China Unicom started domestic sales of Apple’s iPhone 4S on January 13. Analysts expect the handset, which was released in Hong Kong in November and in Taiwan in December, to face strong competition from other major brand-name smartphones and affordable models that cost less than CNY1,000 from Chinese manufacturers. Apple’s top-of-the-line, 64-gigabyte version of the iPhone 4S will is sell for CNY6,788, with the 32GB version  at CNY5,888 and the 16GB version at CNY4,988. The new model is available from China Unicom and a select group of authorized resellers. The 8GB iPhone 4 and iPhone 3GS have been reduced in price to CNY3,988 and CNY2,888, respectively, to make these Apple’s lowest-priced smartphones in China. The country has become Apple’s second-largest market after the United States, with a record USD13 billion in sales in its financial year ended September 24, accounting for 12% of Apple’s global revenue. Sales of smartphones from Chinese brands will continue to be competitive and expand this year, according to market research firm IHS iSuppli. Such sales, led by Huawei Technologies and ZTE, would increase by 94% to 101.4 million units this year from 52.2 million units last year. Chinese handset manufacturers last year started selling 3G smartphones costing less than CNY1,000, down from CNY2,000 in 2010. Nokia and Samsung Electronics remain the largest suppliers of smartphones in China, ahead of Apple, HTC and domestic brands such as Lenovo, Huawei, ZTE, TCL and Yulong Coolpad. Macquarie Securities Analyst Lisa Soh said iPhone 4 sales would help boost Unicom’s 3G subscriber numbers in the first quarter. Unicom had 36.5 million 3G subscribers as of November.

People ― many of them scalpers ― hurled eggs at Apple’s flagship Sanlitun store in Beijing as they lined up early on January 13 only to be told sales were suspended. Scalpers ― in different groups and identifying themselves by wearing the same armbands, masks or gathering under a balloon ― clashed with each other for a place at the front of the line. At least two people had been knocked down during the scuffle by 4 am outside the store, according to witnesses. People were seen being chased, beaten and quarreling, with most of the outbreaks quelled by police shortly after they began. Both Apple fans and scalpers standing in the wintry square overnight for the launch gradually lost their tempers, the China Daily reports. At about 5 am, the Sanlitun store put up a notice announcing that the phones were only available online, which irritated people. Then someone started pelting the glass wall of the store with eggs. More than 100 police and security guards started dispersing the crowd at 8:45 am. The Sanlitun store remained closed on January 13. “It is regretful that the Sanlitun store cannot operate because too many people gathered in Sanlitun and because Apple wants to protect the customers’ and its staff members’ safety,” Apple said. “The demand for iPhone 4S is beyond imagination,” it said in a statement. Another store in Joy City in Beijing and others in Shanghai opened for business as usual. Scalpers who snatched up the devices from Joy City immediately resold the handsets, asking for an additional CNY900 for a black iPhone 4S and CNY800 for a white one. Apple later announced a temporary suspension of the sales of iPhone 4S at its five official retail stores in Beijing and Shanghai ― and said customers can book online or buy from authorized resellers or from China Unicom. Many scalpers hired people or invited friends to join them as the company only allowed each consumer to purchase two phones. When they failed to obtain the phones, scalpers hired by black marketeers were not paid for their efforts. Many genuine iPhone fans were unable to obtain the phones. Apple sold 5.6 million iPhones in China in the first nine months of last year, giving it a 10.4% share of China’s smartphone market in the third quarter, according to research company Gartner.

China Unicom (Hong Kong) said it has large stocks of Apple’s iPhone 4S handsets available for purchase, despite Apple’s mainland stores halting supplies of the device. “Most Chinese people buy an iPhone through China Unicom’s channels, so it (the sales suspension in Apple’s stores) has had a limited impact on the performance of the iPhone 4S in China,” said Li Gang, Deputy General Manager of the parent company, China United Network Communications Group Co. He added that since the iPhone 4S made its Chinese debut, the market performance has surpassed that of its predecessor, the iPhone 4, but he declined to reveal specific sales numbers. “China Unicom is the world’s second-biggest cooperation partner with Apple, second only to U.S.-based AT&T,” said Li. China Unicom had more than 40 million subscribers to its 3G services by the end of December, according to Li. He said China Unicom hopes to become the No 1 player in China’s 3G market in 2012. In Beijing shopping centers and supermarkets such as Wal-mart Stores, shoppers can easily find and purchase an iPhone 4S without pre-ordering. But resellers often charge higher prices. Sundan Electronic Store charges CNY5,488 for a 16G iPhone 4S, CNY500 more than the official retail price.

