As many as 400,000 or more iPhones are already operating in China, according to a report issued by In-Stat. The research firm cites figures from China Mobile, the country's largest cellular carrier, which claims that the 400,000 figure was reached by the end of 2007, representing a full tenth of all iPhone shipments confirmed by Apple. In-Stat notes that this is four times what it had expected to find.

The difficulty for Apple is that the iPhone is not officially on sale in China, and therefore any phones in the country must be unlocked and imported from other regions. Apple still benefits from this in terms of increased unit sales, but it may mean decreased numbers when the phone makes its official debut, and less shared revenue from whichever carrier Apple chooses to partner with.

Although Apple has shown signs of wanting the iPhone in China by the end of 2008, the company has so far made no progress in terms of negotiations. Talks with China Mobile in fact broke off in January, allegedly over Apple's insistence on revenue sharing, a practice not typically welcomed in China. Apple's only alternative is China Unicom, which is smaller than Mobile but is the only other national carrier in the country.