As mobile market matures, Apple bets big in China

• Apple%27s overhauled mobile operating system holds a key to its fate in China
• Deals with overseas wireless operators will go a long way toward long-term success of iPhone
• First-ever press event in Beijing shows the massive importance of that country

SAN FRANCISCO — As Apple unveils its new iPhones and an overhauled mobile operating system this week, the question that may determine the products' success isn't "What can I do with them?" but "Whose technology will they work with?"

In fact, we already know most of what the new iOS 7 software will do — and what it will look like — thanks to the preview Apple executives provided at the company's developer conference in June (more on that, below).

What we don't know yet is how much the new phones will cost, nor what kind of deal Apple CEO Tim Cook has struck with any large overseas wireless operators — including China Mobile — to carry a new, lower-cost iPhone that the company hopes to sell in developing markets.

And, just as important, we don't yet know how interoperable iOS 7 will be with non-Apple devices and software.

First, let's look at wireless networks.

The full-featured smartphones Apple makes don't come cheap, which is why the company has relied on subsidies from mobile carriers to help keep the devices competitively priced.

U.S. wireless providers such as AT&T and Verizon have been happy to offer billions in subsidies to Apple over the past several years because iPhone users tend to spend more time on the Internet than other mobile consumers.

More Web surfing means more downloaded pictures, text and video, which require bigger data plans. Sales of those more-expensive service plans have helped wireless carriers here reap huge profits from iPhone users.

That has kept Apple on top of the U.S. handset market, with second-quarter figures from market researcher Nielsen showing the company with a 40% share, ahead of 24% for Samsung and roughly 9% each for HTC and Motorola (now part of Google).

Apple has maintained its lead in hardware in the U.S. even as Samsung has extended its global handset lead and Google's Android operating system — which works on devices made by many different phone makers — has gained control of more than half of the U.S. market for smartphone software.

Apple's foray into China, meanwhile, has been more challenging, with its sales there in the latest quarter falling 14% year-over-year.

Various market research reports put Apple in either fifth or sixth place in the China smartphone market — the world's largest — well behind No. 1 Samsung.

While China's two smaller wireless carriers — China Unicom and China Telecom — have offered Apple devices for several years, the U.S. company has yet to reach a deal with China Mobile, whose 740 million subscribers make it the dominant wireless carrier in that country.

The problem, by all accounts, has been money, because without China Mobile shelling out subsidies to reduce the cost of iPhones, Apple hasn't been able to compete on price for most smartphone consumers there.

That may be about to change.

Apple has scheduled a media event Wednesday in Beijing — its first-ever in that country — to coincide with its presser Tuesday at its headquarters in Cupertino, Calif., where it's expected to premiere the iPhone 5C and iPhone 5S.

What's more, a Chinese tech blog called Techweb has published an Internet screen shot that is said to be an advertisement from China Telecom saying the carrier will have both new iPhones — including the low-cost iPhone 5C targeted at developing markets — available for order Sept. 20.

That ship date would be significant, because Apple has typically made its phones available in China well after the same models were released in U.S. and European markets.

If Cook has succeeded in getting the iPhone into China Mobile's network, he will greatly extend the product's reach.

Likewise in Japan, where Reuters has reported that country's largest carrier, NTT DoCoMo, will carry the iPhone for the first time.

Now, if Cook can broaden the interoperability of Apple mobile devices, he can go a long way in preventing the company from suffering the same fate in the smartphone market that it did in the PC market two decades ago.

Back then, Apple built powerful, well-designed machines that nevertheless didn't operate easily with other systems and were used by only a small percentage of consumers.

Cook offered a glimpse of this possibility in June, when he demonstrated new capabilities of the company's Internet-based data-management service, called iCloud.

Rather than showcase Apple's Safari browser or its iOS software, the demo showed a device running Google's Web browser, called Chrome, on Microsoft's Windows 8 operating system.

Could the updated operating system, which Cook called "the biggest change to iOS since the iPhone arrived," make it easier to store Web-based apps on iCloud? Or for developers of Windows and Android apps to create Apple-compatible versions?

The new iOS will also be able to run multiple apps simultaneously, something Android-run devices have been able to do for more than a year.

It also will eliminate design elements that look like real-world objects — such as leather or metal — that Apple hardware guru Jonathan Ive has long railed against.

In Ive's own words, heard during a video at Apple's June event, the new iOS will be about "profound beauty in simplicity."

For the sake of Apple's mobile market share, let's hope it also works well with the hardware, apps and operating systems made by others.

John Shinal has covered tech and financial markets for 15 years at Bloomberg, BusinessWeek, the San Francisco Chronicle, Dow Jones MarketWatch, Wall Street Journal Digital Network and others.