Steve Jobs and I hope the iPhone will enter China as soon as possible. We are discussing this issue but we do not have an agreement.”

– China Mobile CEO Wang Jianzhou

It’s been nearly a year and China Mobile is still in talks with Apple about bringing the iPhone to China, though the revenue-sharing issue that had stalled the two companies was resolved back in July. Now we know why the talks keep dragging on: hardware localization. The South China Morning Post reports that China Mobile has asked Apple (AAPL) for an iPhone with Wi-Fi and 3G technology disabled.

Seems China Mobile is building a 3G network of its own using the Chinese developed TD-SCDMA standard and believes that crippling Chinese iPhones will discourage customers from unlocking the device and using it on rival China Telecom’s W-CDMA network. Though, really, China Mobile should know better. China has a thriving gray market for iPhones. In fact, Market research firm In-Stat reported earlier this year that there were some 400,000 cracked iPhones on China Mobile’s network at the end of 2007–10 percent of all iPhones sold by Apple at the time.

So, will Apple agree to the carrier’s demands and customize a piece of standardized hardware for a single region? And beyond that, could CEO Steve Jobs even bring himself to compromise the iPhone “experience”? With 600 million cellphone users in China, 415 million of them China Mobile subscribers, he just might.

Steve Jobs and I hope the iPhone will enter China as soon as possible. We are discussing this issue but we do not have an agreement.”

– China Mobile CEO Wang Jianzhou

It’s been nearly a year and China Mobile is still in talks with Apple about bringing the iPhone to China, though the revenue-sharing issue that had stalled the two companies was resolved back in July. Now we know why the talks keep dragging on: hardware localization. The South China Morning Post reports that China Mobile has asked Apple (AAPL) for an iPhone with Wi-Fi and 3G technology disabled.

Seems China Mobile is building a 3G network of its own using the Chinese developed TD-SCDMA standard and believes that crippling Chinese iPhones will discourage customers from unlocking the device and using it on rival China Telecom’s W-CDMA network. Though, really, China Mobile should know better. China has a thriving gray market for iPhones. In fact, Market research firm In-Stat reported earlier this year that there were some 400,000 cracked iPhones on China Mobile’s network at the end of 2007–10 percent of all iPhones sold by Apple at the time.

So, will Apple agree to the carrier’s demands and customize a piece of standardized hardware for a single region? And beyond that, could CEO Steve Jobs even bring himself to compromise the iPhone “experience”? With 600 million cellphone users in China, 415 million of them China Mobile subscribers, he just might.