Apple says it sold about 3.7 million iPhones last year. That is an amazing number of units and it highlights the ongoing love affair folks are having with this remarkable little tech device.

Yet, there is a strange number that is also connected to the iPhone that you need to consider. There are only 2.3 million Apple iPhones actually registered on the networks of iPhone’s wireless partners in the United States and Europe. Where are the other 1.4 million Apple iPhones? Are they ALL hacked and unlocked to work on other networks?

Well, the the simple answer is yes…but.that is not the complete answer. You see…all those 1.4 million Apple iPhones are not all in the USA or Europe. Instead, look to places where the official iPhone marketing plan had not yet reached…like China!

The Apple iPhone is a very hot commodity in countries where Apple is not really geared up with an official network to sell these little beauties. According to industry experts, a planned deal with China Mobile to provide an official network in that country has fallen through. But ordinary folks are not concerned with that or simply waiting for another deal to be put in place. No, they are not simply waiting around to buy their iPhone through official Apple channels. Instead, people are smuggling them in. And they are paying a premium price to get them and then to have them hacked. Some electronics stores in China are even offering unlocking services to customers who come in with one of these smuggled iPhones.

And these smugglers are not all necessarily the underground pirates you would expect either. Family contacts flying back home, airline flight attendants and tourist groups are all quite capable of bringing the product into China. And those that are not just friends or family doing a favour are often paid $25-30 to act as a courier to fill the demand. In some cases, stores in the USA are using airline passengers to send the product over to waiting buyers and stores in China. And although custom duties are being bypassed in most cases, the actual unlocking of the iPhone in China does not seem to break any local laws. Hence the gray market in Apple iPhones market is thriving and growing even larger.

Yes, Apple is still making money on the actual iPhone’s that are being bought and sold into the foreign grey market. But the downside for Apple and its network partners is that they are not able to control the lucractive and exclusive iPhone cell plans and charges that they have in the US and Europe. Instead that money is going instead to other carriers benefiting from the unlocked products. It is estimated Apple could be losing $1 Billion over the next 2-3 years!

It is ironic that China is manufacturing millions of these iPhones for Apple and yet folks there have to smuggle them back into the country in order to benefit from a device many people clearly love. Clearly the best-laid plans of mice and men…and Apple…often go awry!