China will be finally getting the iPhone this year after long and lengthy negotiations with two Chinese mobile carriers that spanned almost two years. The deal is a three-year deal that will bring the iPhone to China sometime later this year through China Unicorn, the second largest wireless carrier in China.

China was supposed to get the iPhone through China Mobile, the world’s largest wireless carrier with over 687 million wireless customers, but China Mobile balked at the revenue share model originally proposed by Apple. It broke down again over operation and control of the App Store after the introduction of the 3G iPhone. China Unicorn jumped in earlier this year and finally cut a deal with Apple. But is it all going to be worth it for Apple, considering China already has the iPhone in gray markets and not to mention the iPhone clones?

The iPhones coming to China are going to have WiFi disabled because of a government ban in China, and most likely won’t have access to all of the content on the App Store. Now why would someone legally buy an iPhone stripped of these features when they could get a much more functional iPhone in the gray market or buy the extremely cheap iPhone clone? According to research from BDA China, 1.5 million iPhones have been bought in the gray market. That’s a pretty big number, and that’s 1.5 million less customers that are going to buy the iPhone in China. Let’s not forget that China is also saturated with smartphones from various mobile companies, including those running on Google Android, one of Apple’s biggest competitors.

Apple is still making money on the iPhones in the gray market, especially when the numbers are as high as they are, so why is Apple jumping through hoops to comply with rules placed in China just to get the iPhone out there? Apple is usually known to stand pat with their decisions, especially when it comes to the iPhone, Steve Jobs’ baby.

So this begs the question, would you legally buy an iPhone with stripped features or buy one in the gray market for more money and have all the functions the iPhone is supposed to have? Do you think Apple even needs to have a legal iPhone in China?

(Via Arstechnica)