State-owned China Unicom, the world’s third-largest carrier and Apple’s sole iPhone partner in the country, has dropped both the 16GB and 32GB iPhone 4 model and will be introducing the 8GB iPhone 4 later this month. The move comes in anticipation of the iPhone 4S launch on the China Unicom network, due by the year’s end. iPhone 4S is currently pending regulatory approval in the country. The move would indicate that China Unicom will focus on the new iPhone 4S and carry the 8GB iPhone 4 as an inexpensive entry-level handset.

Apple, as always, will benefit the most (the older the iPhone, the better the margin). According to a SoHu report (via The Next Web) referencing the carrier’s general manager Lu Yimin, China Unicom executives visited Apple in the Cupertino, California headquarters in order to negotiate terms. A final agreement has been reportedly reached, but everything is now in the hands of the Chinese government’s regulators tasked with issuing 3G certificates and network licenses for devices operating in the Chinese market.

China Unicom’s deputy director of research recently showed a slide at a conference depicting a next-gen iPhone with HSPA+ capabilities (21Mbps), but it turned out to be just a guessing game. Meanwhile, gray market of unlocked iPhones continues to thrive in China. China Mobile, the world’s leading carrier by revenue, doesn’t offer Apple’s handset as they allegedly want some of App Store revenue. Nevertheless, China Mobile is signing up users outside of Apple’s blessed carrier model. Of course, because the iPhone doesn’t yet support China Mobile’s flavor of 3G called TD-SCDMA, iPhone users on their network use data via WiFi hotspots or through the older 2G frequency.

Nearly one in six dollars of Apple’s September revenue came from China, the 1.34 billion people market, and revenues grew sixfold in the June quarter. The country is an “enormous opportunity” for Apple, CEO Tim Cook told analysts on a conference call. Apple operates massive outlets in Hong Kong and Shanghai and pledged to build at least 25 additional stores in China within the next few years. In all, Apple in fiscal 2012 will open 40 new outlets worldwide, 75 percent outside the United States.

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