TAIPEI (TheStreet) -- A delay in granting network access permits for Apple's (AAPL) iPhone 6 in China has cultivated a black market for the handsets. That proves their popularity, but may threaten Apple if the delay is long term and underground sales become mainstream.

About 5% of all iPhone shipments to China this year will be through unofficial channels, market-research firm Strategy Analytics says. Impatient consumers are paying two to three times the normal price for the device smuggled from Hong Kong or the U.S.

So far, these sales are tracked as iPhone 6 sales in the offshore locations where black market vendors get them. But if the black market matures, supplies may increase, which would push prices down and undercut legit sales of earlier model iPhones as well as of the iPhone 6 when it finally arrives. The market may also invite knockoffs. Counterfeits have hurt sales of branded products from such overseas companies as Microsoft (MSFT) and North Face.

If underground prices stay high, customers may turn to products from Apple's competitors, particularly Android smartphones from homegrown handset and PC developer Lenovo (LNVGY) .

"Considering black market mark-ups are running anywhere from 50% to 150%, it's safe to say that Apple could be selling a lot more iPhone 6 phones in China if it had the green light to sell them directly into the China market -- if it had network access permits already," says Mark Natkin, managing director at Marbridge Consulting, a Beijing research and advisory firm.

Carolyn Wu, Apple's China spokeswoman, did not answer a request for comment. Sales of the company's latest smartphone hit markets outside China on Friday.

Lenovo publicist Angela Lee also declined to discuss any impact of the iPhone 6 black market on Lenovo smartphone sales. The company, known best for PCs, is China's top smartphone maker. Market-research firm IDC ranked it as the world No. 4 smartphone seller in the second quarter.

Other Android competitors are Samsung (SSNLF) and two Chinese companies, Shenzhen-traded Huawei Technology and unlisted Xiaomi.

China's Ministry of Industry and Information Technology has given "no clear schedule" for when it might issue network access permits for the iPhone 6, Natkin says.

A short setback in permits shouldn't hurt Apple's long-term income from China much if legit handsets replace bootlegged ones quickly at lower prices. Chinese growing ranks of moneyed urban consumers are looking forward to the iPhone 6's screen sizes, battery life and processor speeds.

"Most consumers will wait for the real ones to come onto the market and buy them that way," predicts Wang Jun, a smartphone analyst with Beijing-based Analysys International. He calls the black market an "exaggerated trend" that will not reach a scale that hurts Apple.

It's a longer-term permitting delay that could round out the black market, hampering eventual legit sales or steer Chinese consumers toward other smartphone brands.

"The cross-border trade in smuggled iPhones has long been active, and it is getting more active right now as consumers get impatient waiting for the official launch in mainland China," warns Neil Mawston, global wireless practice executive director at market-research firm Strategy Analytics in the United Kingdom.

"The longer the new Apple iPhone 6 launch is delayed in mainland China, the more consumers will get frustrated and look for alternative models from Samsung, Huawei, Xiaomi and others," he says.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.


TheStreet Ratings team rates APPLE INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate APPLE INC (AAPL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and solid stock price performance. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

You can view the full analysis from the report here: AAPL Ratings Report

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