Apple underestimated the staggering demand for the iPhone 4S when it started sales in China in January, CEO Tim Cook said. “We thought we were betting bold,” Cook said about sales of the device in China. “We didn’t bet high enough.” Chinese demand for the handset is “off the charts”, Cook said. Apple has introduced a lottery system for iPhone reservations in Hong Kong to combat scalpers. Customers are requested to submit their personal details online for a chance to reserve an iPhone between 9 a.m. and 12 p.m. each day, and the lucky ones will be notified via e-mail before 9 p.m. when and where they can pick up the phone. Those who don’t receive an e-mail can try their luck again the next day. The Apple store is not selling the iPhone 4 or iPhone 4S to walk-in customers. The lottery system has so far not been used on the mainland.

Apple moved a step closer to accessing 33 million potential iPhone customers in China, as regulators approved new specifications. The China Radio Management Office granted Apple’s application for a handset that operates on the CDMA2000 network standard used by China Telecom and China’s Telecommunications Equipment and Certification Center also granted a license. The iPhone is now available with a service contract only through China Unicom (Hong Kong), the second-largest carrier, which had 36.5 million 3G subscribers at the end of November, while China Telecom had 33.4 million 3G subscribers. The model for China Telecom would probably be based on the iPhone for Verizon Wireless users in the U.S. It could be in stores by the end of February or in early March.

Apple for the first time released a 27-page report detailing working conditions throughout its supply chain along with a detailed report on factory inspections. In one of his first interviews as Chief Executive, Tim Cook said the flap was “unfortunate” and “we will learn some things for the future and change some things.” He added that safety was of the “upmost importance” to the company. The Chinese market is of growing significance to Apple. Last fall, it said China was its fastest-growing region, with around USD13 billion in annual sales. Apple’s supplier report findings are: 62% of its suppliers weren’t compliant with working-hours limits; 32% weren’t compliant with hazardous-substance management practices; and 35% failed to meet Apple’s standards to prevent worker injuries. The report is the most comprehensive on the subject in Apple’s history, based on 229 audits of factories that do work for the company.  Apple also said it found 112 facilities that weren’t properly storing, moving or handling hazardous chemicals. Nearly a third of its suppliers didn’t abide by Apple’s standards on wages and benefits, the company said. The audits also found five facilities that employed underage workers. While Apple has occasionally divulged the names of selected suppliers, the new list covers those 156 companies that represent 97% of its materials, manufacturing and assembly spending. Apple said it has established new requirements for firms dealing with combustible dust after a blast in Chengdu and an explosion at another supplier’s factory in Shanghai that injured 59. Apple has agreed to open its factories to independent auditing by the Fair Labor Association (FLA), a non-profit group founded in 1999. “In high tech to date there hasn’t been anything like external independent assessment, which is what makes Apple’s decision such big news,” says FLA President Auret van Heerden. Apple has been auditing itself since 2007. Working hours are a major issue. In China, 12 and 16 hour shifts are common. In 2008, 82% of factories violated Apple’s limits – a 60 hour week with no less than one day off. By 2011, the number was 68%. In 2008, half violated wages codes by deducting salary as a disciplinary measure, or not providing pay slips. The figure was 30% last year.

Lenovo posted the strongest sales gains among the world’s top personal computer makers in the fourth quarter last year, closing the gap with industry leader Hewlett-Packard. The company saw its global market share rise to a new high of 14%, according to technology market research firms IDC and Gartner. IDC estimated that Lenovo increased its shipments last quarter by 36.8% to a record 13 million, up from 9.5 million a year earlier. By comparison, Gartner calculated Lenovo’s shipments advanced 23% in the last quarter to 12.9 million, from 10.5 million. The growth was achieved when total PC shipments declined due to a shortage of hard disk drives, slow economic conditions and stiff competition from other consumer electronics devices, such as media tablets and smart phones. Total personal consumer shipments last quarter fell 1.4% to 92.2 million units from 93.5 million a year earlier, according to Gartner. IDC saw a more modest 0.2% decline last quarter to 92.7 million, from 92.9 million the previous year. HP remained the industry’s leading supplier with a 16% global market share, but saw its fourth-quarter shipments fall 16% year on year to about 15 million units. Following HP and Lenovo, Dell is in third place, ahead of Acer and AsusTek. Analysts attributed Lenovo’s robust fourth-quarter performance to an aggressive pricing strategy in both the consumer and business markets, as well as an expanded distribution network achieved through strategic investments last year. While Lenovo has set its sights on unseating HP as the world’s top computer supplier by the end of this year, another strategic investment may be needed for the Chinese computer maker to reach that milestone, the South China Morning Post reports. Lenovo also announced a change in business structure to spur growth. From April 2, the company will divide its business into four regions – China; Asia-Pacific/Latin America; North America; and Europe, the Middle East and Africa. Its business in the Asia-Pacific/Latin American region will be headed by Senior Vice President Milko Van Duijl, while its business in China will be run by Senior Vice President Chen Xudong.