Yes, Apple launched the iPhone in China. The market, however, is droids: about 300 million are in use (and another 400 million have been exported). What are the implications for the domestic market, and for global markets?
First, there are gains from specialization and riding down the learning curve (a 1950s Boston Consulting Group discovery). The specialization in turn comes from standardization of core features. Prices help: $40-$100, with new model turnaround times under 3 months from launch to sale. There are China-specific feature sets, such as not having GPS [allowing a lower cost], while accepting dual SIMS [one for work, one for personal … and maybe another couple cards that can be swapped to avoid roaming charges if you visit another part of China].
So … will this huge base allow Chinese firms to eventually dominate global phone markets? In one sense they already do: while the iPhone may be engineered in the US and use imported screens and specialty chips, the assembly itself is all China. As pieces get localized, the ability to tweak or eliminate components for lower cost or different functionality will increase. With rapid life cycles, patents aren’t necessarily a barrier, either, as it may not make commercial sense to file when the technology will be obsolete before the approval process wends its course.
From the perspective of Industrial Organization, what is the nature of competition? In this case it strikes me as a story of (i) standard product differentiation, a range of products and price points, (ii) a willingness to customize, combined with (iii) a “standards” game played in the background, that enables manufacturers to do their thing. Now do those who create the standard benefit? At the moment that is not clear.