Apple (NASDAQ:AAPL) is counting on its relationship with China Unicom (NASDAQ:CHU) to drive iPhone sales in a nation which already has over 500 million mobile subscribers. The head of Unicom said he expects the iPhone to take 10% of China’s 3G users by the end of 2012 when the company forecasts there will be 240 million 3G customers nationwide.

The explosion of iPhone subscribers in China should cause millions of visits to the Apple App store as software programmers begin to write Chinese language software for the iPhone. Last month the store hit two billion app downloads worldwide since its inception.

There are close to two million unlocked iPhones in China. These will be the source of Apple App piracy which could affect the revenue of applications for the handset as seriously nearly unchecked piracy has undercut Microsoft’s (NASDAQ:MSFT) Windows revenue in the world’s most populous nation.

The Apple App store is expected to bring in $1 million in revenue this year in China and $10 million next year. This is small compared to the estimated $200 million in sales that the App store does each month worldwide, according to AdMob. But, Unicom has only sold a few thousand iPhones so far. China App store downloads should be in the tens of millions once the iPhone has been on the commercial market for a year.

Appke is up against the Chinese disregard for intellectual property. iPodNN reports, “Regionally the largest ratio of pirated apps, over 37 percent, is said to be found in China.” Windows suffers from similar problems. The situation got somewhat better once Microsoft pushed the Chinese government to do more to take legal action against people who sold illegitimate versions of its operating system.

The Chinese Apple App store certainly has the potential to reach download levels similar to those in the US within the next two or three years. But, piracy could completely upset that and, if history is any indication, the Chinese government will not do much to prevent it.

Douglas A. McIntyre

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