Apple Watch Hits Cellular Snag in China

Apple Inc. has another headache in China: this time with its latest watch.

For the first time, the Apple Watch can have an independent cellular connection, allowing people to use it to make voice calls, send and receive text and data even if the watch isn't wirelessly connected to an iPhone.

But in China, the feature was abruptly cut off for new subscribers, without explanation, after a brief availability with one telecom company.

Industry analysts say the suspension likely stemmed from Chinese government security concerns to do with tracking users of the device, which uses different technology than standard mobile phones.

China strictly regulates mobile phones and all three major telecom service providers are state-owned companies. To get a SIM--subscriber identity module--card to operate the phone, users must register under their real names with a network carrier.

The latest Apple Watch poses a challenge to the existing user identification system, industry analysts said. The watch contains a new and tiny version of the SIM card, called embedded SIM, or eSIM. The eSIM is embedded in the watch by Apple, not by carriers.

The benefit of a device carrying an eSIM is that, with software, users can choose a telecom operator and a communications plan. But in China, that new system raises the question of how carriers and regulators can track the device user's identity.

"The eSIM (system) isn't mature enough yet in China," one analyst said. "The government still needs to figure out how they can control the eSIM."

When the Apple Watch went on sale Sept. 22, the cellular service was available exclusively to qualified China Unicom customers. But after Sept. 28, new cellular subscriptions were cut off without explanation. Those who had previously registered are so far unaffected.

In a notice on its website, China Unicom said the cellular feature had been offered on a trial basis. It gave no information on when it might resume.

An Apple spokeswoman referred queries to China Unicom.

"We were informed by China Unicom that the new cellular feature on the Apple Watch Series 3 has been suspended," Apple said in a statement.

China's regulator, the Ministry of Industry and Information Technology, didn't respond to requests for comment. China Unicom and the two other state-owned telecoms didn't respond to requests for comment.

Ministry officials are likely studying how to resolve the issue before allowing any broad cellular access to the Apple Watch, which could take months, said the analysts, who asked not to be identified.

In August, the Ministry of Industry and Information Technology approved trial certificates--but not a formal certificate--for cellular-version Apple Watch devices, documents posted on the regulator's database showed.

Qiu Tian, 19, who lives in southern China's Guangxi Province, said he paid $600 for his latest Apple Watch on the debut day and was disappointed he couldn't use the device to make calls.

"I realized that this function probably wouldn't be fully supported by domestic carriers, but I didn't expect it would be halted this soon, said Mr. Qiu.

China is a critical market for Apple, but it has had a series of setbacks here recently. Its iPhone was once top seller in China, but its market share has fallen to about 7%, from an estimated 16.5% in late 2014.

Apple was also forced to shut down its iBooks and iTunes Movies services in China last year under government pressure, and this summer removed about 400 " virtual private network" apps from its China App Store that enabled users to circumvent government internet filters.

The company's iPhone X, now being assembled in China, has been plagued by manufacturing problems, prompting Apple to set its sales start date to November--more than a month later than in past years.

Yang Jie and Yoko Kubota contributed to this article.

(END) Dow Jones Newswires

October 19, 2017 06:58 ET (10:58 GMT)