defending domestic operators, current mobile applications, aside from video downloads, show little differentiation between 3G and 4G. Users' demand for more data tends to outweigh their need for faster 4G networks.

AT&T Contract Package Content

Therefore, under similar user experience conditions (assuming they are close), the U.S. requires a total of 9,949 RMB over two years, while China requires 10,085 RMB, making the prices roughly even. However, considering another factor, the heartache seems to fade instantly: the average annual income in the U.S. is $48,147 USD (approximately 293,412 RMB), while the average annual income in China is 33,115 RMB... meaning that Americans only need to work one week to cover the cost of a phone and contract for a year, whereas Chinese people would need nearly two months of hard work without eating or drinking.

Besides, it’s important not to overlook that the U.S., being the world's most developed country, offers much more than just a $60 package. For example, AT&T provides many other options: you can choose a $25/month contract for two years, where the iPhone price remains $199, costing a total of $799 USD (about 4,874 RMB) over two years. This plan includes 250 minutes of calls and unlimited texts, with data requiring additional purchase. Someone might say, “I just go back and forth between home and work, so I don't need data,” making this package more suitable. While true, it lacks universality, so we didn’t select this package for comparison.

AT&T also offers family sharing plans, where the cost decreases as the number of family members increases. However, given that China's 3G market development is still in its infancy, using such mature operator packages to bully China Unicom and China Telecom feels somewhat unfair.

Beyond family sharing plans, AT&T recently launched the NEXT program, specifically designed for those who "must upgrade their phones." Users choosing this plan commit to staying online for 20 months, paying an additional $27 USD per month (no $199 upfront cost for the phone). After 12 months (a total of approximately 1,976 RMB), users can upgrade to the latest device, preferably opting for the gold version to highlight the latest equipment.

Other U.S. carriers offer similar rates. For example, signing a two-year contract with T-Mobile requires an initial fee of $160 USD, plus an additional $21 USD per month (totaling 24 months) for installation fees. Afterward, users can choose a package including unlimited calls + unlimited texts + 2.5GB of data for $60 USD, resulting in a total cost of $2,094 USD (approximately 12,766 RMB) over two years. Verizon, the CDMA giant, offers LTE packages with contents and costs nearly identical to AT&T's.

Verizon Contract Package Content

A Special Administrative Region's Sky Is Blue

The above is a detailed comparison between my great homeland and the U.S. If you feel the distance is too far to be relatable, then join me at the beautiful Victoria Harbor.

It’s well known that Hong Kong's telecom operators fiercely compete both openly and covertly, benefiting the general public. Taking Hong Kong's Hutchison 3 as an example, using the same prepaid rebate purchase method as China Unicom, the signed price for the 16GB iPhone 5s is 5,080 HKD (approximately 3,997 RMB), saving 1,500 RMB compared to China Unicom. Choosing a similar package content of 368 HKD, the actual phone cost is only 380 HKD (approximately 298 RMB), with a monthly return of 195 HKD. Over two years of use, the total amount paid by the user is 9,208 HKD (approximately 7,241 RMB), differing by 2,800 RMB compared to China Unicom's 10,083 RMB. Imagine an advertisement like this: "Sign up now for a two-year iPhone 5s contract and receive the latest Retina-display iPad mini for free." Additionally, an important point is that the Hong Kong version of the iPhone is considered an official version in Hong Kong, offering easy warranty services without needing a Mainland-Hong Kong-Macao Pass or battling Genius Bar staff.

The 368 HKD package includes 2,500 minutes of calls, 2GB of data (LTE), 10,000 intra-network SMS messages, and unlimited Wi-Fi usage. Friends familiar with life in Hong Kong know the widespread availability of Wi-Fi there. Furthermore, if you're curious, Hong Kong's average annual income is 266,652 HKD (approximately 209,594 RMB), which is over six times that of mainlanders.

Summary: Stop Believing the Myth That iPhones Cost Only $199 in the U.S.; The Gap Isn't in the Phones

From the above detailed comparisons, we can see that in the U.S., the iPhone certainly isn't just $199; the total amount required over two years is 9,949 RMB, nearly equal to the 10,038 RMB spent on a two-year contract with China Unicom. Similarly, China Unicom's "free phone" promotion is also a marketing gimmick and does not result in significantly lower actual expenses (in fact, it's higher).

Through comparing phone bills and contract mechanisms, we can see that developed countries and regions indeed have more complete systems and more flexible package options. However, if we only focus on numbers, I think it's somewhat biased. Remember, in 2008, when the iPhone 3G was officially released and the U.S. entered the mature 3G network era, we were still in the "10MB monthly data limit, enough for QQ chat" GPRS era. In just five short years, we've caught up with top-tier global operators in terms of network speed. Bearing some of the enormous infrastructure construction costs imposed by Mobile, Unicom, and Telecom doesn't seem entirely unreasonable.

Returning to the original question, the idea that buying an iPhone 5s in the U.S. for $199 is completely misleading. The actual total cost is comparable to signing a contract in China. Therefore, stop thinking that iPhones in the U.S. are easily obtainable. The only difference lies in income. If the total two-year cost of an iPhone 5S is 10,000 RMB, Americans need to spend 1/30 of their annual income, Hong Kong compatriots need 1/26, and we... need 1/3.